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In the last decade India has increasingly transitioned toward becoming an “emerging donor” country.  As part of its “South-South” strategy, India seeks to use its foreign aid programs as a tool to further its own economic, political, and strategic interests, while also taking into account the needs of the recipient country.  Its foreign assistance spending consists of grants, preferential loans, contributions to international organizations and international financial institutions, and subsidies for preferential bilateral loans.  However, rather than organizing its aid programs under one unified aid agency, India’s development assistance is channeled through a variety of ministries and government departments, including the Ministry of External Affairs and the Ministry of Finance. 

I.  Introduction

A.  Official Development Assistance Figures

Although traditionally considered largely as a recipient of foreign aid, India in the last decade has increasingly transitioned toward becoming an “emerging donor” country.  The Indian government does not release official figures on the amount it spends on foreign development assistance or “report its aid flows to the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC).”[1]  Therefore, most figures are approximate, based on how foreign assistance activities are allocated in India’s annual budget. 

The OECD estimates that India spent US$539 million in 2009–10 on foreign assistance.[2]  In 2010, according to its annual budget, the Indian government allocated US$785 million for aid-related activities.[3]  An analysis by the Real Instituto Elcan found that budget allocations for aid-related activities have grown at “a compound annual growth rate (CAGR) of 6.9% from 2004 to 2010.”[4]

B.  Private Contribution Figures

Data could only be found in relation to government-related foreign assistance programs.  No information could be found on private contributions.

C.  Snapshot of Foreign Aid Activity

India has been providing significant economic and military aid to neighboring countries in South Asia since the 1950s, soon after its independence.[5]  It is only in the last decade, however, that India has relied on foreign assistance as an increasingly important foreign policy tool to further its own economic, political, and strategic interests.

According to economist Dweep Chanana, there are three parts to India’s foreign assistance spending: “grants and preferential bilateral loans to governments, contributions to international organisations (IOs) and financial institutions (IFIs), and subsidies for preferential bilateral loans provided through the Export Import (EXIM) Bank of India.”[6]

As mentioned above, India has traditionally given foreign aid mainly to neighboring countries.  Even today a large proportion of its foreign aid goes to surrounding countries like Bhutan, Afghanistan, Nepal, and Burma. According to experts, India is “one of the five largest donors to Afghanistan with commitments of over $1 billion since 2001.”[7]

In the last decade, however, India has increasingly attempted to broaden its influence through its aid programs.  In particular, aid to Africa has grown at a “compound annual growth rate of 22% over the past ten years” from 1998–1999.[8]  In 2007, in a joint initiative with the African Union (AU), India helped set up “a pan-African e-network to connect schools and hospitals in Africa with top institutions in India.”[9]  Moreover, in 2008, after an India-Africa Business Summit, India “pledged $500 million in concessional credit facilities to eight resource rich West-African nations.”[10]  In May 2011, at the second annual Africa-India forum summit, India announced a $5 billion credit line for African countries over the next three years.[11]

Besides awarding development aid in the form of grants, loans, and project assistance, India also operates programs for training and technical assistance.  The Indian Technical and Economic Cooperation (ITEC) Programme has operated as India’s flagship foreign assistance program.  It primarily provides technical assistance and training to scholars and leaders of other developing countries.  According to the Ministry of External Affairs (MEA) website:

Under ITEC and its corollary SCAAP (Special Commonwealth Assistance for Africa Programme), 158 countries in Asia & the Pacific, Africa, Latin America & the Caribbean and East & Central Europe are invited to share in the Indian development experience, acquired since its Independence. It has six components, viz. (i) Training (civilian and defence) in India of nominees from ITEC partner countries; (ii) Projects and project related activities such as feasibility studies and consultancy services; (iii) Deputation of Indian experts abroad; (iv) Study tours; (v) Gifting/Donation of equipment; and (vi) Aid for Disaster Relief.[12]

In the last decade, India’s contributions to multilateral organizations have also increased significantly.  According to Chanana,

[i]n 2004, India lent over $400 million in hard currency to Brazil, Burundi, and Indonesia under the International Monetary Fund’s (IMF) financial transactions plan (FTP).  In 2005, India became the 15th largest donor to the World Food Programme.  And last year India’s voting share in the IMF increased slightly, addressing a long-standing demand.[13]

