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

5  The post-2015 relationship

111. The Secretary of State said the UK was 'walking the final mile' in its aid relationship with India.[154] 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 there—including sanitation and nutrition—we 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 no aid.

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 Parliament.

Working with multilaterals and other donors

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.[155]

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.[156] 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 it.[157]

119. We were told that DFID played a critical role in bringing other donors—both bilateral and multilateral—together. 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.[158]

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.[159] 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 2009-10—more than the UK aid budget.[160] 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.[161]

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.[162] 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.[163] 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 with—Kirloskar making irrigation pumps in Senegal for instance.[164]

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.

154   Q 206 Back

155   Ev 104 Back

156   Q 12 Back

157   Q 54 Back

158   Ev w17 Back

159   Ev w65 Back

160   OECD, India's Development Assistance, Opendoors, 8 June2010.  Back

161   Q 147 Back

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

163   Q161 Back

164   Q 155 Back

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Prepared 14 June 2011