Resources for teachers

January 2013

India is a major emerging BRIC economy with its own space programme and more billionaires than Britain. Yet it is also home to more extremely poor people than all of Africa. Faced with such contradictory data, should the UK keep providing financial aid to India?

This article explores the issues facing the UK government as it re-evaluates its overseas aid commitments, especially assistance to India, ‘a country with more mobile phones than toilets’. Although international aid is given for humanitarian reasons, it can also play a geopolitical role. By providing aid, some richer countries may try to build international partnerships and influence in parts of the world that are strategically important to their own interests.

In the second half of this article, we explore the concept of ‘soft power’ and the role that aid can play for donor countries who are seeking to increase their level of soft power (See also the Ask the Expert interview with Dr Alasdair Pinkerton which explores Superpower geographies). The UK is currently ranked as world leader in terms of soft power and this article will explore some of the factors that have contributed to this.

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No more aid for India
Aid and influence
References

No more aid for India

The UK is to stop providing India with financial aid grants by the end of 2015.

However the UK Department for International Development (DFID) will continue to provide new programmes that focus on sharing skills and expertise in priority areas such a growth, trade and investment, skills and health; and on investments in private sector projects designed to help the poor while generating a return (source). This decision has been taken within a complex development context in India. India is home to more people who live in absolute poverty than the entire population of sub-Saharan Africa: yet India is also an emerging new superpower - it is the world’s 10th largest economy, with a space programme and 60 resident billionaires. In this case study we explore the issues surrounding aid and India.

India has been a major recipient of UK aid for many decades. For most of the 1960s and 1970s, India received more UK aid than any other country. The exact figure was £542 million in 2009, down from a peak of £765 million reached in 2008. The UK’s overall financial contribution to India since the coalition government took office in 2010 is expected to total more than £1 billion.

Reasons for the UK’s large donations to India in the past have included:

India used to be part of the British Empire It gained independence in 1947 and is now a member of the Commonwealth. In the post-colonial era, UK aid flows have often been targeted at ex-British colonies such as India
India’s sheer size With 1.2 billion people, this is a developing (and now emerging) economy that has always warranted greater amounts of international aid than, say, some very small African countries
Geopolitical reasons The UK benefits from having India as a powerful ally in a part of the world where there are geopolitical tensions and conflicts
Trade reasons India represents an enormous potential market for British goods and services. By distributing aid to poorer countries like India, the UK has continued to build partnership and influence around the world which can help foster trade relationships
Shared ancestry Many British citizens are the descendants of migrants from India. This connectivity further strengthens the relationship between the two countries

In November 2012, however, the UK government announced the phasing out of financial aid to India. There are several reasons why India is no longer seen as an economic and political priority for financial assistance.

It has become harder to justify providing India with aid, given the rate at which Indian GDP has risen since the early 1990s. The UK government says that it has recognised India's ‘successful transition’ to a major global economic power that does not need as much assistance
UK aid, in any case, does not stretch far in a country of 1.2 billion people. According to the Guardian newspaper (09 November 2012), last year’s donation of around half a billion pounds amounted to less than 0.03% of India's entire national income. ‘It is less than 2% of what the central government spends on the food subsidy and rural employment programmes, not to mention the other basic livelihood and anti-poverty programmes of both central and state governments’
Some political commentators have suggested India does not want to be thought of as being ‘needy’ anymore. Instead of cementing an international alliance, further financial aid runs the risk of negatively impacting on these two countries partnership. When Pranab Mukherjee, now India’s President, suggested that British aid represented ‘a peanut’ in India’s total development expenditure’, his words seemed calculated to make the UK think twice about its role as an aid donor. Indeed, the Indian government current runs its own international aid programme providing development assistance to other countries. Although the levels are relatively low, in comparison to other donor countries, since 2001 India has provided over $300 million of assistance outside its borders with the majority of this support being provided to West, Central and East Asian countries, and South Asian countries in particular (source)
There are other countries that are deemed to be in greater need of aid than India. Cutting aid to India will save the UK £200 million over the next three years. The government has promised that aid to poorer countries will be increased as a result
It is important to note that overall spending on aid by the UK will rise because the Coalition Government is committed to spend 0.7% of the UK’s national income on overseas aid. In 2010 the UK spent £8.45 billion on international development (the equivalent of about £321 per UK house hold) and there is a planned rise to £12 billion in 2013
At a time of austerity many other donor governments are cutting back on their overseas assistance. For example, the world’s leading economies provided US$133 billion in overseas aid in 2011, around 3 per cent less than in 2010, marking the end of a 14-year trend in increased generosity (the cutbacks reflect the severe economic difficulties faced by countries such as Greece, whose aid budget has been reduced by two-fifths)

Not a clear-cut case

Of all the possible reasons for cutting aid to India, it is the fledgling Asian superpower’s newfound ability to ‘stand on its own two feet’ that many commentators find most compelling. The Daily Telegraph (09 November 2012) quotes a spokesperson for the UK organisation TaxPayers' Alliance, which is critical of the UK’s large aid budget, as saying: ‘India’s got space programmes, it's got quite a significant defence force and it is the largest democracy in the world and so this isn't about Britain abandoning its commitments but saying there is a limited pot of money, where's it going to go?’

