Why the end of British aid to India won’t matter

The British international development secretary, Justine Greening, recently announced that all assistance from the UK to India will end by 2015. The withdrawal of foreign assistance from India's largest donor affords an opportunity to reflect on the role British aid (indeed, all foreign assistance) has played in Indian economic development, and on how Indian anti-poverty programmes will evolve in the absence of foreign aid.

The Indian beneficiaries of UK aid programmes will inevitably feel the loss of the experimentation and risk-taking that characterised UK aid. On the other hand, India has also been moving away from more fragmented anti-poverty programmes traditionally supported by donors towards more centralised, universal schemes. But these reforms require increasingly sophisticated management and accountability mechanisms — something donors have had limited success in supporting. While the absence of British aid may leave a small hole, it will not affect India's anti-poverty efforts.

To put the aid stoppage in context, consider that UK assistance comprises about 15 per cent of all foreign aid received by India. The UK gives slightly less than 10 per cent of its foreign aid to India. This makes India the largest beneficiary of UK aid and the UK the largest donor to India. Given the current state of the British economy, it is only natural the UK would be forced to reconsider its assistance to fast-growing countries such as India. Indeed, other donors may soon follow suit, forced by fiscal constraints. In the US foreign aid may be cut due to "budget sequestration", under which all government programmes will be subject to across-the-board cuts.

More than half of official aid from Britain to India went to programmes focused on education, health, nutritional programmes, and water and sanitation access. In relative terms, these are not large amounts (the $450 mission in total annual British aid was about 0.04 per cent of India's GDP). Despite some prevailing views that the Department for International Development was merely a source of British "soft power" or that British aid simply supported British strategic and commercial interests, the evidence suggests that Britain has been one of the better-behaved donors. According to a joint assessment of the Washington-based Brookings Institution and the Centre for Global Development, DFID performs quite well when ranked against other donor agencies on measures of efficiency, institution-building in recipient countries, keeping administrative burdens to a minimum and ensuring transparency.

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