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II.  Legal Framework

A.  Regulation of ODA

1.  Overview

According to an International Development Research Centre report, India “does not adhere to any standard definition of development assistance.  What the country calls ‘overseas development assistance’ is often a mixed bag of project assistance, purchase subsidies, lines of credit, travel costs, and technical training costs incurred by the Indian government.”[14]

2.  Restrictions

Although under its 2003 new aid policy[15] India refuses to accept tied aid from other donor countries, much of its own development assistance is tied.  According to Chanana, the development assistance India provides is “unconditional but often tied, with a substantial part spent in India.  For instance, the flagship ITEC programme provides training in India for visiting delegates, while many EXIM bank lines of credit (LOCs) require the purchase of Indian goods or services.”[16]  A Chatham House working paper notes that “India’s new aid policy was far from unique in that it was driven not by pure altruism, but primarily from the domestic and international political and economic benefits that would accrue from it.”[17]

3.  Policy Considerations

One could attribute a number of political, economic, and strategic objectives to India’s foreign assistance programs.  According to Chanana, “India has increasingly sought to expand its activities as a donor, both to reposition itself as an emerging power and to use aid as an instrument for engaging with other developing countries.”[18]

India has traditionally seen its development assistance as “a component of a South-South cooperation in which countries interact with each other as partners at an equal level.”[19]  The First Secretary of the Permanent Mission of India to the United Nations Office at Geneva, speaking on a joint initiative between India and the AU, stated that “South-South cooperation has always been an important policy plank for India, and as part of this objective we are building a relationship of partnership for mutual benefit with Africa, not one of donor-recipient.”[20]  Therefore, India is not shy in acknowledging that the development assistance it provides can be to “further Indian interests abroad and to promote its own economic situation.”[21]  According to a briefing paper by the Friedrich Ebert Stiftung Foundation,

[t]he “Indian Development Assistance Scheme” (IDEAS), a successor-programme to the 2003 “Indian Development Initiative,” covers the large part of India’s donor activities, and is explicitly designed to increase Indian exports, to promote economic relations to other developing countries and to support India’s strategic interests abroad.  Development assistance, as a complementary foreign policy tool, is intended here especially to

  • open up new markets for Indian companies,
  • guarantee energy security,
  • strengthen India’s negotiating position in international fora,
  • further diversify the country’s alliance and partner structure, and
  • strengthen regional security, suppress separationist movements and terrorist activities in South Asia and thereby also guarantee the security of the nation itself.[22]

The other side of India’s South-South strategy is to also take into account the needs and interests of the aid recipient.  Chanana states that “India attaches far fewer conditionalities to its grants and also gives beneficiaries a greater voice in the process.”[23]  Moreover, he states, “India focuses on smaller interventions, allows recipient countries to define their own priorities and encourages mutual economic growth and long-term trade linkages rather than purely a development impact.”[24]  Therefore, the overall objective is focused on “promoting goodwill” and “local capacity.”  However, some experts, like Bijoy, believe that “there are indications that India is moving from exerting soft to hard power.  The goodwill generated could very well get diluted with India emerging as a major donor.”[25]

4.  Discretionary Aid

India’s foreign development assistance programs may be characterized as discretionary aid because spending is determined through a budget appropriation process every year.

5.  Oversight

It appears that there are very few oversight mechanisms and safeguards against corruption.  According to Vijaya Ramachandran, a senior fellow at the Center for Global Development, “[n]o official records of aid disbursements are kept, either by the Ministry of External Affairs or the Ministry of Finance.”[26]

B.  Regulation of Private Contributions

There does not appear to be any regulation of private contributions.

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III.  Foreign Aid Appropriations Process

India’s annual budget proposal is prepared by the Ministry of Finance (MoF) on the basis of proposals from each ministry of the Indian government.  Each department and ministry submits an expenditure proposal known as a “demand of grants.”  After the MoF presents the Budget proposal to the Indian Parliament for discussion and scrutiny, all demands of grants must be passed by the Indian Parliament.  Subsequently an appropriations bill is introduced to authorize the Indian government to draw funds from government revenue.

