In 2012, India’s then finance minister, Pranab Mukherjee, had famously described Britain’s annual £280 million (Rs 2,798 crore) aid to India as “peanuts” and British critics at the time questioned why Britain was giving aid to India if India was funding its own space programme and had its own foreign aid budget. In 2017, the Indian government stated it gave more foreign aid to countries than it received.
A phasing out of financial aid by 2015 was duly adopted as UK government policy in 2012.
But on Tuesday the Independent Commission for Aid Impact (ICAI), which scrutinises UK government aid and is independent of the government, in its review ofUK aid given to India, stated, “We calculatethat the UK provided around £2.3 billion in aid to India between 2016 and 2021.” This figure includes £441 million in bilateral aid, £129 million in development investment via the Foreign, Commonwealth and Development Office (FCDO), £749 million of aid through multilateral organisations and £1 billion in investments through British International Investment (BII), the UK’s development finance institution. “BII is the world’s oldest development finance institution, established in 1948 as the Colonial Development Corporation with a mission to do good without losing money,” the report states. It has a portfolio of 389 investments in India valued at £2.3 billion in 2021 — by far its largest country portfolio at 28% of the total.
“Many stakeholders may be surprised to see UK aid to India continuing at this level a decade after the UK announced its transition away from its traditional development partnership. While the UK government stated at the time that development investment and technicalassurance would continue, the clear expectation was that overall aid volumes to India would decrease faster than they have,” the report states.
“While there are still substantial volumes of UK aid to India, it is now very different in nature and purpose,” the report notes. “It supports a range of the 2030 UK-India Roadmap objectives under the comprehensive strategic partnership, serving as a tool for UK foreign policy, diplomatic and trade objectives,” the report states. “UK aid to India is now largely focused on climate, infrastructure and economic development, rather than the provision of basic services such as health and education to the poorest states in India.”
The report cites examples of how UK aid is poorly targeted in India. For example a large investment by BII into a midsize Indian bank which was meant to support inclusive growth through the expansion of the bank’s micro-finance lending was not ring-fenced and instead used to expand the bank’s entire business, most notably credit cards. ICAI gave the UK India aid programme an amber-red score, the second-worst score available.
“The UK’s overarching objective is a stronger bilateral relationship with India, and aid is being used in a variety of ways to support that partnership. This results in a fragmented portfolio without a compelling development rationale.While the aid portfolio may be helping to support UK-India bilateral relations, it lacks a strong link to poverty reduction, which remains the statutory purpose of UK aid. We are also concerned that the UK has, since 2017, largely chosen not to engage with the growing challenges in the areas of democracy, human rights and civic space in India, as identified in global indices. “
An FCDO spokesperson said: “Since 2015 the UK has given no financial aid to the government of India. Most of our funding now is focused on business investments which help create new markets and jobs for the UK, as well as India. UK investments are also helping tackle shared challenges such as climate change.”