Resurgent India Receives Massive Foreign Aid

In spite of all of the recent news about aid to Pakistan dominating the media, the fact remains that resurgent India has received more foreign aid than any other developing nation since the end of World War II--estimated at almost $100 billion since the beginning of its First Five-Year Plan in 1951. And it continues to receive more foreign aid in spite of impressive economic growth for almost a decade.

India was the fourth largest recipient of aid (ODA) between 1995 to 2008 (US$26.1 billion), according to Global Humanitarian Assistance website.

According to OECD group of the aid donor nations, the words "aid" and "assistance" refer to flows which qualify as Official Development Assistance (ODA) or Official Aid (OA). Such OA or ODA aid includes both grants and soft loans given by OECD nations and multi-lateral institutions like the World Bank, Asian Development Bank, IMF, etc.

Britain will spend over $1.5 billion during the next three years in aid to Shining India, a nuclear-armed power that sent a spacecraft to the moon recently, to lift "hundreds of millions of people" out of poverty, the British secretary of state for international development said last November, according to the Guardian newspaper.

Douglas Alexander, the first cabinet minister to visit India's poorest state Bihar, said that despite "real strides in economic growth" there were still 828 million people living on less than $2 a day in India.

UK's Department of International Development says if the UN's millennium development goals - alleviating extreme poverty, reducing child mortality rates and fighting epidemics such as Aids - are left unmet in India, they will not be met worldwide. Some 43% of children go hungry and a woman dies in childbirth every five minutes.

British Minister Alexander contrasted the rapid growth in China with India's economic success - highlighting government figures that showed the number of poor people had dropped in the one-party communist state by 70% since 1990 but had risen in the world's biggest democracy by 5%.

After the increase of British aid to $500 million (300 million pounds) a year, India will still remain the biggest recipient of Japan's official development assistance (ODA) in the near future. Since Japan's first ODA to India in 1958, the country has received monetary aid worth Rs 89,500 crore (Rs 895 billion) so far, according to Noro Motoyoshi, Japanese consul general in Kolkata. In 2008, Japan's ODA to India was up by more than 18% compared to 2007 at Rs 6916 crore (Rs 69.16 billion).

The World Bank said recently it will lend India $14 billion in soft loans by 2012 to help the country overhaul its creaking infrastructure and increase living standards in its poor states, according to Financial Express.

At the recent G20 meeting, India has asked the World Bank to raise the amount of money India can borrow as soft loans, generally considered aid, from the bank for its infrastructure projects, according to Times of India. At present, India can borrow up to $15.5 billion in soft loans as per the SBL (single borrower limit)in soft loans fixed by the Bank.

The Indian government has estimated it needs $500 billion over the five years to 2012 to upgrade infrastructure such as roads, ports, power and railways.

"Under the strategy, the bank will use lending, dialogue, analytical work, engagement with the private sector, and capacity building to help India achieve its goals," the World Bank said on its website.

The International Bank for Reconstruction and Development would lend $9.6 billion and the International Development Association would make available $4.4 billion of funding, according to India's Financial Express.

Only 30 per cent of India's state highways have two lanes or more, and the majority are in poor condition, the bank said. Electricity generation capacity has grown at less than 5 per cent in the past five years, much slower than overall economic growth of about 8 per cent over the same period.

The funds would also be used to help reduce poverty in seven low-income states; Bihar, Chhatisgarh, Jharkand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh, the World Bank said.

Foreign Aid as Percentage of Indian GDP. Source: World Bank

The biggest direct aid donor countries to India are Japan and UK, as well as multiple international humanitarian aid programs supported through NGOs, in addition to the World Bank, UNICEF, UNESCO, UNDP, WFP, and a whole alphabet soup of organizations active in helping the teeming population of the poor, the illiterates, the hungry and and the destitute in India.

According to Japan's ministry of finance, India has received $33 billion in soft loans and a billion dollars in grants from Japan since 1997. In 2008, Japan gave India $2.5 billion in soft loans, and $5 million in grants. By contrast, Pakistan has received $10 billion in soft loans, and $2.3 billion in grants from Japan since 1999. In 2008, Japan gave Pakistan $500 million in soft loans and $63 million in grants.

