The Future of DFID's Programme in India - International Development Committee Contents

4  The UK partnership with India

91. DFID notes that India is an emerging global power and a critical partner for the UK. Its economy is the world's eleventh largest in GDP terms and India presently accounts for 2% of global trade.[137] Its economy is growing fast and is projected by Goldman Sachs to overtake the UK's by 2022. The relationship between the UK and India is multi-dimensional. While DFID has the lead in terms of the poverty reduction agenda, policies in areas other than aid—in diplomacy, defence, migration, trade and climate change— are also important. As Oxfam pointed out:

    Aid is not sufficient for poor countries or communities to fight poverty and inequality—there are many other important factors, such as reforming international trade and financial rules to ensure that poor countries can generate and retain their own resources—but it is necessary.[138]

92. According to the Institute of Public Policy Research (IPPR), the UK's commitment to and delivery of international poverty reduction objectives thus needs to be judged across a whole range of policies including those which are outside the direct control and remit of DFID.[139] This chapter looks at three aspects of the wider UK-India partnership —"beyond aid"—and at how these relate to development goals, namely climate change, trade and investment and education and research.

Climate change

93. As the world's fourth largest carbon emitter, India is critical to the outcome of global climate change negotiations and Indian energy needs have a huge impact on international energy markets. DFID wants climate change to be a key part of its new relationship because India has a large population (400 million) who still do not have access to modern energy sources; it has the second largest number of people after China who are vulnerable to climate change; and, because it has not yet determined how it will meet its increasing energy needs.

94. We met the new Environment Minister Jaraim Ramesh in India. He was particularly pleased with the relationship between India and the Coalition Government and said he had a good relationship with the Secretary of State for Energy and Climate Change, the Rt Hon Chris Huhne MP, and the Minister of State for the Department of Energy and Climate Change, Greg Barker MP. Dr Price, from Chatham House, reported that although India's priority had been economic growth, it was increasingly recognising that it could and should play an important role in mitigating climate change by developing renewable energy, adopting low carbon technology and conserving its forests.[140] Dr Mehra told us that climate change was now being more widely debated in Indian society.[141] She also explained how the new Minister had begun to try to shift the debate in India:

    He started introducing the arguments that India is a highly vulnerable country, we need to understand our degree of vulnerability and we should also seize the future—so recognise that carbon constraints could lead to India's underdevelopment. We have the capacity to invest in technology now so that we emerge as a winner in the low-carbon transition.

She said that India was not as advanced as China in terms of thinking about investing in clean energy sources. Nevertheless it had recently introduced policies to tax coal and to stop subsidising kerosene.

95. The UK approach to climate change in India is a cross-Government one. There is a Climate Change and Energy Unit (CCEU) in India which brings together staff and resources from the FCO, DFID, the Department for Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs (DEFRA) to lead the UK climate change strategy for India. DFID says:

    CCEU leads a co-ordinated dialogue with Government of India on the UK approach to climate change. It works with a wide range of Indian partners including the Government of India, business, and NGOs to deliver our joint objectives on: a credible, fair and ambitious global agreement; rapid investment in low-carbon growth; and increased resilience of the poor to the impact of climate change. It also works jointly on the financial frameworks for climate change, ensuring they are effectively coordinated across HMG departments. The Unit's joint approach has enabled it to factor development concerns into the full range of climate change discussions.[142]

96. Christian Aid commented that there was little information available about the work of the joint DFID-FCO unit and called for greater transparency.[143] DFID has produced a list of disparate projects under the heading 'climate change'—however it has not set out a clear strategy or approach. Oxfam highlighted the need to develop low-cost, low carbon energy for the poorest:

    India had an estimated 400 million people without access to electricity. On a per capita basis, the average person in India emits about 1.2 tonnes of carbon dioxide, compared to over 20 tonnes in the US. Therefore increasing energy use and access are development priorities for India. But if catastrophic climate change is to be avoided, India, and other developing economies, will need to forge new low carbon paths to development, and as they do so, they will incur incremental costs—for example the higher costs of investing in a wind farm over a coal-fired plant. These will, by definition, not be met by the private sector without public intervention.[144]

97. The Secretary of State told us that DFID was discussing how to use its climate finance to help the development of green energy, especially for the poorest, in India.[145] We are delighted that the Government intends to approach climate change with India in a coherent, cross-Government manner. However we would like greater clarity about the Climate Change and Energy Unit—in particular the Government's objectives and work plan for it, and DFID's strategy for ensuring that developmental concerns, including helping India to develop new low carbon paths so that it can provide affordable energy for the poorest, are an integral part of this.

Trade and investment

98. During the past two decades India's trade has grown twenty-fold as it has gradually reduced its restrictions on Indian firms investing overseas. India had historically sought to ensure its large domestic market demand was met by Indian companies and has worried about the impact of more competitive foreign goods on its domestic market. It now operates a more liberal trading environment. In 2004 India ranked 20th among world exporters and fifteenth among world importers of goods. In terms of services it was the eighth largest exporter and the seventh largest importer.

99. DFID says:

    Development is a recognised component of UK trade policy, reflected in the work of the Department for Business Innovation and Skills/DFID Joint Trade Policy Unit. At the beginning of 2010, an India Trade Policy Unit (ITPU) was established, with a cross-HMG work plan. The ITPU brings together FCO, DFID and UKTI expertise and networks to pursue key HMG objectives such as the India-EU Free Trade Agreement and a successful conclusion to the WTO Doha Development Agenda.[146]

100. We met UKTI officials in Indore, Madhya Pradesh. We were told that UKTI did not normally come to places such as Indore since it was a second tier city. The team were based in Mumbai and also covered Pune—both thriving cities. The UKTI presentation, designed for UK companies, was intended to attract investment to India, and as such presented the modern, technologically advanced, India. This was a markedly different picture of India from the one we saw where DFID worked. This is the reality of India. However we were concerned that UKTI was not engaged in cities such as Indore, which DFID was trying to help develop. There is a need for a more coherent UK Government approach to attracting investment to India from the UK.

