From January 1, UK to stop financial aid to India

NEW DELHI: From January 1, 2016, India will no longer receive financial aid from the UK, a decision which was taken by the British government in 2012 after a domestic outcry about India's growing economic status.

The transition has taken three years during which the existing financial grant projects were completed and the unutilized funds moved into what are called "technical assistance" projects. The MEA informed Parliament last week that "it was agreed that the existing financial grant projects will be completed responsibly as planned and technical cooperation would continue by sharing skills and expertise or in investments in private sector projects".

In 2012, then finance minister Pranab Mukherjee had famously said British aid was "a peanut" (sic) in India's total development spend and that the country could very well do without it. This followed loud voices in the UK protesting against British aid to India, a country which, they said, has a robust space and defence programme. Aid activists, however, pointed to India's poor millions to make a case for retaining the programme.

The MEA said, "The new component Private Sector Development Initiative (PSDI), introduced in 2011 to promote private sector investment in eight low income states of Madhya Pradesh, Odisha, Bihar, West Bengal, Chhattisgarh, Jharkhand, UP and Rajasthan, will continue."

The government said UK had provided financial aid for government programmes between 2013-2015 (Rs 855.01 cr in 2013-14, Rs 601.77 cr in 2014-15 and 190.06 cr in 2015-16). At present, there are 26 government sector projects with DFID assistance at the Centre and in MP, Odisha, West Bengal and Bihar-- primarily in health, education, governance and urban reforms sectors.

However, British media reported in early December that fresh Whitehall statistics showed that despite the UK promise to cut aid to India, there appeared to be a spike in development spending which rose to £279 million in 2014 from £268 million in the previous year. The only other country, the report said, which received more than India was Ethiopia, but that showed a dip of £8million from 2013.

The Indian government said in 2014-15 and 2015-16, five new agreements have been signed for technical assistance projects in the areas of agricultural reforms, urban infrastructure, energy access, etc. Under the new parameters technical cooperation will focus on policy and skills.