The Hindu : What price hubris?

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Friday, Jun 20, 2003

Opinion

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What price hubris?

By Harsh Sethi

Jaswant Singh's announcement (on reviewing external aid flows) may please our unreconstructed swadeshites... But there is little doubt that it has alienated many of our external well-wishers.

QUIETLY, AND without much fanfare, the Finance Minister has introduced a significant shift in our external relations. Probably, he is reliving the glories of his days as the country's premier spokesperson in the global community. Some months ago, as part of his budget speech, Jaswant Singh announced that India was in the process of reviewing its position on external aid flows.In a recent meeting with representatives of select donor countries, the Finance Secretary announced that the Central and the State Governments as well as parastatal institutions will no longer be the end recipients of bilateral assistance, be it grants or loans. And that the country will no longer accept any tied aid.

He went on to elaborate that the ongoing, agreed pipeline programmes will continue as will cooperation with multilaterals (the World Bank, the ADB, the U.N. and the European Union). But that the smaller donors — the Netherlands, France, the Scandinavian countries, Canada, Australia, Italy, Saudi Arabia and Kuwait among others — which effectively implies all except the United States, the U.K., Russia, Japan and Germany, need no longer deal with the Government. Instead, they can continue their relationship with NGOs, institutions and individuals under a revised procedure. It is, for instance, recommended that the donors prepare a full list of potential recipients specifying the amount and the purpose, which will need Government approval before disbursements are permitted. Additionally, bilaterals can co-finance along with multilaterals, but only in an agreed multilateral framework.

While this move has been on the cards for some time now, its timing and form have taken many by surprise, if not created deep consternation. For a start, it is not as if this is an omnibus policy, affecting all the donors equally. Expectedly, it has given rise to the suspicion that some countries are being targeted for their criticism of specific Indian policies. The Scandinavian countries — Denmark, Norway and Sweden — for instance, unilaterally snapped their aid to India following Pokhran II. Are they now being penalised for their temerity? After all, Japan too suspended aid to India once we went formally nuclear. But it has been kept off the blacklist.

Similarly, the Netherlands, whose aid to India helped initiate successful and prestigious programmes such as the Indo-Dutch Programme on Alternatives in Development (IDPAD) and Mahila Samakhya, have now been told that they are persona non grata. This, despite the Dutch being substantial donors. Here again, the suspicion is that the powers that be were upset with the Dutch criticism of the "events" in Gujarat in 2002 and more, its support to those civil society groups in the forefront of opposing Narendra Modi, the VHP and the RSS.

Such examples can easily be multiplied. So is it that this policy initiative is merely a smokescreen for hitting out at those who have been critical or too demanding in requiring output/performance indicators on how their moneys are being utilised? Clearly, size and political importance matter. Russia, though a minor donor, cannot be touched. Nor can the U.S. despite its criticism of India at different points of time. No one, least of all, us, can do without Uncle Sam.

This, however, might be a caricatured view. The present regime, more than any other, rarely misses an opportunity to flaunt its nationalist credentials. Being classified as an aid-receiving country hardly adds to pride and self-worth. So, now that our forex reserves are comfortable, why not return loans (even when not due) and discontinue aid arrangements? In addition to claiming that it no longer needs largesse from the rest of the world, India can pose as generous by suggesting that global aid be directed towards those countries which need it more viz., sub-Saharan Africa. Possibly, we now want to join the club of aid-givers, not takers, which is more suited to our newly-acquired and revised position in global affairs.

Few would argue against dispensing with aid, if possible. After all, whatever the humanitarian impulse behind giving aid, it is difficult to deny that it comes at a price, tied in myriad ways to the interests of the donor country. Equally, managing aid flows is a cumbersome, complex task involving not only protracted negotiations over amounts, purpose and time-lines but also elaborate reporting mechanisms. So, unless the amounts involved are substantial and are perceived as making a perceptible difference to the sector/people to whom it is directed, the aid may well not be worth the while.

The above is well-known and in the past, we have witnessed much heart-burning on demands made by donors not just on financial probity but politico-social parameters such as gender and social equity, minority participation, need to involve the NGOs and community groups in all aspects of decision-making and implementation. Not surprisingly, this does not sit well with bureaucrats and politicians, rarely known for their willingness to submit to a call for accountability and transparency. Thus, even when donor-aided programmes have been successful, and oftentimes globally acclaimed, for their innovativeness, those administering them have often been less than happy.

Some of these tendencies can be best illustrated by the shifts engendered by Murli Manohar Joshi, Minister of Human Resource Development. Most in the news over his efforts to `saffronise' education — both in terms of content and by placing trusted fellow-travellers in key positions — he has also successfully centralised all the education programmes by merging them into the omnibus Sarva Shiksha Abhiyan. The few which resisted — the literacy movement spearheaded by the Bharatiya Gyan Vigyan Samithi for example — have been starved of funds and sidelined. Even the unanimous view of experts that education programmes should be locally rooted and context-specific has not dissuaded Dr. Joshi from favouring uniformity and control.

These apart, there are at least two major implications of this mode of curtailing aid, which, it appears, our decision-makers have not adequately appreciated. One crucial fallout will be on our federal politics. A side effect of the reforms initiated in 1991 was the lessening of Central control over the State Governments, allowing direct negotiations with donors, both bilateral and multilateral. It is so far unclear whether this recent decision of Mr. Singh was taken after due consultation with the State Governments. Given the fiscal constraints faced by most local governments, aid played a differential role, particularly in social sector programmes of education, reproductive health, watershed development, social forestry, urban sanitation and water supply, among others. Not all of these were supported by multilaterals or by donors still on the acceptable list. What happens to such programmes? Will the State Governments now have to turn to the Centre for assistance? And will there be a differential application of the policy of support to local governments, more so if run by parties which are not part of the ruling combine at the Centre?

A second implication will be on India's ability to access soft loans, aid and grants, even from multilaterals. The Scandinavians, for instance, though minor donors in the Indian context, are the key donors for multilateral agencies. Will they be inclined to support Indian requests once they are told that their assistance is no longer required, ostensibly because India is now well on its way to becoming a prosperous country, possibly itself a donor nation? No matter how healthy our forex reserves currently look, there is no assurance of stability. Equally, while aid flows constitute a miniscule proportion of our GDP, there is little doubt that many of our programmes have been kick-started by aid and have managed an order of quality at least in part due to the interaction with the donors.

Mr. Singh's grandiose announcement may please our unreconstructed swadeshites; it may bolster our pride that we are no longer a beggar nation. But, there is little doubt that it has alienated many of our external well-wishers and may land us with consequences that our political masters may not have thought of. Alternatively, it is possible that they just don't care. After all, what price for pride?

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