UK’s move to end Indian aid by 2015 is 'premature and politically motivated': IPPR

In November 2012, UK’s international development secretary, Justine Greening said that Britain will start slashing its financial aid to India and will cut it completely by 2015.

At that time Greening also said that the UK will offer technical assistance to India.

This assistance will cost the UK £30m every year after 2015 and slashing aid will help it save around £200m between 2013 and 2015 which represents less than 1% of UK’s overseas development assistance funds to India, according to a report by IPPR (the Institute for Public Policy Research) in the UK.

Business investment and personal remittances between the UK and India vastly outweigh the value of British government aid and that’s why the government must rethink its plans to cut Indian aid, IPPR experts said.

The think tank advised that instead of arbitrarily cutting the financial aid, the UK must outline a clear ‘exit strategy’, specifying the objectives relating to poverty and development that should be achieved before the aid is withdrawn.

The strategy should be communicated to the UK public to demonstrate that financial aid is effective and that it is not an open-ended or permanent commitment, said the IPPR report’s authors Will Straw and Alex Glennie.

The experts also emphasised the existing bilateral ties between the two countries and its benefits.

The UK has been one of the largest bilateral donors to India, largely due to the historic ties between the two countries. In 2010 alone, the UK sent a total of $4.1bn in remittances to India. Britain’s FDI contribution to India has risen from £135m in 2001 to £1.8bn in 2010.

Meanwhile, the flows of Indian investment to the UK are also rising since 2007. For instance, Tata purchased Corus Steel for £6.2bn in 2007 and Jaguar Land Rover for £1.15bn in 2008, and more recently India Hospitality Corp acquired Adelie Food Holding for £220m in 2012.

As the annual flows of remittances and FDI from the UK to India both dwarf the Department of International Development’s (DfID’s) India budget, the decision to terminate British aid to India should considered the totality of British flows in the round, Straw said.

The IPRR has also made a range of recommendation in its report. It said that the UK government should continue to support India until there has been further progress in reducing poverty and achieving developmental goals. It also recommended that the UK should maintain its focus on supporting good governance in the poorest states.

It has also urged the British government and financial sector to engage with the substantial Indian population living in the UK on the issue of remittances.

“So long as significant numbers of poor people live in India, there is a principled case for Britain continuing to devote aid resources to India’s poorest states,” the IPPR report also read.