A commentator in the Guardian newspaper (09 November 2012) adopts a similar stance, saying: ‘The country can afford to finance its own development and poverty reduction programmes. It is absolutely true that the continuing squalor and economic degradation of about half of the Indian population really need not exist... More progressive policies that raise taxes from (India’s) rich to ensure the basic needs of the people are obviously both necessary and possible.’

However, Oxfam's director of campaigns and policy, Phil Bloomer, takes a different view: ‘We're concerned that completely withdrawing British aid to India by 2015 is too hasty. It's crucial that we don't cut off money which gives a lifeline to poor families, and a third of the world's poorest people live in India. The scale of the challenge remains huge’ (Daily Telegraph, 09 November 2012).

Different perspectives on giving aid to India

Charities like Oxfam are concerned that the focus for UK overseas aid should be poor people, rather than countries, in which case there is a compelling case to keep providing India’s poor with humanitarian assistance. Although the average standard of living has risen in India, an enormous rift has opened up between the ‘haves’ and ‘have-nots’ in Indian society, manifested in stark regional inequalities in access to sanitation and health care. The table below draws on data from the Financial Times (24 September 2012). It shows modern India to be a nation of extremes, especially when the quality of life for people living in the northern Indian state of Uttar Pradesh, which has high levels of poverty, is highlighted.

Two-speed India

Signs of wealth	Signs of want
India’s sheer size makes it the world’s tenth largest economy. If its current rate of economic development continues it could be third largest by 2030.	In India as a whole, about 600 million people – around half the total population – lack basis sanitation and still practice ‘open defecation’ either in fields or urban wasteland.
India now has US$300 billion in foreign reserves and Indian TNCs are so wealthy that they are ‘going on an international buying spree’. Tata recently acquired well-known UK brand Jaguar Land Rover.	In the poor state of Uttar Pradesh – whose population is more than 200 million – the challenge of poverty is still ‘dauntingly big’. Unicef estimates that only 21 per cent of the state’s inhabitants have access to a proper toilet.
India has nuclear weapons and its own space programme (with a planned mission to Mars). It is now also the world’s largest importer of weapons (and will be spending US$10 billion on fighter jets from France).	1.7m children under the age of five died in India in 2011– just under a quarter of the worldwide total – and 42 per cent of children are categorised as underweight.
India’s 100 richest people own assets equivalent to a quarter of its gross domestic product.	250 million Indian people are malnourished.
India has its own international development scheme and gave £328 million in aid to other countries in 2011.

It is India’s extremes of wealth and poverty that make it a controversial case when evaluating the need for international aid and assistance. One Indian citizen writes: ‘In India, the 300 million of us who belong to the new middle class live side by side with the ghosts of 250,000 debt-ridden farmers who have killed themselves, and of the 800 million who have been impoverished and dispossessed to make way for us. And who survive on less than 50 cents a day’ (Financial Times, 24 September 2012). In a similar vein, another correspondent notes that ‘(India) now has more mobile phones than toilets. India has more absolutely poor people than Africa, and more billionaires than Britain. It is magnet both for the world’s aid agencies and for its multinationals’.

‘Assistance’ not aid

The story of British aid to India is not entirely ended, according to the Daily Telegraph (09 November 2012). British officials will continue to provide up to £30 million worth of expert advice to India every year, even after financial grant aid to the country comes to an end in 2015. This ‘technical assistance’ amounts to about one tenth of the current aid budget to India in monetary terms. The UK government believes that India values Britain’s technical assistance far more ‘than the aid grants that currently comprise the bulk of the UK's annual aid programme to the country’.

A UK government spokesperson said that the on-going advice service will reflect the fact that the UK and India are now moving towards ‘a relationship focussing on skills-sharing rather than aid’. India is no longer dependent on the UK but is, increasingly, one of its most important business partners. New programmes will focus on sharing British expertise in areas such as trade and healthcare.

What do you think? Do you agree that the time has come to let India stand alone? Or are there arguments to continue giving assistance directly to those Indians who need it most? Are there other good reasons to keep providing aid to India? In the next part of this article we examine whether aid donations are geopolitically beneficial to donor countries like the UK.

Aid and influence

It can be argued that international aid can also benefit the donor as well as the recipient. In this section, we explore whether international aid also impacts on ‘soft power’ relationships between countries.

International aid and other forms of assistance have long been an important means by which wealthy nations build up their soft power profile. The term soft power describes how countries use attraction and persuasion, rather than coercion, to influence the behaviour of other states. The changing global pattern of UK aid over time partly reflects changing political priorities for the British government and the wider geopolitical context.

