If India doesn't 'need' aid, why do foreign governments still give it?
Although India is an economic powerhouse, focused foreign aid still has a vital role in its development and its application could be a blueprint for the future
Priyanka Sharma, 5, passes a stack of used plastic containers, scavenged from a nearby political rally, to her sister Priya, left, in New Delhi, India. Photograph: Gurinder Osan/AP
Aid to India has been in the news a lot recently. India is growing so fast that it will be the second-largest economy in the world (after China) in a few decades. It has a space programme, a nuclear programme, and even an aid programme. So why do rich countries still give India aid? Fair question. But rather than an anomaly, is aid to India actually a blueprint for aid programmes of the future?
Every year, almost 2 million Indian children can't get enough food or basic healthcare and die before their fifth birthday. Around 10% of Indians (about 120 million people) drink dangerously dirty water, while 400 million are without electricity. The international community needs to work to support poverty reduction and green growth in India, and there is a very long list of ways of doing that. Aid will play only a minor part in this support but, despite what some will tell you, it still has a role.
The main criticism of aid to India is that India doesn't need it. But that is exactly the reason why it can work well. The trouble with aid is that when it becomes too important to a country (too much, for too long), it stops supporting the process of development and starts to delay it. It can undermine the ability and accountability of the state, because the state gets its money, policy and legitimacy from elsewhere. This is most obvious in the pernicious practice of "policy conditionality", where countries have to do what donors say to get their money.
Because of this, it is often those countries that need aid least that can use it best. Aid has been irrelevant to India's GDP for many years, contributing well under 1%. But it can play a catalytic role to support change and progress when it is invested wisely, without undermining ownership and institutional development.
There are three ways that aid should be spent in India. Firstly, in support of big infrastructure projects. This will mostly be in the form of concessional loans from the World Bank and other regional development banks, which count as aid but will end in the next few years as India "graduates" from being a low-income country and so stops being eligible.
The second way is through the work of big international efforts to support development, particularly in the areas of health, water and resilience to climate change. One of the great things about being alive in this era is that noble international initiatives exist to help all human beings, regardless of which country they are in. These attempts, mostly led by the UN and supported by other funds such as the GAVI (Global Alliance for Vaccines and Immunisation and the Global Fund, are a work in progress, with failures to learn from as well as successes. But those successes have been fairly spectacular in some places, and need to be scaled up.
We also need to develop new ways for the international community to unite to fight poverty and promote clean development. We need to invest in health and climate change technology, and support knowledge-sharing between rich, middle-income and poor countries.
Thirdly, some rich countries should continue to contribute bilaterally. Donor government aid agencies have acted a little like NGOs in India, only with more money and more access to the top decision-makers. Their money is small fry even for Indian states, let alone for the central government, so lesson-learning and knowledge-sharing are at least as important as the financial investments themselves. The work they do on the ground, and the money they invest, allow innovative ideas to be applied, increasing the pool of knowledge and experience in breaking through difficult problems of extreme poverty.
NGOs and government aid agencies can connect various sectors of society, including civil society, thinktanks and the private sector. For all the important work it does, the UN can find it hard (for political reasons) to challenge host governments, meaning that bilateral donors and NGOs have an important role to play. Crucially, they work within clear policy guidelines set by the Indian government, rather than placing their own policy conditions, so they build rather than undermine national and regional government capacity and accountability.
There are far more important things than aid for poverty reduction in India, and I would not fight to keep it at today's levels. However, the majority of poor people now live in middle-income countries. The world needs to find a new way to support those countries to tackle poverty quickly and effectively.
The way the international community provides aid to India is a hint towards a new global aid compact, in which the old top-down donor-recipient relationships are replaced by respectful collaboration between sovereign countries: a state strong enough to say no, but wise enough to accept advice, support and appropriate financing.
If India doesn't 'need' aid, why do foreign governments still give it? | Global development | guardian.co.uk