Future of UK aid to India in question

India is considering whether to decline UK government aid should London cut and reshape development assistance to its former colony.

An Indian foreign ministry official said on Wednesday that India would take a decision on the future of a long-standing bilateral aid relationship in “consultation” with Britain.

The outcome is crucial to the Department for International Development, which derives international credibility from its presence in India.

The official’s comments were made after a media report revealed that internal discussions were under way within the Indian government on the desirability of future UK aid to Asia’s third-largest economy.

India receives more UK aid than any other country, worth more than £1.5bn over the past five years.

The Indian Express, a daily newspaper, had reported that a senior Indian diplomat had written to the finance secretary recommending that India stop taking development assistance from April next year in the light of plans by London to restructure it.

Andrew Mitchell, the international development secretary, will meet counterparts at India’s finance ministry in November to discuss the future size of development assistance, a Delhi-based spokesman for Dfid said on Wednesday. A final decision is expected at the end of the year.

“We really think that there’s no reason to panic. At this moment, [speculation about cutting back is] premature; they haven’t made a decision,” the spokesman said.

The talks between the two countries on development assistance take place after David Cameron, the prime minister, put all the country’s overseas aid ­commitments under review. Questions have been raised by MPs about whether India, the fastest-growing large economy after China, still needs support from the UK.

“All Dfid’s country programmes are currently under review to ensure our aid helps the poorest people in the poorest countries,” said Dfid. “No decision on future funding to India has been made."

India’s ambivalence towards foreign assistance has deepened following years of strong economic growth. In 2004, New Delhi reduced to six the number of foreign countries permitted to provide aid to India.

Pranab Mukherjee, India's finance minister, described the UK’s aid to India as “peanuts” when seen as a proportion of the country’s total GDP. He told parliament last month that India would prefer to surrender assistance should the British government decide to cut it.

New Delhi has boosted its own donor efforts in countries such as Burma and Afghanistan and in sub-Saharan Africa. This, alongside a moon mission and the launch of a nuclear submarine, has left some development partners wondering whether India fits the bill for assistance.

Development experts argue that India’s high rates of economic growth are not translating into greater social investment. They say that a strong focus on poverty alleviation needs to be maintained in India as the country holds the largest concentration of the world’s poor.

Moreover, meeting the United Nations millennium development goals rests on improvements in India, where health indicators, particularly among women and children, remain some of the worst in the world.