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Indian economy is now the third-largest in the world (in Purchasing Power Parity terms), growing at approximately 7% for the last two decades. Indian army is the world’s third largest military, Indian Air Force is the world’s fourth largest air force and our annual defence budget runs into billions of dollars. We are also a nuclear-weapons armed state and recently spent hundreds of millions of dollars on space research.
With this in mind, it becomes a bit puzzling to note that India was the sixth largest recipient of foreign aid (official development assistance) in 2011 and continues to be one of the highest recipients. According to the data on World Bank’s website, it received $3.2 billion in 2011, $1.6 billion in 2012 and $2.4 billion in 2013. The top donors have been- World Bank, Japan, Germany, Asian Development Bank, United Kingdom, France, Global Fund (to fight AIDS, tuberculosis and malaria), United States and European Union.
If that confuses you, what might puzzle you more is that while it has been receiving billions of dollars in foreign aid, India has also been giving aid to other countries. It has a foreign aid budget of $1.6 billion for the period 2015-16.
Most of India’s foreign aid over the past decade has been directed towards its neighbours. An analysis by Devex says that 84% of this $1.6 billion Indian foreign aid is to be directed towards the South Asia, with Bhutan being allotted the largest share of 63% ($981 million). This is in consonance with India’s status as a regional power.
India has historically been the largest donor to Bhutan. Much of India’s assistance here goes towards developing the hydro-power sector. India has signed a treaty with Bhutan in 2007 to develop and import a minimum of 10,000 megawatts of electricity by 2020.
The next highest recipient is Afghanistan at 7% ($108 million). India has been assisting in the construction of large-scale infrastructure projects there, including the new parliament building in Kabul and the Salma Dam in Herat province.
Other recipients include Sri Lanka at 5% ($80 million), Nepal at 4% ($67 million), Bangladesh and Myanmar at 3% each ($43 million) and Maldives at 2%. Moreover, African countries are also slated to receive 3% of this amount.
India’s foreign aid has been growing continuously over the past few years, rising from $442 million in 2009-10 to $1.6 billion in 2015-16 (at an average of 24 percent). A similar trend is also exhibited by other BRIC countries. Foreign aid expenditure of the BRIC countries increased from about $1.5 billion in 2005 to approximately $3.6 billion in 2009. In fact, the BRIC foreign aid continued to increase substantially even in the aftermath of the global financial crisis of 2008.
Clearly, foreign aid is not the charity that the rich countries occasionally do. In the contemporary times, it is used as a strategic tool for various ends – consolidation of donor’s status of regional, continental or global power, strengthen cultural or diplomatic relations, to reward the recipient country for favourable decisions/actions, to provide infrastructure needed by the donor for resource extraction from the recipient country or to gain other kinds of commercial access.
In fact, as reported by The Guardian, India’s decision to buy French Rafale jets rather than the Eurofighter Typhoon gave rise to accusations of ‘ingratitude’, as we seemingly did not return the favour of receiving hundreds of millions of dollars in aid. British International development secretary Andrew Mitchell even admitted that the focus of aid to India included ‘seeking to sell the Typhoon’ – in violation of the stated rationale of British overseas aid, to fight poverty and promote health and education.
India is in the process of creating its own foreign aid agency, the India Agency for Partnership in Development (IAPD), which will be able to spend $11.3 billion for the next five to seven years. Some other countries already have such an agency, like the U.S. Agency for International Development.
The government says that the agency would increase accountability over India’s expanding foreign aid spending, which is currently operated by a few officials in the Ministry of External Affairs.