101. India exports a range of products and increasingly services. It has been able to produce generic drugs at much lower costs than western rivals. This has significantly brought down the cost of anti-retrovirals. For example, in the 1990s treatment cost between US$10,000 and 15,000 per person per year. By 2001 the same treatment was available from Indian pharmaceuticals for US$300. Now it costs just $88.[147]

102. Stop Aids campaign has expressed concerns about one particular aspect of the India-EU Free Trade Agreement—the inclusion of a Trade Related Intellectual Property (TRIPS) Plus clause which it says would markedly increase the price of generic HIV treatments. According to Stop Aids Campaign about 80% of people on anti retroviral (ARV) treatment for HIV across Africa are taking high quality, affordable generic drugs produced in India. India has been able to do this by restricting the granting of patents on new drugs to those which were distinctly new or different from previous versions.

103. Stop Aids Campaign argues that the new EU-India Free Trade Agreement will necessitate a change in this policy "significantly threatening the vital supply of Indian medicines."[148] We met with the Clinton Health Access Initiative in Delhi—a private foundation which aims to increase the availability of low cost quality drugs for AIDS and malaria to developing countries. They sought to reassure us that it was highly unlikely the Free Trade Agreement would prevent India from continuing to produce and export low cost generic HIV drugs and pointed out that DFID was a strong supporter of ensuring access to life saving medicines through its "Achieving Universal Access" programme.

104. We support the expansion of trade between India and the UK and consider that increased trade has the potential to assist development in India. For example, India has played an important role in the production of low cost anti-retrovirals which have greatly assisted those suffering from HIV/AIDs in both India and Africa. The proposed EU-India Free-Trade Agreement should ensure that India can continue to supply essential and affordable medicines in this way without penalty, recognising that over time Africa is likely to develop its own capacity to do so. DFID must champion this within the Government and the UK Government must lobby for this within the EU. We recommend that the Government set out its position on this issue in its response to our report.

105. DFID has a key role to play in ensuring that UK Government policies "beyond aid" are coherent with its poverty reduction objectives. Development will not happen with aid alone. India is growing fast and already attracts large amounts of inward investment. DFID must play a greater role in encouraging UK investment in India to actively support DFID's development objectives, especially in the poorest states.

Education cooperation

106. In India we discussed different aspects of UK-India cooperation in education. DFID has provided support to Government of India programmes for universal primary education and is now considering helping with secondary education. The British Council has projects amounting to £1.3 million for 2011-12 including training 3,000 master trainers in English to reach 750,000 teachers.[149]

107. There are 44,000 Indian university students currently studying in the UK. They constitute the second largest number of international students after China. We were told that India could not itself provide sufficient university places to meet the growing demand for higher education but there were restrictions on third countries opening campuses in India. However we were told this would change once the Government of India Foreign Education Providers Bill was passed, opening up opportunities for UK Universities.

108. The Secretary of State told us about DFID's "research hub in Delhi, which works with the Foreign Office and the Research Councils UK to develop research opportunities with universities in India, and the UK, which will support development and action on climate change".[150] He suggested this was an evolving area of cooperation. The Government is seeking to promote greater opportunities for cooperation between the UK and India at higher education level. We welcome the Government of India's Foreign Education Providers Bill, currently before its Parliament, which will open up opportunities for UK Universities to invest in India and help meet the growing demand for higher education.

Policy Coherence for Development

109. On these three issues—education, climate change and trade, which are wider than development—the UK can have a significant and positive impact. To do so it needs to work together with other Government departments. One World Action said: "DFID needs to do more to work across Whitehall to influence other Ministries to ensure that trade, investment and security policies do not further exacerbate poverty and inequality in India."[151] As noted, there was no evidence that UKTI shared DFID's objectives in relation to inward investment. Dr Eyben thought that DFID and FCO could improve their working relationship,[152] although on our visit we witnessed good cooperation between these across a range of issues.

110. World Vision pointed out:

    In India, more than anywhere, it is crucial that DFID plays a full role in ensuring that the recent focus on India's economic development is not to the detriment of the "poorest faces of India". India is a large and diverse country with over 1 billion people living in it; huge prosperity and high levels of poverty live side by side and it is vital that the UK works with the Government of India to ensure that those in poverty receive the support they need and that the prosperity is not isolated and brings equity.[153]

DFID has created a new Partnership Secretariat which focuses on developing partnerships with the emerging powers on climate change, trade and on other issues. The Coalition Government has recognised the importance of policy coherence for development. It is important that DFID has a strong voice in all cross-Government debates on India and ensures that poverty reduction is a key part of these. We recommend that the Government provide more information on the work of the Partnership Secretariat in the its Response to this Report.

137   Ev86 Back

138   Ev w16 Back

139   IPPR, Policy Coherence and the future of the UK's International Development agenda, March 2010. Back

140   Gareth Price, India's Global Impact,, February 2011 Back

141   Q 163 Back

142   Q  Back

143   Ev w3 Back

144   Ev w18 Back

145   Q 259 Back

146   Ev 92 Back

147   Gareth Price, India's Global Impact,, February 2011  Back

148   Ev w28 Back

149   DFID, Education Collaboration,Briefing for visit, March 2011 Back

150   Q 261 Back

151   Ev w14 Back

152   Q 167 Back

153   Ev w67 Back

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Prepared 14 June 2011