Aid Ties to Bind third World
Developed countries have given foreign aid to help override various needs of Third World countries, including India. India has been not only a beneficiary of such assistance but even during the period of its own difficulties, it has given development assistance to poorer countries especially by way of technical cooperation, capacity building, humanitarian assistance, contributing to UN peacekeeping and other such activities. Currently, when India is a rising power, it has significantly raised this “development cooperation” (DC), which is now in billions of rupees.
Should a country with high poverty levels be giving aid to others? Nehru’s argument that economic development of all countries is an obligation of the entire international community remains relevant, and PM Modi echoed this in his speech at the UN that “India is part of the developing world, but we are prepared to share our modest resources with those countries that need this assistance as much as we do”.
There are two levels to India’s aid. One is the normative level, underlying the discourse on South-South solidarity, regional cooperation, and India remains firm as a leader of these norms. The second level is the “pragmatic interpretation” that links assistance to economic, and geopolitical reciprocity for strategic transactions at the bilateral level.
In keeping with this two-level approach, India’s major interest is in strengthening regional links. Over 80 per cent of India’s grant and loan commitments go to the South Asian countries: Bhutan, Afghanistan, Sri Lanka, Nepal, Bangladesh and the Maldives. This is a clear priority area for this government, and one that will pay positive dividends. Here they seek economic benefits and also compete against other rivals, including China, Pakistan and the West for retaining influence.
Indian development cooperation is often linked directly to national development. For example, the hydropower cooperation with Bhutan will generate export revenues for Bhutan and provide clean and low-cost electricity to India. A similar model is envisaged for Nepal. Thus, mutual gain and partnership based on reciprocity as opposed to aid as charity gives dignity to the recipient and benefit to the giver.
At other times, assistance has been offered on humanitarian grounds, for example, writing off the debt of many of the Heavily Indebted Poor Countries (HIPCs) that were unable to sustain any debt repayment. DC has been extended to Africa. There have been some reports that the motive is to extract resources, especially minerals, oil and buy cheap land, since commercial engagement with Africa has been on the rise, in part due to the opportunities it provides to India to build its energy security. While no fresh line of credit has so far been issued to an African country by the new government, it is expected that this will change in the coming year. The next India-Africa Summit will take place in 2015, where PM Modi is expected to reveal his government’s Africa policy. The Africa summit will be significant in that the Indian government will invite all 54 African heads of state to New Delhi. This will of course be compared to the Chinese policies towards Africa, because the Chinese have been particularly proactive in both giving assistance as well as building strong business links with the Africans that include extraction of natural resources.
India has created a Development Partnership Administration, under the ministry of external affairs, to streamline assistance programmes and has played an important role in setting up the BRICS Development Bank. The idea of development being projected by the Indian government is that development means growth and growth comes with expansion of business.
Simultaneously, there are many poor countries that receive external development support for social infrastructure and community-based projects. These, however, are much less than the assistance being given for infrastructure-oriented projects. Under the “development as growth” model, the Indian private sector plays a hugely important role.
The MEA also has initiated joint venture partnerships between Indian PSUs and PSUs in partner countries. In the last six months alone, India has signed up to three major multilateral institutions: the BRICS Development Bank (New Development Bank), the Asia Infrastructure Bank and the SAARC Development Bank. All three institutions are being led by emerging economies from the South.
At the BRICS summit in Brazil in July 2014, the New Development Bank whose primary objective is to fund infrastructure and sustainable development projects was founded with India privileged with the bank’s first presidency. The BRICS Development Bank has the potential to change the terms of aid. Firstly, by offering credit to poor countries without the economic and political conditionalities of privatisation and liberalisation that are linked to the Bretton Woods institutions. Secondly, a BRICS country would have the same share of capital without the agreement of the other four countries. This particular requirement was allegedly put forward by India to ensure the bank is not dominated by any one country.
Further, 21 Asian nations including China and India signed an agreement to establish a infrastructure investment bank that will provide rich resource capital base for infrastructure financing, and reduce the dependency on other established multilateral development banks such as Asian Development, the World Bank and the International Monetary Fund. At the SAARC summit in November 2014, member countries agreed in principle to establish a SAARC Development Bank. Officials state that India would be the site for setting up the bank, since it is the largest and most powerful economy in the region.
Clearly, India along with the other BRICS countries is providing options for other developing countries in terms of development assistance as well as trade. Of course, the most gains appear to have gone to businesses whose opportunities abroad have gained. To be firm that the principles of development assistance remain consistent with mutual benefit, India needs to ensure that its assistance has a positive impact, that it is transparent and that the recipient countries do not turn against it because of some purely quick profit-making steps. For this, India needs to have impact assessments, involve civil society, train their officials involved in this assistance to be sensitive to both the needs of Indian societies as well as their partner countries.