Funding for foreign assistance programs is channeled through multiple ministries of the Indian government.  For example, in the Ministry of External Affairs’ expenditure proposal, foreign assistance is allocated under the title of “Technical and Economic Cooperation With Other Countries.”  According to the Notes on Demand of Grants 2011‑2012, “[t]his budget head caters to India’s multilateral and bilateral aid and assistance programmes to neighbouring and other developing countries.”[27]

As will be discussed below, foreign assistance is also channeled through the MoF.  The MoF’s expenditure proposal for 2011‑2012 includes a separate allocation for contributions to IFIs (the World Bank and IMF).  Also, a separate budget is allocated for contributions to the United Nations Development Programme (UNDP).  Other multilateral assistance is under the heading of “International Cooperation,” which represents India’s contribution to the following entities:

  • International Fund for Agricultural Development (IFAD)
  • Commonwealth Fund for Technical Co-operation (CFTC)
  • Technical Assistance Scheme of the Asian Development Bank (ADB)
  • Organisation for Economic Co-operation and Development (OECD)
  • Network on Fiscal Relations
  • Technical Cooperation with African Development Bank (AfDB)[28]

India has also entered into numerous bilateral cooperation agreements for the provision of foreign aid, including the following:

  • Line of Credit Agreement worth $1 billion was signed in Dhaka on August 7, 2010, between EXIM Bank of India and Government of Bangladesh.[29]
  • In December 2009, twelve MoUs were signed in the areas of hydropower, narcotics, IT, medicine, agriculture, civil aviation, and environment between India and Bhutan.[30]
  • In Nepal, India contributes to various development projects in the areas of health, infrastructure, rural development, and education.[31]

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IV.  Implementing Agencies

Although India does not have a dedicated aid agency, most aid work is conducted through multiple programs operating within different ministries of the Indian government.  According to Dweep Chanana, “the Ministry of External Affairs plays a coordinating function” while the other “individual ministries have their own objectives and budgets both for bilateral programmes and for the funding of International Organisations.”[32]

The MEA plays the principal role in providing development aid through grants and project assistance.  According to the German Development Institute (DIE), “MEA has various institutional arrangements under its wings, such as the Indian Technical and Economic Cooperation (ITEC) Programme, Aid to African countries through Special Commonwealth Assistance Programme for Africa (SCAAP), [and] Bilateral Aid to neighboring and other developing countries.”[33]

Budget allocations for development assistance are also channeled through the MoF.  According to the 2011‑2012 Annual Budget, India provides development assistance to both Sri Lanka and Cambodia through the Finance Ministry.[34]  Moreover, the MoF’s Department of Economic Affairs has been extending Lines of Credit to other developing foreign countries.  According to the MoF website, one of the Department’s major functions is “Government of India Supported Lines of Credit (LOCs) routed through EXIM Bank of India to countries of Asia (Excluding Bangladesh, Nepal, Bhutan) Africa, CIS region and Latin American region[,] which are being extended under the Indian Development and Economic Assistance Scheme (IDEAS).”[35]

The size of contributions to the World Food Programme is decided by the Ministry of Agriculture.[36]  However, the MEA still determines which countries should be recipients of the assistance.[37]

Under the 2007–2008 Budget, the Indian government proposed the creation of a unified aid agency called the India International Development Cooperation Agency (IIDCA), “which would consolidate Indian aid and allow for larger projects.”[38]  However, progress has stalled and the agency has yet to be established.  Consequently, according to the German Development Institute, “India’s development cooperation policy remains fragmented in the responsibility of various ministries.”[39]

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V.  Other Types of ‘Aid’

India also provides scholarships to overseas students through the Indian Council for Cultural Relations (ICCR) scholarship scheme.[40]

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Prepared by Tariq Ahmad
Foreign Law Specialist
September 2011


[1] C.R. Bijoy, India: Transitioning to a Global Donor, in The Reality of Aid, South-South Cooperation: A Challenge to the Aid System? 68 (Special Report on South-South Cooperation 2010), http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf.

[2] House of Commons International Development Committee, The Future of DFID’s Programme in India, 2010-12, H.C. 616-I, http://www.publications.parliament.uk/pa/cm201012/cmselect/cmintdev/ 616/61608.htm.

[3] Dweep Chanana, India’s Transition to Global Donor: Limitations and Prospects (Real Instituto Elcan, ARI No. 123/2010, July 23, 2010), http://www.realinstitutoelcano.org/wps/portal/rielcano_eng/ Content?WCM_GLOBAL_ CONTEXT=/elcano/elcano_in/zonas_in/cooperation+developpment/ari123-2010.

[4] Id.

[5] Dweep Chanana, India as an Emerging Donor, 44 Econ. & Pol. Wkly. 11 (Mar. 21–27, 2009), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1410508&#.

[6] Chanana, supra note 3.

[7] Chanana, supra note 5, at 12.

