Does India need aid and if so, what kind?

January 12, 2011 4 By admin

Thought provoking piece on India and aid from Andy Sumner, whose paper showing that 72% of the world’s poor now India peepslive in middle income countries (MICs) caused a big stir last year. Andy has now become a contributor to the Global Dashboard blog.

The UK is currently tying itself in knots over whether to give aid to a country that has a third of the world’s poor people, is the biggest recipient of British aid over the last decade, but also has $300bn in foreign exchange reserves (400 times more than the UK’s aid contribution), and a space programme. Tricky, eh?

Andy proposes three ways DFID and other donors could do things differently:

“i. Focus on poor people, not poor countries If the focus of aid is poor people not poor countries then the low income/middle income country way of looking at the world needs a rethink. DFID could switch its aid allocation metrics to fit DFID’s mission – ie from poor countries (low or middle income countries) to poor people.

ii. Think beyond traditional aid Maybe aid is no longer about money transfers with MICs. There is the ‘do no harm’ agenda – designing favourable and coherent development policies on remittances and migration, trade preferences, climate negotiations and climate financing, as well as tax havens – and a case for making aid increasingly about global public goods (and the importance of MICs support to these) and multilateralism, especially in middle-income countries and where aid might be channelled through the United Nations Children’s Fund, for example, or a new global fund for cash transfers to households as a direct poverty and redistributive measure.

iii. See equity and shared prosperity as a global and donor concern not just a domestic issue More equitable countries reduce poverty faster, and stubborn asset, gender or identity inequality (ie caste systems) might begin to explain persistent poverty amid wealth in MICs. This entails some thinking on what aid is for and it’s role perhaps in supporting political voice of the poor and marginalized in policy processes. Any attempt to discuss inequality will be viewed as an infringement on political sovereignty but is domestic inequality solely a domestic issue if it hinders the effectiveness of aid?”

I think (ii) – do no harm – makes absolute sense, but have my doubts about the other two.

What does focusing on poor people mean? If it’s aid donors delivering services themselves, or subsidizing the Indian government to do so, then it just seems to let the state off the hook (for example by letting it carry on subsidizing the private sector, rather than public services). The standard counterargument is that some Indian states are as large and as poor as many African countries, and so have the same claim on aid, but that strikes me as rather apolitical – Indian states like Bihar are not independent countries, but part of a large, rising power and that changes the equation.

India demonstrationThere is another way to focus on poor people that makes more sense – helping them organize. Development happens through the construction of effective states and active citizenship, and the nature of the interaction between the two. The problem in India is not policy (there’s lots of them, many excellent, on everything from employment guarantee schemes to the right to education), or cash, (remember those reserves). The problem is implementation, and the political priority accorded to poor people. A study in Bihar showed that teachers teach on average only every second day and there are no sanctions. In the same state, one of India’s poorest, 80% of the food that is supposed to reach poor people through the distribution system goes missing (sold by corrupt bureaucrats, etc).

So one role for donors is to support poor people and their organizations in demanding accountability in the implementation of policies. The question then is how far such support can go before provoking accusations of interference in domestic politics, and whether the boundaries on such actions are even tighter for foreign governments giving aid than for multilaterals like the UN or international NGOs. Go too far and it might well be that the Indian government gets tired of the aid donors even before the donors give up on India. India’s finance minister has already dismissed aid as ‘peanuts’, and the government dislikes the aid agencies’ public narrative of 450 million poor Indians, child malnutrition, maternal mortality and so on, rather than its own preferred story of India as an emerging power.

Another option might be for aid donors to pick political winners – spotting and supporting promising exercises in state-building – states or bits of the official system at either federal or state level that are clearly committed to reducing poverty and inequality. Donor cash or technical assistance might have more impact if targeted in this way.

The bottom line is that if the Indian government really wanted to end poverty, it could do so ($300bn in reserves works out at $650 per poor Indian). Whether it does will depend much more on the evolution of domestic politics and the continued mobilisation of the Indian people, rather than whether or not DFID continues to give aid. No easy answers – as Madeleine Bunting wrote in a follow-up piece to Andy Sumner’s, some experts admit ‘changing their minds from backing to ending aid to India every other day.’

I’m with them – if you’re not confused, you aren’t thinking hard enough…….