When aid recipients become donors, should the helping hand be pulled back?

IN JANUARY 2012, India took the first steps towards setting up an international aid agency, to be located within the Ministry of External Affairs. In February, there was a controversy in Britain over the government’s decision to continue giving £280 million in aid to India each year. This charity did not persuade the Indian Air Force to award its fighter aircraft contract to a British manufacturer. Further, it was argued in London, at a time when Britain itself was facing economic decline and advocating austerity in public spending, did it make sense to send money to an emerging economy that could surely look after itself?Were the two phenomena paradoxical? Could India be an aid recipient and aid giver at the same time? To be fair it could and it can, for aid is often not so much a product of a recipient’s needs as a giver’s motivations. Why does a country give aid to another? There are essentially two reasons. At the broader level the winners of the international economic system hand out some of their earnings to the less well-off as part of a contract, and to ensure disaffection does not boil over. This is the sort of enlightened self-interest that determines why a family in an upperclass neighbourhood contributes to the welfare of the nearby slum lest neglect and alienation someday breed extreme resentment. This sentiment is not always expressed negatively. The international aid community is full of “do gooders” who genuinely believe in aid for aid’s sake and not merely as a contrivance for stability. Yet the wider philosophy remains the same. The second reason is more transactional. Countries give aid to strategic allies in exchange for, say, votes at the United Nations and similar bodies or route it in the form of goods and services produced by the donor economy. For recipient countries such as India—with expanding internal resources—external aid is only useful if it is substantial or if some unique proposition is being delivered. In the case of British aid, £280 million amounts to just over `2,000 crore a year. Five years ago, estimates by the Comptroller and Auditor General of India concluded that annual antipoverty spending by union government ministries alone amounted to `51,000 crore. The outlay has only grown since then, with state government spending added to it. As such, British aid is a drop in the ocean. There was a time when India happily took bilateral assistance from anyone who offered it. But as domestic capacities strengthened, this image as an all-purpose beggar was recognised as an embarrassing anachronism. There was also a practical problem. Individual donors had different reporting formats, regulations to meet and forms to fill. The bureaucratic cost of administering a relatively small amount of aid from a specific country was just not worth it for the government. In 2003, the NDA government cut the Gordian knot and said it would take bilateral aid from only six donors—Britain, the United States, Russia, Germany, Japan and the European Union. The UPA government, which came in the following year, initially criticised this policy and reinstated several other donors. Eventually, the UPA government too saw merit in its predecessor’s restrictive action. As such, what Finance Minister Pranab Mukherjee means when he terms British aid “a peanut in our total development programme”, and what Jaswant Singh did in the Finance Ministry in 2003 when he shortened the list of bilateral donors to India are not substantively different. For donor countries the continuance of aid well beyond any reasonable sell-by date and without pragmatic calculations of its political benefits is probably the result of sheer inertia. Japan is one of India’s largest aid partners, but its imperatives and support have remained the same even as India has moved from poor to middle-income status and even as its global stature (and ability to win an election to, for instance, the Security Council) has challenged if not surpassed Japan’s. Some Japanese aid helps develop Indian infrastructure and (indirectly) facilitates Japanese companies that have invested in India. Some of it is clearly overdone, and the result of nobody in Tokyo reversing a legacy initiative and taking a cold-blooded cost-benefit call. In the case of Britain the inertia is of another order. The British Department for International Development (DFID) is almost a special-interest group within Whitehall. With its impressive budgets, job opportunities, patronage networks and local associate organisations in India, it has a vested interest in perpetuating the idea that British aid is absolutely critical to India’s development, if not its survival. Those in Britain who wonder if India deserves aid should not point a finger at New Delhi alone. They would be better served turning a gaze at DFID and asking whether it is becoming a self-serving entity. The principal problem Britain faces is that it has divorced its aidgiving from a straightforward pursuit of foreign policy goals. In contrast, emerging powers like China and India take a far more calculative line. When China builds airports in Africa or India strengthens public health capacities in Afghanistan, it does so with clear, short-term objectives. These could be seeking a stronger economic relationship and access to resources (in the case of China and Africa), or a deeper strategic and security embrace (in the case of India and Afghanistan). While aid giving is increasingly becoming more transactional—and its transactional attributes are in turn increasingly appreciated in traditional recipient capitals that are transiting to a new role in world affairs—the semiotics of aid is equally important. There is a difference between a country offering help as a partner, and appearing condescending— even without wishing to be so. A few years ago, the then British foreign secretary turned up in India with more enthusiasm than good sense. He went on a poverty tour of the countryside, even spending a night in a poor village in Uttar Pradesh and taking pains to empathise with the “real India”. Obviously, this squared up with his politics—he belongs to the left of the Labour Party—and his sense of the relationship between First World Britain and the desperately poor in India. It is the same attitude of gushing charity and noblesse oblige that informs so much of Britain’s aid infrastructure in India. All this may be wonderful for the soul but is it astute diplomacy? It gets Britain NGO partners, but does it actually win it new Indian friends and influence people at large? If not, is the aid programme worth it?

The views expressed in this column are of the author alone.