India Top Recipient of US Economic Aid Source: Times of India
India, often described as peaceful, stable and prosperous in the Western media, remains home to the largest number of poor and hungry people in the world. About one-third of the world's poor people live in India. More than 450 million Indians exist on less than $1.25 a day, according to the World Bank. It also has a higher proportion of its population living on less than $2 per day than even sub-Saharan Africa. India has about 42% of the population living below the new international poverty line of $1.25 per day. The number of Indian poor also constitute 33% of the global poor, which is pegged at 1.4 billion people, according to a Times of India news report. More than 6 million of those desperately poor Indians live in Mumbai alone, representing about half the residents of the nation's financial capital. They live in super-sized slums and improvised housing juxtaposed with the shining new skyscrapers that symbolize India's resurgence. According to the World Bank and the UN Development Program (UNDP), 22% of Pakistan's population is classified as poor.

There is widespread hunger and malnutrition in all parts of India. India ranks 66th on the 2008 Global Hunger Index of 88 countries while Pakistan is slightly better at 61 and Bangladesh slightly worse at 70.

Indian media's headlines about the newly-minted Indian billionaires need to bring sharper focus on the growing rich-poor gap in India. On its inside pages, The Times of India last year reported Communist Party leader Sitaram Yechury's as saying that "on the one hand, 36 Indian billionaires constituted 25% of India’s GDP while on the other, 70% of Indians had to do with Rs 20 a day". "A farmer commits suicide every 30 minutes. The gap between the two Indias is widening," he said. Over 1500 farmers committed suicide last year in the central state of Chhattisgarh alone.

Among the Asian nations mentioned in an October 2008 UN report, Pakistan is more egalitarian than the India, Bangladesh, China and Indonesia. Based on all the UNDP data, Pakistan does not have the level of hunger and abject poverty observed in India or Bangladesh.

According to the new UN-HABITAT report on the State of the World's Cities 2008/9: Harmonious Cities, China has the highest level of consumption inequality based on Gini Coefficient in the Asia region, higher than Pakistan (0.298), Bangladesh (0.318), India (0.325), and Indonesia (0.343), among others." Gini coefficient is defined as a ratio with values between 0 and 1: A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient indicates more unequal distribution. 0 corresponds to perfect equality (everyone having exactly the same income) and 1 corresponds to perfect inequality (where one person has all the income, while everyone else has zero income).

Violence is rising in India because of the growing rich-poor gap. Prime Minister Manmohan Singh himself has called the Maoist insurgency emanating from the state of Chhattisgarh the biggest internal security threat to India since independence. The Maoists, however, are confined to rural areas; their bold tactics haven't rattled Indian middle-class confidence in recent years as much as the bomb attacks in major cities have. These attacks are routinely blamed on Muslim militants. How long will Maoists remain confined to the rural areas will depend on the response of the Indian government to the insurgents who exploit huge and growing economic disparities in Indian society.

In 2006 a commission appointed by the government revealed that Muslims in India are worse educated and less likely to find employment than low-caste Hindus. Muslim isolation and despair is compounded by what B. Raman, a hawkish security analyst, was moved after the most recent attacks to describe as the "inherent unfairness of the Indian criminal justice system".

Ironically, there are some parallels here between the violent Maoists movement in India and the Taliban militants in Pakistan, in spite of their diametrically opposed ideologies. Maoists say they are fighting for the rights of neglected tribal people and landless farmers, as are the Taliban in FATA and NWFP. Though their tactics vary, both movements have killed dozens of people, including security personnel, in the last few weeks. Both movements control wide swathes of territory in their respective countries. Both continue to challenge the writ of central or provincial authorities.

I have always been intrigued by Kerala and I wonder if there is a Kerala model that could be replicated in the rest of South Asia. With the exception of Kerala, the situation in India is far worse than the Human Development Index suggests. According to economist Amartya Sen, who won the Nobel Prize for his work on hunger, India has fared worse than any other country in the world at preventing recurring hunger.

In addition to its high literacy rate, Kerala boasts one of India's best healthcare systems, even for those who can't afford to pay user fees and therefore depend on government hospitals. Kerala's infant mortality rate is about 16 deaths per 1,000 births, or half the national average of 32 deaths per 1,000 births.

Freelance journalist Shirin Shirin thinks Kerala's success has something to do with the fact that communists have ruled Kerala for much of the past 50 years. The CPI(M) successfully pushed for three major reforms in the 1960s and 1970s. The first and most important was land reform. While nearly everyone looks on land reform as a huge success in Kerala, the policy was controversial when it was first proposed in 1959. Land reform, after all, is an attack on one of capitalism's founding principles - the right to property. The central government intervened and effectively blocked the implementation of land reform for 10 years. But planners and unions in Kerala understood that building a more egalitarian economy required attacking the old feudal system at its roots, and small farmers weren't going to stand for anything less.

