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Last Updated : May 18, 2020 08:38 AM IST | Source: Moneycontrol.com

Providing development aid has been an important part of Indian foreign policy. Will it change due to COVID-19?

The COVID-19 situation may push India further to secure more assistance and soft loans under various bilateral or multilateral windows.

In the context of COVID-19, France has announced that it will provide €200 million to India to support vulnerable sections of the society. President Trump has said that the US will airlift 200 ventilators to India costing $2.6 million. Earlier, the US Centers for Disease Control and Prevention (CDC) agreed to provide $3.6 million to assist India's response to coronavirus. The World Bank’s total commitment to India’s COVID-19 response has reached $2 billion. To strengthen the Indian health system, the China-based Asian Infrastructure Investment Bank (AIIB) has approved a loan of $500 million.

For more than a decade, the narrative has been that as a rising power, India has become a major aid provider rather than a recipient of development aid. In fact, provision of development assistance abroad has become an important part of Indian foreign policy. Is it now changing because COVID-19? A careful analysis of development data reveals that the shift was already underway in the last few years, much before COVID-19 arrived on the scene.

While answering a question in the Loka Sabha in March 2017, the Minister of State for External Affairs, General V K Singh asserted that “in the last three years, India has provided more aid to foreign countries than it has received”. The figures, provided were about grants-in-aid rather than soft loans. Still, from 2005 onwards, Indian development profile was moving more towards provider of development cooperation.

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Indian development activities abroad broadly fall under three major headings. These include lines of credit (LOCs), capacity-building, particularly the Indian Technical and Economic Cooperation (ITEC) program, and bilateral grant assistance projects.

Since 2002, the EXIM Bank has signed 259 LOCs covering more than sixty countries in Africa, Asia, the Commonwealth of Independent States (CIS), and Latin America, with credit commitments of more than $25 billion. Majority of these LOCs have gone to African countries and are concentrated in the infrastructure sector. They have enabled Indian exporters to penetrate new markets and promoted Indian technology abroad. LOCs have helped in creating goodwill for India and also counterbalanced the growing Chinese influence, particularly in Africa.

Under capacity building programmes, more than 10,000 personnel from other developing  countries come to India every year for training.

Grant assistance projects are being implemented mainly in South Asia and Africa. Due to growing uncertainty, India has not announced any major new project in Afghanistan. Still, its commitments in Africa are growing. Recently, India committed $10 million to the SAARC Coronavirus Emergency Fund and also to provide medical supplies to other developing countries.

The OECD Development Assistance Committee (DAC), which monitors global aid data also includes soft loans in the Official Development Assistance (ODA), the term used for development aid. Earlier, those concessional loans where the grant element was at least 25 percent were included under ODA. More recently, only the “grant-equivalent” of loans would be recorded as ODA.

As per latest OECD-DAC data, in 2017 and 2018, India has been the largest recipient of gross ODA in the world. In these two years, India received about $4 billion each year. Other major recipients viz. Afghanistan, Ethiopia, Syria and Bangladesh received lower amount than India. India, of course received more soft loans (more than $3 billion a year) than grants. The grant elements were larger in the case of some other developing countries in Asia and Africa. Today, India is the number one recipient of aid from Japan and Germany. It also receives significant assistance from the European Union, France and the US. Aid from the UK has declined in recent years.

India is not a member of the OECD. Similar to other BRICS countries, New Delhi also does not follow OECD’s ODA definitions for its development aid abroad. Still, the OECD tries to capture these donors’ outflows under the category – ODA-like flows. India’s ODA-like flows in 2016 and 2017 were $1.7 billion and $3 billion respectively. Similar figures for China were $3.6 billion and $4.6 billion in these years. In 2017, India also provided $1.1 billion to multilateral organizations like the Asian Development Bank, AIIB and the World Bank.

These figures indicate that Indian development assistance dynamics has already been under transformation in the last few years. Soft loans have been increasing mainly to fund new infrastructure and renewable projects. The COVID-19 situation may push India further to secure more assistance and soft loans under various bilateral or multilateral windows. Although India will continue to be engaged in its development activities abroad, its own development needs will also be growing. We may witness some new trends in India’s development aid dynamics in the coming years.

Gulshan Sachdeva is Jean Monnet Chair and Chairperson Centre for European Studies, Jawaharlal Nehru University, New Delhi. Views are personal.
First Published on May 18, 2020 08:38 am
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