India finetunes external assistance to meet strategic goals
India undertook a major review of its external aid policy in 2003 when the then Bharatiya Janata Party (BJP)-led government of Atal Bihari Vajpayee decided to change the image of the country from an aid recipient to an aid donor. Since then, successive governments have tried to promote development assistance as a key instrument in India’s foreign policy. And now the Narendra Modi government has moved to refurbish that policy in accordance with the country’s expanding economy and international profile as a “leading” power.
This was apparent from Finance Minister Nirmala Sitharaman’s July 5 budget speech. She announced a near 15% hike in the budgetary allocation for the Ministry of External Affairs, earmarking INR 17,884.78 crore for 2019-20, up from INR15,582.00 crore in the 2018-19 revised estimate. The allocated “Aid to Countries” has been increased by INR 2037.79 crore – from INR 5,545 crore in 2018-19 to INR 7,582.79 crore in 2019-20. More notably, she spoke of the need to “revamp” the Indian Development Assistance Scheme (IDEAS), which provides concessional financing for projects and contributes to infrastructure development and capacity building in recipient developing countries.
The reason for this is not far to seek. India’s development cooperation initiatives are known to suffer from project delays and low disbursal rate of lines of credit. In 2017, the Parliamentary Standing Committee on External Affairs had expressed concern that “inadequate, delayed, withheld and reduced funding have constituted severe obstacles to the execution of Indian foreign policy in recent years.” It was also seen in the past that in some cases there was hardly any association between the country’s economic interests and its lines of credit.
Conscious of this, the government now looks to do some course correction and focus where its long-term strategic interests lie. The move also comes as IDEAS is due to come up for a renewal after a few months. In 2015, a year after coming to power, the Modi government had realised the value of the programme and decided to extend it for five years. It also decided to streamline Lines of Credit offered to various countries in South and South East Asia, Africa and Central America. An effective external aid strategy is one that serves the country’s foreign policy objectives of boosting economic growth and protecting its strategic interests while respecting the recipient nation’s development needs and sovereignty.
In February, then External Affairs Minister Sushma Swaraj amplified this in reply to a member’s question in Parliament when she said India’s abiding geo-political, strategic and economic interests and the need to effectively deliver India’s assistance programme has prompted greater engagement with developing countries. Though the focus of development assistance has been countries in India’s neighbourhood and in Africa, India, she said, is expanding its development cooperation reach to Southeast Asia, East and Central Asia, the Caribbean, Latin America and Pacific Island countries.
The Modi government’s proactive stance has been evident from its focus on the Indian Ocean and littoral countries as well as Africa, that have witnessed a large number of China-funded infrastructure projects. Although not stated explicitly, India’s external aid is now geared by the need to keep the countries from drifting further into China’s strategic orbit.
Minister of State for External Affairs V Muraleedharan made this quite apparent in a recent statement in the Lok Sabha in which he highlighted India’s offer of soft loans for several development and capacity building projects in countries in the nearby and elsewhere that stands in sharp contrast to China’s Belt and Road Initiative which is increasingly seen by many as a debt trap. “Government is of the firm belief that connectivity initiatives must be based on universally recognized international norms. They must follow principles of openness, transparency and financial responsibility and must be pursued in a manner that respects sovereignty, equality and territorial integrity of nations,” he said in a veiled reference to the BRI.
The Modi government’s proactive stance has been evident from its focus on the Indian Ocean and littoral countries as well as Africa, that have witnessed a large number of Chinafunded infrastructure projects. Although not stated explicitly, India’s external aid is now geared by the need to keep the countries from drifting further into China’s strategic orbit