But even Shining Kerala is plagued by hunger and malnourishment, just as the rest of India. The first India State Hunger Index (Ishi) this year found that Madhya Pradesh had the most severe level of hunger in India, comparable to Chad and Ethiopia. Four states — Punjab, Kerala, Haryana and Assam — fell in the 'serious' category. "Affluent" Gujarat, 13th on the Indian list is below Haiti, ranked 69. The authors said India's poor performance was primarily due to its relatively high levels of child malnutrition and under-nourishment resulting from calorie deficient diets.

A recent issue of San Jose Mercury News has a pictorial about grinding poverty in India done by John Boudreau and Dai Sugano. This heartbreaking pictorial illustrates the extent of the problem that India faces, a problem that could potentially be very destabilizing and put the entire society at the risk of widespread chaos and violence.

Related Links:

Aid at a Glance by OECD Nations

Economic Woes? Look to Kerala

Mumbai's Slumdog Millionaire

Poverty Tours in India, Brazil and South Africa

South Asia's War on Hunger Takes Back Seat

Grinding Poverty in Resurgent India

Pakistani Children's Plight

Japans's Aid to India

Poverty in Pakistan

Japan's ODA to Pakistan

OECD's Definition of Aid


Amod said…
Your blog is really good.and also meaningful article in your blog.South India Tours
Riaz Haq said…
For all those who sing the praises of Indian democracy, here's the real truth:

India was very a well governed nation under Muslims...far better than the pathetic governance you have today in "the largest democracy".

The pre-British, early 19th century Moghul India, described as caste-ridden, feudalistic and unmodern, was economically ahead of the rest of the world,including Britain and the US, according to S. Gururmurthy, a popular Indian columnist. The Indian economy contributed 19 per cent of the world GDP in 1830, and 18 per cent of global trade, when the share of Britain was 8 per cent in production and 9 per cent in trade, and that of US, 2 per cent in production and 1 per cent in trade. India had hundreds of thousands of village schools and had a functional literacy rate of over 30 per cent. In contrast, when the British left, India’s share of world production and trade declined to less than 1 per cent and its literacy was down to 17 per cent.
Anonymous said…
Riaz, are you saying that Islamic rule is better for the subcontinent? May be India is still poor, but not a threat to the world and many Indian companies have made positive contributions to the world as a whole.

One can always go back a century or two, come up with figures and make some bizarre arguments.
India under Muslim rule may have contributed 19% to the world economy(let us not forget that non Muslim China contributed another 25% or so during that time), but this had nothing to do with Islamic rule per se. Otherwise, Pakistan should have been an economic powerhouse by now as it has always been ruled by Muslim laws since independence.

One can come up with figures of corrupt Indian politicians, farmers committing suicide etc. These problems you have in Pakistan as well, but India atleast offers some hope and a functioning system for those who are willing to work hard and change their lives. The fact that one of the greatest scientist from India and our last President was a Muslim born in a poor family and one of the richest entrepreneur in India, Azim Premji is a Shia Muslim is a testimony to that. Ever pondered whether this would happen in Pakistan?

The fact is that even while growing at only 3% or "Hindu growth rate" for much of the post independent period until 90s, India was able to develop and sustain a functioning civil society which offered freedom of press, freedom of ideas and some basic tolerance for ethnic, religious and linguistic minorities, something which Muslim Pakistan does not offer and "Muslim India" under Mughal rule may not have offered. And this was possible because of democracy - not Shariah laws..
Riaz Haq said…
Anon: "The fact that one of the greatest scientist from India and our last President was a Muslim born in a poor family and one of the richest entrepreneur in India, Azim Premji is a Shia Muslim is a testimony to that. Ever pondered whether this would happen in Pakistan?"

These are well known tokens used by the propaganda machine. The vast majority of Indians have become what Indian-American journalist Asra Nomani calls "India's New Untouchables". The Sachar Commission Report bears it out.

As far as restoring the past glory of India, economic historian Angus Maddison estimates it will take at least 50 years to get back to here India was in the Moghul era in 1700s. And that is the best case scenario.

