Succumbing to growing domestic pressure, the British government on Friday announced halt to further financial aid to India but said that all existing commitments until 2015 would be honoured.
The focus will then shift to offering technical assistance and investment in private sector poverty alleviation projects.
The move, which would save Britain over £200 million over the next three years, follows mounting opposition within the ruling Tory party to continued financial aid to major emerging economies such as India, China and Brazil at a time when Britain itself is facing a deep economic crisis.
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Last year, Britain gave India about £250m in bilateral aid besides £29m in technical co-operation.
Announcing the decision, the International Development Secretary Justine Greening said it was taken in consultation with the Indian government during her visit to New Delhi early this week.
"After reviewing the programme and holding discussions with the government of India this week, we agree that now is the time to move to a relationship focusing on skills sharing rather than aid," she said pointing out that India was “successfully developing’’ and it was time to recognise its “changing place in the world’’.
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"It is of course critical that we fulfil all the commitments we have already made and that we continue with those short-term projects already under way which are an important part of the UK and government of India's development programme," she added.
India has long maintained that it does not need aid and would prefer more trade with Britain. The President, Pranab Mukherjee, when he was Finance Minister, dismissed the money India got from Britain as “a peanut in our total development expenditure.”
Aid agencies called the decision “premature’’ saying that despite India’s “impressive’’ economic growth there were still too many poor people in the country who needed a helping hand.