In any era, the UK aid map shows the places where Britain has provided humanitarian assistance and also where wider political, economic, strategic and security links may be relevant. For instance:

In 1960, the top recipients of UK aid are Cyprus and Malta
By 1961, this geography ‘has already shifted dramatically, with Kenya (becoming independent in 1964) and India emerging as the top recipients’ (Guardian, 14 April 2011)
In 2002, Serbia becomes as the top recipient (following a decade of conflict between the former Yugoslavian republics), replacing India
By 2005, Nigeria has taken the top spot, followed by Iraq (following the 2003 invasion)
By 2009, Afghanistan, Sudan, Ghana, Kenya and Ethiopia are all major UK aid beneficiaries

The USA and Pakistan

Looking away from the UK for a moment, another interesting case to look at is ‘aid and assistance’ given to Pakistan by the USA. According to some estimates, this has amounted to US$20 billion paid between 2002 and 2010 (Financial Times, 11 May 2011). Of this, humanitarian aid makes up about one quarter; the remaining finance was actually provided for military or security purposes.

The USA views Pakistan as a key ally in its ‘war against terror’ that commenced in 2001 and has provide significant levels of aid and assistance, in part to support the USA’s military agenda directed against the Taliban. For example, it was in Pakistan that Osama Bin Laden was killed by American forces in 2011. John Boehner, speaker of the US House of Representatives, said the billions provided to Pakistan over the past decade had been ‘expensive’ but ‘worth it’ (Financial Times, 11 May 2011).

US aid and assistance to Pakistan, 2002-10

International aid and ethical leverage

International aid is sometimes used to gain political influence in other ways. One interesting case is the suggestion from a number of governments to withhold aid from countries seen to be pursuing an aggressively homophobic agenda, such as Malawi. This issue had been raised after two gay men were sentenced to 14 years hard labour. A judge in Malawi told them: 'I will give you a scaring sentence so that the public will be protected from people like you, so that we are not tempted to emulate this horrendous example’ (Daily Mail, 08 October 2011). However, in 2012 this legislation was suspended and the Minister of Justice commented "There is a moratorium on all such laws, meaning that police will not arrest or prosecute anyone based on these laws" (source). In 2011 the UK Government suspended ‘general budget support’ aid to Malawi after of the Government of Malawi repeated failed to address UK concerns over economic management and governance (source).

In another case, the Netherlands suspended aid to Rwanda in July 2012 as a result of evidence showing violation of a United Nations arms embargo (by supplying weapons to a militia group in neighbouring DR Congo). The continuing involvement of Rwanda in the DRC was the reason given for not releasing £21M of UK aid to Rwanda in November 2012 (source).

Any such decision to cut aid can be controversial. If a state like Uganda or Rwanda refuses to meet the ethical standards and conditions of governance demanded by a donor country, and aid is withheld, it may increase hardship for people living in poverty (for whom the aid is intended).

Aid, influence and soft power

Interestingly, the UK’s decision to cut international aid to India coincides with Britain’s recent ranking as ‘the most powerful nation on earth’ according to Monocle magazine's annual ‘Global Soft Power’ survey. The survey ranks nations according to 50 criteria including their ‘cultural output’, capacity for education, appeal to business and Olympic medals. The top five spots went to Britain, the US, Germany, France and Sweden in 2012. The UK’s exceptionally strong ‘soft power’ performance in 2012 is attributed to events and factors including:

The Olympic opening ceremony
The Queen’s Golden Jubilee
22 ‘number one’ albums by UK artists in overseas music charts
Andy Murray winning his first Grand Slam title
A large number of foreign students in the UK
The quality of UK business brands
The continued global reach of Britain's media, from the BBC World Service to international magazines such as The Economist

The result of these multiple achievements? ‘Britain projects more positive influence around the world than any other nation,’ according to the Independent. In other words, the UK is an extremely strong geopolitical position, irrespective of the size of its international aid budget.

Tyler Brûlé, Monocle's editor-in-chief, is reported as saying: ‘We're in a time, right now, where, more than ever, it's not particularly fashionable to go out and write massive cheques to get your way in the world... if you're able to effect change because you present yourself as an attractive nation to befriend and engage with, that can only be positive. It's about the rules of attraction and what makes a nation the most attractive in the room.’

In the past, it may be argued that ‘massive cheques’ to India helped support Britain's strategic interests ‘even if it is frequently denied by some official spokespersons’ argues the Guardian (09 November 2012). But times have changed and, as the Monocle survey shows, there are alternative ways of building global partnerships than providing aid; be it through soft power or through international trade, strategic partners or international alliances. Supporting this argument, the Guardian notes that: ‘Public opinion in India was appalled recently, when India's decision to buy fighter jets from France rather than the UK (after a global tendering process) was decried in the British media as ingratitude given the UK's aid to India. The blatant expectation of such quid pro quo is something that defeats all the pious declarations of aid being proffered in the name of a common humanity. But it also acts against the UK's own diplomatic interests, by alienating those who are supposed to be won over by such expressions of soft power.’