I believe the Brits and colonization of India was devastating for the subcontinent. They left us poor and divided. Had the Brits not colonized us, India would have become industrialized and democratic much much faster. It wouldn't be the home to the largest number of poor and hungry in the world, as it is today.
Anonymous said…
"These are well known tokens used by the propaganda machine. The vast majority of Indians have become what Indian-American journalist Asra Nomani calls "India's New Untouchables". The Sachar Commission Report bears it out."

Propaganda in what sense? So do you think that this success stories of Muslims or other minorities are a conspiracy by infidels to paint India white? I am a Muslim myself from an average background and have been able to take advantage of our secular, democratic system to get a decent education for almost free, get a good job and live a decent life, all in a Hindu dominated society.(Sorry for being Anon, too lazy to start a google account ;-) ).

You would find many reports such as Sachar committee reports in India - this shows that Govt. is willing to actively study why some parts of soceity such as some section of Muslims were left out of the development. This willingness and ability to enquire ones own failures, whereby either govt. appointed committees or private NGOs actively study the disparities and publish such reports without fear of persecution is one sign of a succesful democracy - something which you ridiculed in your previous post. You would find similar reports about Muslims in Britain, blacks in USA etc. You can always point this relative failures of otherwise succesful democracies, conveniently ignoring that such reports are barely published by any countries in OIC. This is a luxury that the minorities(or even majoroties) in Pakistan or Saudi Arabia can only dream of. And you wont hear similar reports from China for obvious reasons.

"As far as restoring the past glory of India, economic historian Angus Maddison estimates it will take at least 50 years to get back to here India was in the Moghul era in 1700s. And that is the best case scenario."

We don't want to go to past, we want to go to the future. What you are conveniently ignoring is the fact that enormous knowledge had been created over last 200-300 years by Europeans. It is just wishful thinking that had Briton not colonized India, India(incl. Pakistan and Bangl.) would have contributed to 19% of world GDP in 2009. Seeing those parts of Muslim world which was not colonized by Europeans such as Ottoman Turkey, there is scant evidence that India would have achieved the same economic output it today has, had it stayed under Mughal empire. In such an empire, there would be barely any scope for intellectual freedom or free press or freedom to innovate without interference by Mullahs - all which are vital for GDP growth. In the best case it would habe become a bigger Pakistan with ethnic and religious bigotry in every corner of life.

"I believe the Brits and colonization of India was devastating for the subcontinent. They left us poor and divided. Had the Brits not colonized us, India would have become industrialized and democratic much much faster. It wouldn't be the home to the largest number of poor and hungry in the world, as it is today."

This is an easy victim complex thinking. There are other previously colonized parts of the world which have economically preogressed(even predominantly Muslim Malaysia had done relatively well, though the role played by Chinese entrepreneurs there cant be underestimated).

The biggest drag on India in the post independence period was licence Raj. Had it been demolished sooner, number of poor people in India would have been much lesser. But I see some dignity in even these poor people - they are more likely to blame their government or their own destiny for their bad luck. Its unlikely that they grow big beard, shout with full mouth in front of the camera and sent suicide bombers throughout the world.

At the moment, probably educated Pakistanis have lost any hope that their country can be fixed. But nevertheless an easy thing to do will be to wish that the neighbour was as chaotic as Pakistan itself. But India is barely fixated on Pakistan or Kashmir anymore(OK, when there is a big terror attack, tempers are high) - along with economic growth, people have also achieved phsychological growth.
Riaz Haq said…
Here's a BBC report about India considering declining British aid:

The Indian government is debating whether it should still accept any development aid from Britain.

India is currently the biggest recipient of UK development aid, receiving more than £800m (about $1.25bn) over the three years to 2011.

Foreign Secretary Nirupama Rao told the BBC no final decision had been made.

Britain's Department for International Development (DfID) says it is reviewing its spending, and close dialogue with the Indian government will continue.

The BBC's Chris Morris in Delhi says there are those who argue that a country like India, which has an economy growing at nearly 10% a year and a massive defence budget, simply does not need British development assistance.

On the other hand, nearly half a billion people in India are still desperately poor and efforts to reduce global poverty will make no significant progress if those figures do not improve, our correspondent says.
Leaked memo

An internal memo - written by Mrs Rao and leaked to a local newspaper - appeared to suggest that India had already decided it did not want any more development aid from Britain after April next year.

But Mrs Rao says the quotes used have been taken out of context.

She admits that there is a debate within government about whether any development aid is still needed. But no decision has been taken, and there will be full consultation with London.

British officials say the tone of the leaked memo does not reflect what they are hearing from the rest of the Indian government.

