Background Paper No. 25
BY Ammar Nainar
India, once a major recipient of development assistance, has only recently evolved into a significant provider of foreign assistance. Development assistance has become a critical tool in India’s foreign relations, especially since the establishment of the Development Partnership Administration (DPA) divisions within the Ministry of External Affairs (MEA) and increased coordination with the Export-Import (EXIM) Bank of India. Since 2000, India’s Ministry of External Affairs has overseen financial assistance to over 65 countries worth over $48 billion. This amount comprised $14.74 billion in grants, $32.6 billion in lines of credit, and $656 million in capacity building and training programs. These figures do not reflect other kinds of Indian support such as emergency financial assistance, multilateral aid and lending, and certain training programs conducted by other Indian government agencies. Over this period, India’s government has also conducted more than 20 major humanitarian assistance and disaster relief (HADR) missions and extended offers of training to over 128,000 individuals from other countries.
Like many other countries, India’s foreign assistance – grants, loans, concessional lines of credit, capacity building, and humanitarian assistance – is driven by a combination of strategic, economic, and reputational considerations. Although primarily focused on India’s immediate neighborhood, significant amounts are now extended to Africa and other developing countries. While traditionally focused on economic development and technical assistance, India’s foreign assistance has also assumed a more strategic character. Areas such as defense and security, governance and accountability, connectivity and energy infrastructure, and technology and cybersecurity are increasingly being supported by Indian development financing and capacity building in select countries. These developments increase the prospect for coordination and potential collaboration with strategic partners, including, but not limited to, the United States, Europe, Japan, Australia, South Korea, Israel, and the United Arab Emirates.
1. The Evolution of India’s Foreign Assistance Programs
India has a longer tradition of foreign assistance than is often known. In 1938, India sent doctors, including the celebrated Dr. Dwarkanath Kotnis, as well as ambulances, to Hebei province in China for medical relief during the Sino-Japanese war. During the early years after independence, India was itself a crucial recipient of development assistance, at one time comprising as much as 3 percent of its gross domestic product (GDP). At the same time, India was also assisting other developing economies. In 1949, India extended concessional loans to Burma (Myanmar) for food commodities and grants to Nepal and Bhutan for infrastructure development. In January 1950, under the Colombo Plan for Co-operative Economic Development of South and Southeast Asia, India contributed $10 million in grants and provided 24 training slots to scholars from Sri Lanka, Pakistan, Indonesia, and Thailand at the International Statistical Education Centre in Kolkata. By 1954, India had a dedicated aid mission in Kathmandu implementing at least 75 projects. It also concluded a trilateral agreement with the United States to build roads in Nepal. Until the early 1960s, the Indian government was mainly providing such kinds of multilateral foreign assistance through the Ministry of Finance.
A major administrative shift occurred in September 1964, when the MEA set up its own bilateral foreign assistance program known as the Indian Technical and Economic Cooperation (ITEC) program. It encompassed training in India, posting Indian experts abroad, gifting equipment, conducting technical surveys, and implementing grant projects in areas such as education, agriculture, and health. During the 1970s, Malaysia, Afghanistan, and Mauritius were major recipients and by the late 1970s, countries such as Ecuador and Peru also enrolled in ITEC. In 1977, India, due to the success of its own Green Revolution, set up the Mekong Delta Rice Institute in Vietnam and conducted feasibility studies for railway networks in the Middle East. In terms of defense, India gifted naval vessels and basic trainer aircraft to Bangladesh, Malaysia, and Kuwait, and provided military training to Iraq and Oman.
By the late 1990s and early 2000s, India took nascent steps to consolidate different types of foreign assistance. In the mid-1990s, the government created a separate division in MEA for ITEC and in 2003, it introduced concessional Lines of Credit (LoCs) to developing countries. In 2005, a Development Partnership division was established to track implementation. This transformed into the Development Partnership Administration (DPA) by 2012 to coordinate and centralize its foreign assistance programs.
