5 The post-2015 relationship|
111. The Secretary of State said the UK was 'walking
the final mile' in its aid relationship with India.
He explained that, although India had been DFID's largest programme
for some years, this would change. India had demonstrated the
effectiveness of its pro-poor policies but immense challenges
remained. Nevertheless the Secretary of State did not wish to
pre-judge the post 2015 relationship at this stage.
112. DFID has said it is continuing to work in India
because this is where the poverty is, and we support DFID in this.
We recognise that India has some way to go to meet the Millennium
Development Goals. We also recognise that India has high levels
of economic growth, is increasing taxation, and is directing more
resources towards public services. As such we are keen to support
a step change in the nature of the relationship in the period
up to 2015. Efforts towards this end have already begun with Prime
Minister's declaration of an "enhanced partnership"
covering much more than development and recognising India's role
as an emerging economic and political power.
113. If DFID's proposed focus on fewer states is
matched with increased emphasis on key social sectors thereincluding
sanitation and nutritionwe would expect to see some marked
improvements in these states by 2015, bearing in mind that DFID
funding will primarily be used to demonstrate good practice, provide
technical support and build capacity. State Governments are not
opposed to this.
114. We discussed with officials in Madhya Pradesh
the possibility of a different type of relationship with DFID.
They were positive about considering new ways of working. They
said that technical assistance was more important than financial
assistance; and that the Government of Madhya Pradesh would still
be interested in technical assistance from the UK if there was
115. We also recognise that there is an opportunity
cost to continuing to provide £280 million a year in aid
to India. This is a sizable sum of money which could be spent
in other poorer countries. DFID has produced a list of the results
it expects to see in each country it provides aid to by 2015.
We recommend that the newly created Independent Consortium
on Aid Impact (ICAI) undertake a study of the opportunity cost
of DFID continuing to provide £280 million per year to India,
or to other countries with a lower GDP per capita or slower progress
towards the Millennium Development Goals, as a means of demonstrating
to us and the British public whether investing in India represents
value for money.
116. Notwithstanding, in a context where DFID
is closing its aid programmes in some poorer countries we think
that after 2015 DFID's aid relationship with India should change
fundamentally. Assuming the progress we expect to see, DFID should
continue to provide technical assistance where needed and requested,
but the funding mechanism should change. This will need to be
planned in advance. DFID must now begin to consider how the post
2015 relationship will look and report on its plans in the next
12 months. We will continue to monitor progress in India and intend
to ensure that any decisions are reviewed before the end of this
Working with multilaterals and
117. Unlike many developing countries where DFID
works, there are few donors in India. Multilateral partners include
the World Bank ($14 billion over 3 years), the Asian Development
Bank ($3 billion annually), the United Nations ($240 million annually)
and the European Commission ($113 million annually). The main
bilateral donors include the UK ($454 million); US ($50 million)
and Germany ($50 million). Japan also has a considerable ODA loan
portfolio in India ($2 billion), including $26 million in grants.
France, Norway, Sweden and Switzerland also have small programmes.
118. As noted in chapter one, India has reached the
threshold in terms of per capita income at which it is considered
to be a middle income country. As a result India will graduate
from eligibility to receive World Bank funds through the International
Development Association (IDA) in about three years' time.
This means the type of relationship which the World Bank has with
India will change towards a less concessional loans based one.
The World Bank already provides a mixture of loans and grants
to India. In the financial year 2011-12 the Bank's strategic priorities
are rapid, inclusive growth, sustainable development and increasing
effectiveness of service delivery. DFID works closely with the
World Bank in India with 40% of its aid being channelled through
119. We were told that DFID played a critical role
in bringing other donorsboth bilateral and multilateraltogether.
Many of the interventions that DFID has been supporting in-country
have been designed as joint interventions with the World Bank,
the EU and UN agencies. These include the Government of India's
programme on universal primary education and the Reproductive
and Child Health Programme.
120. As the largest bilateral donor DFID has an
important role to play in influencing other donors in terms of
best practice and value for money.
DFID also plays an important role in fostering dialogue
with other donors and works cooperatively with multilateral organisations
such as the World Bank. As India graduates from International
Development Association eligibility, DFID and the World Bank must
ensure the transition takes place without having a detrimental
effect on poverty levels and on inequality. Given India's apparent
desire to reduce its reliance on bilateral donors, we expect the
role of multilaterals, especially the World Bank, to increase.
We recommend that over the next year, DFID undertake a careful
examination of the Bank's potential to continue to drive forward
poverty reduction in India.
Working with India as a donor
121. As mentioned in chapter one, India is also an
aid donor. The Organisation for Economic Cooperation and Development
(OECD) estimates that India spent US$539 million in 2009-10more
than the UK aid budget.
However the type of assistance provided by India is qualitatively
different from that provided by traditional donors. India is not
a member of the OECD's Development Assistance Committee (DAC)
which determines the type of assistance its members may report
as Official Development Assistance. We were told that India views
its assistance as south-south cooperation rather than aid.
122. In Africa India has undertaken a US$117 million
Pan-African e-Network project linking schools and hospitals in
Africa with those in India.
In India we learnt that the Government of India had spent a lot
on building roads from the Iranian border into Afghanistan. We
were told Indian assistance was very popular there.
Dr Price explained India's comparative advantage in some areas:
What India is giving to other countries is low-cost
irrigation equipment that they can do because big Indian companies
have got a massive history of doing things at very low cost. They
can do things that we would be struggling to find a British company
that could compete withKirloskar making irrigation pumps
in Senegal for instance.
There is an opportunity for greater mutual learning
about development between the UK and India. The Foreign (Permanent)
Secretary Nirupama Rao at the Ministry of External Affairs, which
oversees India's development assistance, also suggested greater
cooperation could be mutually beneficial.
123. India is increasing its role as a donor in
many of the countries where DFID works. We recommend that DFID
establish a development forum for joint work with the Government
of India and its focus state Governments to share best practice
and provide important learning opportunities for both parties.
This Forum for Development Dialogue could see the UK providing
technical assistance with India's aid programme. We recommend
the Forum be established before 2015.
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OECD, India's Development Assistance, Opendoors, 8 June2010.
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Gareth Price, India's Global Impact, www.chathamhouse.org,
February 2011 Back
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