When Prime Minister David Cameron met his Indian counterpart Manmohan Singh in Delhi recently, it was agreed that no-one would make a decision about giving or receiving development aid without a proper consultation process.

Britain is already reviewing its development budget, and re-examining its priorities.

"All DfID's country programmes are currently under review to ensure our aid helps the poorest people in the poorest countries," a spokesperson in London said.

India's Finance Minister, Pranab Mukherjee, told parliament recently that India would prefer to voluntarily surrender money if Britain made a decision to cut aid.

So as well as financial considerations in both countries, there is an element of national pride at stake, our correspondent says - if Britain decides to cut aid to India, Delhi may say it does not want the money anyway.
RationalPointer said…
FYI ,India is now in a position to deny even loan from the WB,for instance recent natural calamities like Tsunami,earthquake,drought etc ,Indian PM said big NO to any foreign aid ,and rehabilitation of the affected people were entirely governed.

As of 2010 Dec
US president Obama toured India in search of business and jobs for US(India provided 50k jobs for Americans),this is on record with US President accepting this in front of the whole world.
Well as of Muslim rule in India is concerned ,There are no GDP statistics available (wonder your source of information) ,But there is one thing very significant to note that ,what could have been the reason which attracted American explorer Columbus ,french explorer Vasco da Gama,mughal etc to specifically explore in "India"(oldest civilization in whole world),I bet (if India was a poor country pre-Mughal era) only an idiot would have invaded it ,so for what did they came for and what made them like so much about India to settle down forever? Answers to above questions is nothing but enormous wealth.But I still concur history is something which cannot be debated because of lack of proofs both at your point and my point.
Riaz Haq said…
RP: "FYI ,India is now in a position to deny even loan from the WB,for instance recent natural calamities like..."

India has been and continues to be the biggest borrower from WB, in fact India asked for an increase in WB's SBL, single-borrower limit last year.

RP: "US president Obama toured India in search of business and jobs for US(India provided 50k jobs for Americans),this is on record with US President accepting this in front of the whole world."

Obama's claims of job creation were for domestic consumption, coming in the wake of a big election defeat of his party from economic concerns.

RP: "Well as of Muslim rule in India is concerned ,There are no GDP statistics available (wonder your source of information) "

Read Prof Angus Maddison's "The World Economy".
Riaz Haq said…
#UK being taken for a ride! #India lands on #moon after taking £2.3bn in UK #aid over five years
The UK paid India £2.3billion in overseas aid to India between 2016 and 2021 - even though Britain's economy is a fraction of the size. #chandaryaan3 #Modi

14:25, Wed, Aug 23, 2023 | UPDATED: 21:21, Wed, Aug 23, 2023

On the day India landed a spacecraft near the south pole of the Moon, a Brexiteer has asked why Britain continues to pay foreign aid to the world's second-most populous nation - having handed over £2.3billion between 2016 and 2021.

On Wednesday (August 23), India landed a spacecraft in uncharted territory which scientists believe could hold vital reserves of frozen water and precious elements, as the country cements its growing reputation in space and technology.

However, while many, including the UK Space Agency (UKSA) itself, offered warm congratulations, former Brexit Party MEP Ben Habib was more concerned about the fact that Britain is still paying money to a nation whose economy dwarfs our own.

He told "It is odd, to put it mildly, that the UK gives increasing amounts of aid to India, a country with a space programme and an economy bigger than our own.

"Kemi Badenoch may think the aid will make her job getting a trade agreement easier, but it will not.

"They will take the aid, bank it and drive negotiations without any recognition of our generosity.

"Neither can the UK afford it. It should not have escaped the FCDO that we are in the grip of a cost-of-living crisis. Our finances stretched.

"Instead of spraying aid around the world, perhaps HMG could instead cut our taxes?"

"People speak of the soft power that providing aid gives the UK. It is a quaint but wrong notion.

"The £100 million given to India over three years will do nothing for India, will not be recognised and will not improve the UK’s standing one jot.

"Like so much of government expenditure, our foreign aid is being wasted."

The £2.3 billion of aid spending between 2016 and 2021 consists of £441 million in bilateral aid, plus £1 billion of investments through BII, £129 million in FCDO investments, and £749 million through multilateral channels such as the World Bank, according to publicly avaiable figures.

Figures uncovered by the Taxpayers’ Alliance last year indicated Britain spent more than £112million in 2021 on foreign aid projects in India and Pakistan - where almost £12million went towards a scheme promoting various contraception methods.

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