For reasons quite inexplicable, an important initiative of the government of India has gone completely unreported in the media. A new body for governing India’s outgoing development assistance, called the Development Partnership Administration (DPA), has been set up under the Economic Relations Division of the Ministry of External Affairs (MEA). The set-up seems to be just short of an “aid” agency, which most of the members of the development community were expecting for quite long. DPA is expected to help in the consolidation of outgoing aid and streamline all administrative matters related to this process. It will also help in assessing the effectiveness of credit lines that India is extending to its partners, which has grown in the last few years.
In the past few years, emerging economies, in particular China and India, have been in the limelight for their enhanced involvement in development partnership projects. Some commentators have been critical of China’s involvement in Africa that the government released a white paper on China’s aid policy underlining its objectives, historical context and its accomplishments. Brazil publishes an annual report on the aid related activities. South Africa has recently operationalised an office for formulation and dissemination of details on such partnerships.
Now that an agency is in place, India needs to articulate its development cooperation agenda in a cogent manner. With enhanced quantums, particularly since 2003, India has strong grounds to release, if not a white paper, at least an official policy statement, to bring to the table the unique Indian model of “development compact.” The facets for engagement include trade and investment, technology transfer, finance through credit lines and capacity building though a flagship programme, viz. the Indian Technical and Economic Cooperation (ITEC) programme. Western aid is often criticised for conflicting policies, for instance, giving aid for improving on the one hand, and providing huge subsidies to their own farmers on the other, which actually perpetuates “aid-dependence.” India has worked to create technical capacities, and provided production support. In 2008, the Prime Minister, during the India-Africa Forum Summit, announced the DFTP (duty free tariff preference) scheme for 49 least developed Countries (33 in Africa, 15 in Asia and one in the Americas). Our preliminary research indicates that India provides somewhere close to $3 billion, some of which is in cash but a large part of it in kind.
Actually the idea of an Indian aid agency has been around for quite sometime now. It was first mooted in the Budget speech of 2003 when then Finance Minister Jaswant Singh announced an agency in his budget speech. He had called it “India Development Assistance (IDA).” This was the time when India was “shining” and the government had driven away quite a few bilateral donors. Subsequently a minimum limit of $25 million was fixed for the government to accept any bilateral assistance. The rest of it was allowed to go to specified civil society organisations and other agencies.
Nothing much happened on this proposal until 2007 when Mr. P. Chidambaram announced the government’s intention to establish the “India International Development Cooperation Agency (IIDCA)” to provide unified administration of the country’s outgoing development assistance. It was stated that one guiding principle for the new agency would be that India’s assistance be directed especially at developing countries that are in greater need of external aid.
Traditionally, Indian development assistance programme has at best been a marginal component in the overall foreign policy framework. However, apart from rising quantums and leveraging of various other related instruments, India is now bringing to the table its experience in supporting successful small-scale programmes, which have created a niche for themselves. The Small Development Project (SDP) programme was launched to ensure economic deliverables, particularly in the areas of education, health and infrastructure.
The SDPs generally cost less than Rs.3.12 crore with the focus on areas like infrastructure development and capacity building in the areas of education, health and community development. The idea is that the projects should meet local needs and managed by local communities and institutions, saving project implementation costs. The most important feature is the local ownership of the programme. The first such programme was launched in 2003 in Nepal. Since then, India has been trying this model in Sri Lanka and Afghanistan.
For a U.N.-led initiative
At the recent 4th High Level Forum on Aid Effectiveness held at Busan, South Korea, India, along with other emerging economies, agreed to the setting-up of a global mechanism to improve the effectiveness of global aid flows. The Organisation for Economic Cooperation and Development (OECD) and its Development Assistance Committee (DAC) were keen to set up a new entity called Global Partnership for managing the global aid architecture. Several rounds of discussions on this proposal have revealed wide differences in perception between Indian and DAC members on aid and development cooperation. There is, therefore, no reason why India should support a DAC platform. In fact, India should develop strategies to support a U.N.-led initiative. The Development Cooperation Forum of Economic and Social Council (ECOSOC) and United Nations Conference on Trade and Development (UNCTAD) are two obvious candidates in this regard. At the same time, India should engage bilaterally with DAC to benefit from the expertise on project impact analysis and other practices to improve quality of delivery and introduce mechanisms for better assessment of Indian projects. Again, lessons may be learnt from the China-DAC study group for necessary course corrections.
Simultaneously, India should explore possibilities for trilateral cooperation with DAC and other partners from the South. It is also likely unavoidable that the emerging donors will coordinate more closely with DAC donors under a trilateral rubric in the future. The key challenges and gains to be made here will be in sharing complementary professional skills in the design and delivery of aid programming, as well as in the management of aid projects in areas of project finance and technology transfer. This could bring significant expenditure gains in “returns on development.”
(Sachin Chaturvedi is Senior Fellow, Research and Information System for Developing Countries. The views expressed are personal.)