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End of British Aid Marks Economic Shift for India

  • Anjana Pasricha

Indian Foreign Minister Salman Khurshid, left, with British Foreign Secretary William Hague, New Delhi, Nov. 8, 2012.

Indian Foreign Minister Salman Khurshid, left, with British Foreign Secretary William Hague, New Delhi, Nov. 8, 2012.

Britain has decided to stop giving development aid to India - a country with rising incomes and a growing economy. The move marks a change in the global profile of the former British colony from a poor country dependent on foreign aid to an emerging economy which has itself become a donor nation.

Announcing the decision to stop direct aid to India by 2015, British officials said it is time to recognize India’s changing place in the world.

In India, the move was met with a nonchalant shrug by political leaders. Foreign minister Salman Khurshid said “aid is past, trade is future.”

Earlier this year, President Pranab Mukherjee, formerly India’s Finance Minister, had called the British annual aid contribution of about $360 million a “peanut.”

For many years after India’s independence from British rule, New Delhi was among the largest recipients of foreign aid in the world.

But economist D.H. Pai Panandiker says that over the past decade, the aid has become insignificant to India.

“The equation has completely changed," notes Panandiker. "It is no longer the India of pre-2000. Post 2000 India is entirely different. The total annual export earnings would be $ 300 billion. Against that aid of a small amount of a few million dollars becomes almost invisible. India is now self reliant, it does not need any foreign assistance to develop.”

In fact, a growing economy has allowed a reversal of roles, and made it possible for New Delhi to emerge as a donor nation. In recent years, India has given a $2 billion aid package to Afghanistan, and has extended lines of credit worth several billion dollars to African countries and Bangladesh. With a growing aid portfolio, India recently announced plans to establish its own aid agency.

Analysts say India wants to be seen as an emerging global power which is no longer dependent on handouts by richer countries.

However development experts point out poverty is still rampant in India, especially in underdeveloped regions of the country. Two thirds of the 1.2 billion people live on less than $2 a day.

Addressing a seminar in New Delhi Friday, India’s Rural Development Minister, Jairam Ramesh, says that nutrition and health remain critical issues for India.

“A country like Kenya has had a faster decline in infant mortality rates in the last five years than what India has witnessed in the last 25 years. We all know that the health system in India has collapsed. In many of the poor parts of India in fact, the public health system simply does not exist,” Ramesh says.

Development economists say while foreign aid may only add up to a small amount, it makes a significant impact on poverty alleviation programs, and the time to “disengage” is not right. An author and commentator in New Delhi, Gurcharan Das, agrees.

“For the very poor it does matter, and very often development aid of this kind brings with it organization and technology and method of distribution which make it more efficient,” Das says.

The decision to end British aid comes as many donor countries take a closer look at the need for foreign aid. It also comes at a time of economic gloom in Britain, where some have questioned handouts to Asia's third largest economy.

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