2. Types of Foreign Assistance
India’s government extends at least four kinds of foreign assistance through the Ministry of External Affairs: grants, lines of credit, capacity building, and HADR. Each of these types of assistance is implemented by four separate DPA divisions within the Ministry of External Affairs. Currently, DPA-I handles lines of credit, concessional finance, and matters like loan terms, project identification, evaluation, monitoring, and coordinating with the EXIM Bank and the Ministry of Finance. DPA-II administers the ITEC program, as well as small grant projects in Africa and Southeast Asia and triangular cooperation with partner countries. DPA-III implements grant projects in India’s neighboring countries like Afghanistan, Myanmar, Maldives, Nepal, and Sri Lanka. DPA-IV handles cultural projects like preservation and temple restoration in Southeast Asia.
India also extends other kinds of assistance outside the scope of this study. For example, emergency financial assistance, such as over $4 billion in funds extended to Sri Lanka during its recent financial crisis, is administered by the Ministry of Finance and the Reserve Bank of India. India’s bilateral financial package to Sri Lanka was the first of its scale and kind for India. Also, the finance ministry contributes to international financial institutions such as the International Monetary Fund, World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, and the New Development Bank. Other ministries provide financial contributions to United Nations specialized agencies and select multilateral institutions. In 2022-23, such contributions totaled approximately $422 million.
Grants
Grants are project-specific assistance and gifts requested by the recipient country. The recipient countries identify and determine their projects and submit a formal request to an MEA regional division. Thereafter, these requests are assessed for budgets and feasibility before being approved and implemented by DPA-II and for neighboring countries by DPA-III. Between 2000 to 2022, India disbursed approximately $14.7 billion in grants. South Asia received 70 percent while India’s extended neighborhood of Mauritius, Africa, and Eurasia received most of the remainder.
Grants have been provided for projects and equipment pertaining to agriculture, technology, infrastructure including connectivity, community development, energy, and defense and security. Some of India’s signature projects include hydroelectricity projects and e-libraries in Bhutan, vocational training centers in Africa, the National College for Law Enforcement and Police in Maldives, and hospitals in Afghanistan. In the early 2000s, India started extending grants of less than $50,000 for small projects in education, sanitation, and health, called Small Development or Quick Impact Projects (QIPs). They are designed to benefit local communities and to be completed within six months to one year. India has completed over 500 such QIPs in Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Vietnam, Nepal, and Myanmar, among other countries.
However, despite efforts to ensure transparency and accountability, grant projects have suffered from procedural delays and procurement issues in India and weak capacity or political instability in the recipient country. In neighboring countries, India’s infrastructure projects are sometimes delayed due to lack of technical capacity in managing land records, property rights frameworks, and deficiencies in land surveying.
It is also important to note that India is not a traditional aid donor belonging to the Organization for Economic Cooperation and Development (OECD). This entails providing obligatory economic aid comprising of grants, loans, and technical assistance to developing countries. India’s grants, loans, and technical assistance are provided in a voluntary manner, wherein the recipient country selects, requests, and determines the nature of assistance sought from India. India also provides assistance on a government-to-government basis. These differences set apart India’s foreign assistance from that of most traditional OECD aid donors.
Lines of Credit
Lines of Credit (LoC) began to be employed regularly by India after 2003-04 as the Indian Development Economic Assistance Scheme (IDEAS). The Export-Import Bank of India (EXIM Bank), India’s specialized export promotion agency, extends LoCs to developing countries on behalf of the Indian government. LoCs facilitate borrower countries or institutions to import Indian goods, services, and projects on concessional terms determined by International Monetary Fund guidelines (IMF). The EXIM Bank extends LoCs after an inter-agency process which begins with the borrower country submitting a project proposal to the local Indian diplomatic mission. This proposal is then referred to an MEA regional division and DPA-I. If required, DPA-I refers the proposal to a line ministry for technical feasibility. Thereafter, a standing committee of MEA, the finance ministry, EXIM bank, and other officials examine the proposal and make recommendations. As a final step, proposals are sent to the Foreign and Finance Ministers for approval. LoCs can now take as little as 15 days to be approved.
