It’s not just Bollywood and yoga anymore.
India’s soft power has now been on display for at least a couple of decades: Indian philosophy has captivated Western minds since the 1960s; Bollywood’s prodigious celluloid fare has long drawn huge audiences in significant parts of Asia, Africa, and beyond; India’s English-language novelists have often edged out native British writers for the prestigious Man Booker Prize; and, of course, yoga studios have become all but ubiquitous in the United States. However, even South Asian scholars and analysts have rarely thought of India’s largesse as a possible source of material power, especially in the realm of foreign assistance.
With U.S. Secretary of State Hillary Clinton having visited India this week in an effort to secure its cooperation on a range of international issues, it is time to start thinking of India not as a beneficiary of the world’s charity (though it still is) — but as a major donor. Although there is no published, centralized data, or even agreement on the definition of Indian “foreign aid,” if one uses the Development Assistance Committee’s official definition of aid, India disbursed over $1.5 billion in traditional foreign aid in 2011 — second only to China among developing-country donors — even while it remained the world’s largest recipient of multilateral assistance. Indian foreign assistance has not only tripled since the turn of the century — with foreign aid by the five BRICS countries growing 10 times faster than aid by G-7 countries — but it has also grown in terms of the diversity of recipients. India also recently announced that it will be creating its own aid agency and has built an administrative structure, the “Development Partnership Administration,” within its External Affairs Ministry toward that end, though there has not yet been any budgeted increase in the diplomatic corps.
India’s identity as an international donor is a downright confounding phenomenon. In the four decades between 1951 and 1992, India was the largest global recipient of foreign aid, receiving a total of approximately $55 billion. During most of the Cold War era, given its anemic growth rates and its pervasive poverty, India was acutely dependent on aid from multilateral and bilateral donors. Indeed, in the mid-1960s, there were moments when foreign assistance, especially food aid, was critical to fending off famine and widespread starvation. And yet, India started disbursing its own foreign aid as early as the 1950s.
In those days, the most meaningful form of assistance that the cash-strapped External Affairs Ministry could proffer was technical advice and training. Indian bureaucrats from various government departments were deputed abroad to help poorer governments with their professional expertise, and civil servants from developing countries were offered training in India through a program launched in 1964 — the Indian Technical and Economic Cooperation (ITEC) program. Although ITEC was small in monetary terms, it bore fruit over the subsequent decades as many bureaucrats and politicians from other developed countries received their educational training in India. This year, for instance, 150 bureaucrats from Ethiopia are receiving Indian training. This program, of course, has also provided for good future relations with recipient countries. Take the example of Afghan President Hamid Karzai, who attended university in India and enjoys warmer relations with India than with neighboring Pakistan.
Since the 1950s, India has provided modest amounts of assistance to smaller and less-developed neighbors, especially Bhutan and Nepal. Much of it has been in the form of technical assistance, such as 50 years of support for the building of Bhutan’s hydroelectric facilities in exchange for fixed-rate electricity. But now, after a decade of nearly 9 percent annual growth (it has recently slowed down somewhat), India is for the first time in a position to provide direct cash transfers and subsidized loans.
India’s assistance effort is clearly enmeshed into a larger set of foreign-policy goals: ensuring secure sources of energy for an expanding economy, opening markets for India’s increasingly export-oriented industrial and service sectors, and bolstering geostrategic ties with key neighbors. New Delhi’s recent reluctance to ostracize Iran over its controversial nuclear program has to be understood in light of India being the world’s second-largest importer of Iranian oil. The Indian government has also provided assistance to Tehran in order to expand the Iranian port of Chabahar, linking it via roads and railroads to western Afghanistan — and beyond, to the resource-rich Central Asian republics.
In Afghanistan, India has specific plans to build a railroad linkage to the city of Hajigak, where several Indian steel and mining companies — led by the state-owned National Mineral Development Corp. and the Steel Authority of India — have won the rights to mine Afghanistan’s biggest iron ore deposits. Moreover, though the United States objects to India’s use of the Iranian port of Chabahar for importing oil, India this year used the port for the first time to deliver humanitarian aid to Afghanistan — demonstrating not only its foreign-policy and aid-policy independence, but also that sea-route access to Afghanistan through Pakistan is not the only option.
India is also expanding its development assistance to African countries beyond its traditional relationships within the Commonwealth in an effort to secure access to natural resources as well as serve its broader strategic aims. Through its state-owned companies, it has significantly increased oil imports from African countries like South Sudan — where India recently sent a special envoy to negotiate a peace agreement with Khartoum. At the 2011 India-Africa Forum Summit, India pledged $5 billion in aid to Africa in the form of concessional loans — an amount similar to India’s current annual health-care budget. In addition, it pledged $700 million to help establish new institutions and training programs in consultation with the African Union and $300 million for the Ethiopia-Djibouti railway line. It also promised 10,000 new scholarships for the India-Africa Virtual University, 2,500 training slots under the ITEC program, and 22,000 scholarships for studying in India over the next three years. Additionally, it announced the introduction of an India-Africa Business Council, as well as other smaller programs such as government-supported cultural and artisanal exchanges.