[8] Vijaya Ramachandran & Julie Waltz, India Emerges as an Aid Donor, Center For Global Development (Oct. 5, 2010), http://blogs.cgdev.org/globaldevelopment/2010/10/india-emerges-as-an-aid-donor.php.

[9] Chanana, supra note 5, at 12.

[10] Ramachandran & Waltz, supra note 8.

[11] Dr. Manmohan Singh, Address by PM at the Plenary Session of the 2nd Africa-India Forum Summit (May 24, 2011), http://www.indiaafricasummit.nic.in/pdfs/PMPlenarySessionof2ndafrica.pdf.

[12] Introduction, ITEC Ministry Of External Affairs, http://itec.mea.gov.in/ (last visited Sept. 15, 2011).

[13] Chanana, supra note 5, at 12.

[14] Subhash Agrawal, Emerging Donors in International Development Assistance: The India Case 5 (Int’l Dev. Res. Centre, Dec. 2007), http://publicwebsite.idrc.ca/EN/Documents/Case-of-India.pdf.

[15] Budget Speech, Ministry of Finance, Union Budget 2003–2004, http://www.indiabudget.nic.in/ub2003-04/bs/speecha.htm.

[16] Chanana, supra note 3.

[17] Gareth Price, India’s Aid Dynamics: From Recipient to Donor? (Chatham House, Asia Programme Working Paper, Sept. 2004), http://www.chathamhouse.org/sites/default/files/public/Research/Asia/wp200904.pdf.

[18] Chanana, supra note 3.

[19] Matthias Jobelius, New Powers for Global Change? Challenges for the International Development Cooperation: The Case of India (Friedrich Ebert Stiftung, Briefing Paper 5, Mar. 2007), available at http://www.basas.org.uk/projects/Jobelius.pdf.

20 South-South Trade, International Trade Forum, http://www.tradeforum.org/m/fullstory.php/aid/ 1187/South_96South_Trade.html (last visited Sept. 15, 2011).

[21] Jobelius, supra note 19, at 4.

[22] Id.

[23] Chanana, supra note 5, at 12.

[24] Chanana, supra note 3.

[25] Bijoy, supra note 1, at 74.

[26] Ramachandran & Waltz, supra note 8.

[27] Ministry of External Affairs, Notes on Demand of Grants 2011-2012, http://indiabudget.nic.in/ ub2011-12/eb/sbe31.pdf.

[28] Id.

[29] Ministry of External Affairs, India-Bangladesh Relations (Aug. 2011), http://mea.gov.in/mystart.php?id=50042439

.

[30] Ministry of External Affairs, India-Bhutan Relations (Aug. 2011), http://mea.gov.in/mystart.php?id=50042442.

[31] Ministry of External Affairs, Embassy of India: Kathmandu, India-Nepal Relations (July 31, 2011), www.mea.gov.in/mystart.php?id=50044504.

[32] Chanana, supra note 3.

[33] India’s Development Cooperation – Opportunities and Challenges for International Development Cooperation (Deutsches Institut für Entwicklungspolitik/German Development Institute Briefing Paper, Mar. 2009), http://www.die-gdi.de/CMS-Homepage/openwebcms3_e.nsf/(ynDK_contentByKey)/ANES-7QAGRV/$FILE/BP%203.2009.pdf.

[34] Ministry of Finance (MoF), Notes on Demand of Grants 2011-2012, http://indiabudget.nic.in/ub2011-12/eb/sbe32.pdf.

[35] Commercial Imports and Exports (CIE) – II Section, Ministry of Finance (MoF), http://finmin.nic.in/the_ministry/dept_eco_affairs/cie2sec/cie2sec_index.asp (last visited Sept. 15, 2011).

[36] Chanana, supra note 3.

[37] Gareth Price, Diversity In Donorship: The Changing Landscape of Official Humanitarian Aid: India’s Official Aid Programme 14 (Humanitarian Policy Group, HPG Background Paper No. 20, Sept. 2005), available at http://www.odi.org.uk/resources/download/302.pdf

[38] Gareth Price, For the Global Good: India’s Developing International Role 14 (Chatham House, Sept. 2004), http://www.chathamhouse.org/sites/default/files/public/Research/Asia/r_indiarole0511.pdf.

[39] India’s Development Cooperation, supra note 33, at 1.

[40] The Many Scholarship Schemes of ICC, Indian Council for Cultural Relations (ICCR), http://www.iccrindia.net/scholarshipschemes.html (last visited Sept. 20, 2011).

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Last Updated: 06/09/2015