Between 2000 to 2022, the Indian government has extended 312 LoCs totaling $32.6 billion to more than 65 countries and completing more than 320 projects. More than 50 percent of LoCs are concentrated in South Asia and the Indo-Pacific regions, consistent with India’s Neighborhood First and Act East policies. Africa is a close second with 34 percent while Latin America and the Middle East are the least with 3 percent and 1 percent, respectively. LoCs are provided for agriculture, industry, infrastructure, social welfare, energy, and defense and security. 50 percent of LoCs are concentrated on industry, infrastructure, and energy. This reflects India’s stated priorities in the IDEAS framework to use LoCs to support strategic infrastructure projects and promote trade and economic ties with borrowing countries. One example is in Mongolia where an Indian credit of approximately $1 billion is going towards Mongolia’s first petroleum oil refinery.
The LoC framework underwent reforms in 2015 to counter graft and complete outstanding projects. Some changes included: classifying borrower countries into three categories as per IMF standards; reducing the minimum value of Indian goods and services required to be imported from 85 percent to 75 percent; requiring a detailed project report (DPR) with appropriate information on land, and better timelines. India usually approves only those LoC projects with a substantive DPR, and too often borrowing countries may not have the technical capacity to prepare one. Consequently, another reform in 2015 involved ensuring that borrowing countries could appoint a non-Indian project consultant to design such DPRs and even prepare tender documents, and evaluate bids. Most importantly, the EXIM bank decided to “pre-qualify” companies that could only bid for tenders in their core competency.
In 2022, the framework was further revised to codify Indian sovereign guarantees to the borrower country, should an Indian private company undertake any “strategically important infrastructure project” in their country. The latest revision, also known as Concessional Finance (CF) guidelines, reflects burgeoning public-private coordination to make Indian private companies more competitive to bid and implement for infrastructure projects overseas. Despite these changes, Indian companies sometimes suffer from payment arrears and questions are raised about the financial sustainability of their projects.
China, like India, is also a non-traditional donor that provides comparable forms of foreign assistance like grants, interest-free loans, and interest subsidies for concessionary loans. Comparisons between the two countries are inevitable. In fact, the AidData Research Lab at William & Mary College hypothesizes that India is more likely to extend an LoC to a country if China has already done so and if India and China have a similar export structure in that country. Likewise, India is more likely to implement a grant project in Bangladesh, Nepal, Bhutan, Sri Lanka, and Myanmar if they have received Chinese assistance in the previous year.
Capacity Building
Capacity building involves technical training and professional education in India or the host country. India’s capacity building program formally began with ITEC’s establishment in 1964. ITEC comprises short to long-term courses for policy makers, military officers, and civilians in India. It also extends to deputing Indian experts abroad and facilitating study tours to India. 160 countries participate in ITEC, which features over 300 courses conducted by 100 institutions, including at government and higher education institutions. General ITEC courses are provided in agriculture, public administration, finance and auditing, English language, and law enforcement. ITEC also covers advanced subjects such as election training, World Trade Organization trade negotiations, solar technology, big data, and quantum computing. Defense training is conducted at India’s military academies and staff colleges, including specific courses in hydrography and international maritime law. India bears the costs of ITEC assistance, including airfare, tuition, stipends, and accommodation.
Between 2000 and 2022, India has spent $656 million in ITEC capacity building, having allocated more than 100,000 personnel slots for civil training and 28,000 slots for defense training. The largest numbers of trainees are from Africa and Asia, with the smallest number from Latin America. Overall, since 1964, India has trained 343,315 scholars under the ITEC program. Besides capacity building in India, Indian experts are also sent abroad upon request. Since 2014, India has posted 157 experts in Africa, Central Asia, and the Indo-Pacific regions. For example, Indian experts under the ITEC program have trained the Sierra Leone police in cyber-crime investigations, aided tiger restoration efforts in Cambodia, and rehabilitated abandoned mines in El Salvador.
Overall, ITEC assistance allows India to facilitate the sharing of best practices and to develop a network of professionals, policy experts, political leaders, bureaucrats, and military officers in other countries. It also enables the transfer of knowledge and technology in a manner that complements Indian grants and LoCs. Several military and political leaders in other countries have been alumni of ITEC programs.
