Key Facts About UK Aid to India

UK Aid to IndiaThe United Kingdom and India have had a long history of partnership. The two regularly collaborate in fields such as technology, education and trade. The U.K. has also given India valuable aid that has supported its progress and development over the past decades. According to the Independent Commission for Aid Impact, the U.K. supplied India with £2.3 billion in aid between 2016 and 2021. However, in recent years, as India’s economy has flourished, the U.K. has moved away from bilateral aid to the country. Instead, the focus is now on investment that will not only help India but will also yield considerable returns for the U.K. Here’s everything you need to know about the U.K.’s aid to India.

Official Development Assistance (ODA)

The U.K. is a member of the Organisation for Economic Cooperation and Development’s Development Assistance Committee. And as such, it makes contributions toward ODA. According to the parliament, ODA has the development and welfare of developing countries as its main objective.

In 1970, the U.N. set a target for all countries that supported ODA to donate 0.7% of its gross national income. Before meeting the target for the first time in 2013, the U.K. consistently failed to do so in the years prior. The International Development Act of 2015 only solidified the country’s commitment to this goal. So, for the first time since 2013, the U.K. decided to reduce ODA spending to 0.5% of its GNI due to financial challenges during COVID-19.

Past Efforts: UK Aid to India

The U.K. has been providing aid to India for a while now, but it has gradually shifted its focus over the years. In the past, bilateral aid was the main form of support to India. The U.K. government gave particular importance to social sector programs in India between 2008 and 2011. According to a framework paper, aid focused on “areas such as health, education, rural livelihoods and urban slum improvement” via Indian-government-led programs. The target states for such programs included Andhra Pradesh, West Bengal, Odisha, Madhya Pradesh and Bihar.

In 2011, the U.K. directed its focus to the Indian private sector. According to an accord made in July of that year between the countries, the U.K. provided financial and technical assistance predominantly in Odisha, Bihar and Madhya Pradesh. The government also approved the Private Sector Development Initiative in eight Indian states where the U.K. could provide aid in the form of “returnable capital”.

The U.K. reevaluated its aid strategy again in 2012 and agreed with the Indian government on a new direction for support after 2015. It decided to cease financial grants to government sector programs after 2015. Instead, the country looked to focus on technical cooperation in areas like governance, growth, education and skills, trade and investment and health. The government also pledged to support small entrepreneurial projects which would lead to more opportunities in the private sector.

Changing Priorities

In recent years, the Department for International Development (DFID) and other agencies are investing to modernize and improve the Indian economy. In 2018, out of all the bilateral aid given to India, 85% of it was directed toward economic development. The top three funded programs that year were National Infrastructure Investment Fund, Infrastructure Equity Fund and the Poorest States Inclusive Growth Program.

According to a policy paper, “the U.K.’s support in India is helping stimulate prosperity, generate jobs, develop skills and open up new markets for both countries.” Besides supporting Sustainable Development Goals (SDG) 7, 8, 9 and 11, DFID promises results in other areas.

A major focus is on skills training and start-ups. The target is to invest in 50 enterprises, with an estimate to generate 25,000 jobs and yield high returns on investment. DFID will additionally fund urban development for 700,000 people, creating 20,000 jobs and securing around £1 billion in financing.

DFID will also support clean energy in India and potentially yield a return of £6.5 billion for the private sector. It is set to prevent 20 million tonnes of greenhouse gas emissions by providing clean energy to 1.8 million people. Furthermore, it aims to help 2 million people living in poverty in India deal with drought, flood and extreme heat.

Looking Ahead: UK Aid to India

According to the Independent Commission for Aid Impact, India ranked n0. 11 as the largest recipient of the U.K. bilateral aid in 2021. While this shows that India still receives aid from the U.K., its objective has changed substantially over the past decades, as it has been the “largest recipient of the U.K.’s development investment.”

Out of the £2.3 billion donated to India between 2016 and 2021, £129 million was invested in Indian ventures. British International Investment (BII) also invested £1 billion in the country during that time, representing 28% of its global portfolio. All these investments have been generating profitable returns for the U.K.

In May 2021, the UK government released a policy paper tagged 2030 Roadmap for India-U.K. Future Relations. It contains guidelines that will ensure a deepening partnership with India on issues like trade, defense and clean energy. The U.K. investment in India is creating opportunities in both nations, leading to a more prosperous U.K. While certain sectors still need aid in India, history suggests that effective partnerships and support can uplift the entire nation.

– Siddhant Bhatnagar
Photo: Flickr