Larger mercantilist goals also underpin Indian development assistance today. The far-flung diaspora of Indian traders from Fiji to Kenya facilitated early trade relationships between India and some of the subsequent recipients of foreign assistance. The global economic downturn has increased the necessity of finding new markets for India’s rapidly growing industrial and service sectors. India’s $1 billion line of credit to Bangladesh in 2010 was extended to assist with infrastructure projects, such as highways and communications networks. But by tying the line of credit to 85 percent usage of Indian contractors, the aid also helps create new markets for India’s goods and workers. Similarly, $125 million in Indian assistance to nearly 50 countries in the form of the Pan-African e-Network — which ties educational centers and hospitals in Africa with universities and specialty hospitals in India — may not be large in monetary terms, but it’s also creating a demand for Indian tertiary health and education services at a fraction of their cost in upper-income countries. India has learned from developed countries, particularly the United States, that foreign assistance can create benefits for both donor and recipient. It has also learned from its nemesis China that development assistance can provide seed money to enable the entry of private commercial interests.
India’s larger strategic ambitions have also influenced its development assistance. It has bolstered its aid programs in Nepal and Bangladesh in an attempt to curb Chinese influence; it has emerged as the fifth-largest donor to Afghanistan as it works determinedly to keep its long-standing adversary, Pakistan, at bay; and it has also extended its reach into Myanmar to ensure that Beijing does not rule the roost. Beyond its own neighborhood, India has sought to make inroads into Africa — not only to obtain access to critical raw materials and energy resources, but also to keep a check on Chinese interests and win support in the United Nations for its ambitions to become a permanent member of the Security Council. Crucially to the recipient countries in Africa, neither India nor China usually imposes conditionalities on aid, in contrast to multilateral and bilateral OECD countries, which makes Indian aid, as well as Chinese aid, more attractive to recipient countries.
India’s foreign aid activities have now also extended to humanitarian assistance, such as when its Navy participated in an ad hoc coalition with the United States, Japan, Australia, and Singapore to disburse blankets and tents in the aftermath of the 2004 Indian Ocean tsunami. In 2008, in the wake of Cyclone Nargis, which also devastated significant parts its own coastal regions, India nevertheless provided critical humanitarian relief to other affected countries, particularly Sri Lanka. In 2009, the conflict in Palestine led India to disburse humanitarian aid to the Palestinian territories, and India gave humanitarian aid to Tajikistan to avert famine there. Additionally, in response to floods in 2010, India gave humanitarian aid to Pakistan — a country with which it has fought three wars. These endeavors reflect not only greater institutional capacity to respond to natural calamities, but also the necessary political commitment and diplomatic skill to act swiftly and engage beyond India’s traditional neighborhood.
Through humanitarian as well as programmatic lending, India’s approach to foreign assistance shows that it wants to be recognized as an emerging great power. In using foreign aid not only to help in times of disaster and spur development in the recipient country, but also to secure Indian resource supplies, seek markets for its goods, and cement larger goals, New Delhi is mimicking the policies of developed countries.Indian foreign aid has seen annual growth rates of 10 to 20 percent over the past decade. And because many traditional aid donors have seen their aid budgets stagnate or even decrease in response to the global economic crisis, India’s aid influence could have a multiplying effect.
Due to India’s status as an emerging economy, a consolidated democracy, and a developing country free from colonial influence, Indian foreign assistance has great legitimacy in the eyes of other emerging countries — a legitimacy in clear contrast to that of China. It is this legitimacy that differentiates Indian development assistance and is likely to bolster its soft power.
But as the Indian foreign assistance program increases in size and breadth, it will change how traditional donors view their own foreign aid to India and may well lead to increased questioning among Indians themselves of why a country with a larger number of poor people than all of sub-Saharan Africa is spending its money on foreign aid. For now, however, it seems like international aid to India will keep flowing: Britain recently announced a revamped aid program to India, focusing on the poorest states and most vulnerable groups, with a plan to move from an aid-based relationship to a two-way partnership. And, for once, India’s legendarily opaque bureaucracy could have an unintended benefit: Because the country lacks a centralized aid agency with data on the full breadth of Indian foreign assistance — and because at least a quarter of the population remains illiterate and poor — it will probably take a while longer for Indians to start questioning their government’s aid abroad. So far, this has perfectly served the Indian government, enabling it to distribute aid to serve its larger foreign-policy goals, without having to be held accountable. But with even the richest foreign countries questioning the utility of foreign aid in an age of austerity, Indian leaders may soon have to justify their increasing generosity to voters.
Authors: RANI D. MULLEN is associate professor of government at the College of William & Mary and is currently a visiting fellow at the Centre for Policy Research in New Delhi. SUMIT GANGULY holds the Rabindranath Tagore chair in Indian cultures and civilizations and is a professor of political science at Indiana University, Bloomington.
MAY 8, 2012