Humanitarian Assistance and Disaster Relief
An increasingly visible part of India’s foreign assistance is providing relief following natural disasters and humanitarian crises. This is provided in two forms. One is of humanitarian assistance in cash, commodities, and medicines, directly offered to governments affected by natural disasters and other calamities. Between 2000 to 2022, the MEA provided humanitarian assistance to more than 85 countries, both bilateral and multilateral. In recent times, India has provided humanitarian assistance to Afghanistan, Ukraine, Bhutan, Cambodia, Fiji, Kiribati, and the Palestinian territories, including in the form of wheat, medicines, and blankets.
Another aspect of HADR involves deployment operations undertaken by the Indian military and government agencies. These are coordinated by the MEA’s DPA-II division, the Rapid Response Cell, and the Ministry of Defence’s Integrated Defense Staff. Civilian entities and the military assess the scale and type of emergency, and thereafter, allocate and deploy resources in the affected country. At times, the National Disaster Response Force of India’s National Disaster Management Authority is also involved in HADR operations.
India’s HADR operations have recently benefitted from faster financial clearances, better civil-military coordination, and higher military readiness. Since 2017, the Indian Navy has been undertaking mission-based deployments, with regular patrols in the Indian Ocean. In such deployments, naval vessels are equipped with disaster relief materials to reach affected sites within a short timeframe. In combination, the Indian military performs specialized functions like restoring communications, transporting relief material, providing medical assistance, and maintaining essential services. Since 2005, India has acquired heavy lift capabilities for its air force and navy and concluded logistics agreements with select countries in the Indo-Pacific region. Also, the MEA coordinates with the Finance Ministry for supplemental grants to meet any unforeseen expenditures arising out of such operations. A combination of these developments, therefore, has enabled India to increase the frequency and extent of its HADR operations.
3. Emerging Uses of Foreign Assistance
Although India’s foreign assistance has traditionally been focused on economic development and technical support in strategically important areas, it is now being deployed increasingly in other areas. These include defense and security, governance and accountability, technology and cybersecurity, and energy and infrastructure.
Defense and security is one emerging area. India has leveraged lines of credit to supply Vietnam with offshore patrol vessels and high-speed guard boats; granted coast guard vessels, coastal radars and maritime reconnaissance aircrafts to Sri Lanka, Mauritius, Maldives, and Seychelles; and provided helicopters to Nepal, Namibia, and Suriname. India has also supported institutions by building a high-altitude biomedical research lab in Kyrgyzstan by the Defence Research and Development Organisation (DRDO), the Defense Ministry Headquarters in Maldives, a military hospital in Liberia, and recently, a Cyber Security Training Centre at the National Defense University in Mongolia. Additionally, India dispatched military instructors and training teams to Lesotho, Tanzania, Kazakhstan, Ethiopia, Uganda, Laos, and Cambodia under ITEC. Indian grants and capacity building have also been provided, for example, to Togo to host the African Union Maritime Security Summit in 2016-17. Similarly in 2003, India assisted Mozambique with maritime patrolling while the latter was hosting the African Union Summit and a World Economic Forum event.
Indian foreign assistance also goes towards improving governance and accountability, including material support for the conduct of elections, training officials, and building government offices. India has granted indelible ink for elections to Fiji, Nepal, Papua New Guinea, and Sierra Leone, as well as vehicles to election and local government offices in Cambodia, Laos, and Senegal. India regularly trains senior civil servants, judicial officers, justices, and parliamentary rapporteurs from Bangladesh, Kenya, Sri Lanka, Tunisia, Bhutan, and Myanmar. Under ITEC, the Election Commission of India has trained 2,478 participants from 117 countries on election principles and voter registration. India’s Lok Sabha (the lower house of parliament) has been organizing an ITEC course on legislation drafting since 1985. In Afghanistan, India posted its civil servants as mentor-trainers to Afghan civil servants in partnership with Canada and the United Nations. India has also built parliament buildings in Gambia, Afghanistan, Eswatini, and Burundi, as well as the president’s office in Ghana. Beyond signature offices, it has constructed the Supreme Court in Mauritius, the Diplomatic Academy in Ghana, and a census data processing center in Armenia.
With technology emerging as an area of competition, India’s foreign assistance is increasingly evident in technology capabilities, cybersecurity training, and telecommunication networks. For example, India has gifted Param supercomputers to Kazakhstan, Namibia, and Tanzania in addition to equipment to the Dalat Nuclear Center in Vietnam. It has provided computers to the Al-Khotwa Institute in Yemen, the first ever school to teach children about information technology in that country. India has also set up satellite networks in 48 African countries to provide virtual healthcare and education from Indian hospitals and universities. Using ITEC resources, India has trained officials from the Prime Minister’s Office of Iraq in cybersecurity, trained police officers from Kenya on forensic DNA technology, and helped Mauritius set up a Computer Emergency Response Team (CERT). India has also computerized Presidential Offices in Madagascar and Ivory Coast and funded the Niue’s Pacific island’s 4G telecommunications network.
Finally, economic integration by roadways, ports, railways, and energy pipelines comprises a significant portion of India’s foreign assistance. India has built highways in Guyana (the East Bank-East Coast Road project) and in Afghanistan (Zaranj-Delaram highway which provides Afghan provinces bordering Iran, access to the Arabian Sea), as well as ports in Iran and Myanmar. It has also helped finance and build railways in Maldives, Sri Lanka, Bangladesh, Mauritius, and Mozambique. India is constructing Maldives’ largest ever infrastructure project which will connect Maldives’ capital with three other islands, it has laid and upgraded Sri Lanka’s railway networks after the 2009 Civil War, built the first rail network between Northeast India and Bangladesh, and constructed a metro in Mauritius. Clean energy is another priority with Indian lines of credit being used for constructing wind energy farms in Cuba, solar projects in West Africa (Democratic Republic of Congo, Togo), solar electrification of residences in Pacific Island countries, and hydropower projects in Rwanda, Vietnam, and Cambodia.
4. Scope for Partnerships
The growing volume, efficiency, and strategic direction of India’s foreign assistance offer valuable openings for coordination and cooperation with India’s partners. There are some early examples of coordination. In 2010, India’s Exim Bank extended a line of credit to Malawi to complete a project sponsored by the Japan International Cooperation Agency (JICA). India has also concluded formal agreements with the United States, Japan, and the United Kingdom for implementing joint development projects in Africa. For example, India has collaborated with the United States Agency for International Development (USAID) to train almost 1,144 officials from Africa and Asia on advanced agriculture technology. The Election Commission of India’s IIDEM has also developed ten joint modules with the U.S. based International Foundation for Electoral Systems (IFES) on election training. However, trilateral cooperation has also proved complicated as in the case of India and Japan in Sri Lanka. Sri Lanka unilaterally removed India and Japan from an agreement to develop the East Container Terminal at the Colombo Port in February 2021. An ambitious Asia-Africa Growth Corridor announced by India and Japan after the Belt and Road Initiative Forum in 2017, has progressed little beyond a vision document as both sides struggle to identify joint projects.
Recent developments offer some possibilities for how India can coordinate different types of foreign assistance with like-minded countries. These include the U.S. International Development Finance Corporation’s investment in Sri Lanka’s West Container Terminal of the Colombo Port which is being developed by an Indian company. The launch of the India-Middle East Europe Economic Corridor (IMEEC) also opens possibilities for cooperation with the UAE, Saudi Arabia, Israel, United States, and Europe in West Asia. Although different systems of accountability and the fact that India does not provide ODA unlike OECD traditional donors will make jointly financed and implemented projects difficult, the prospects for strategic coordination are greater.
Acknowledgements
The author is grateful to Smruti Pattanaik, Dhruva Jaishankar, and two anonymous reviewers for their comments and suggestions on earlier drafts of this paper. Any errors that remain are those of the author. This paper reflects the views of the author and does not represent the position of the institution, its affiliates, or partners.
Note: Citations and references can be found in the PDF version of this paper available here.