Aid from India?

You may have seen in the news recently that India looks likely to set up a national Aid Agency to distribute overseas aid, with a budget of some $11 billion. Unsurprisingly, this is raising a few eyebrows, including my own. I'm all for a diversification of international development away from the domination of a few (Western) organisations and improved co-operation between developing countries. The field has been moving in this direction for some time anyway, and China already eclipses most rich countries in terms of the amount of aid it gives. But when DfID in the UK stands accused of giving away money that is needed at home (which, since the recession, it often is, though it's generally withstood this pressure admirably) the idea of India doing the same is extraordinary.

To put things into context: if India's poorer states were independent countries, they would rank alongside some of the least well-off and least developed countries in the world. And these are not small states: Bihar, the poorest Indian state, has over 100 million people, while an independent Uttar Pradesh would be the fifth biggest country in the world. The projected budget of India's aid agency amounts to around half of Bihar's entire GDP.

India may no longer be a poor country, but a lot of poor people live here. According to the World Bank, 28% of the rural population and 26% of the urban population subsist below the poverty line. That's around 350 million people for whom the emergence of India as an economic power has yet to bring anything close to a decent standard of living. I wonder what they make of the government's plans.

Of course, this is a hard line to tread. Those who object to the UK maintaining its levels of aid spending at a time of severe economic hardship do have a point: poverty and desperation are not unique to developing countries. But I've always found the arguments in favour of maintaining an active development programme - in terms of the moral imperative and enlightened self interest - convincing, and I think DfID's work brings tremendous benefit to the UK as well as to the recipients of it.

So why should I not think the same of India? It remains to be seen, after all, how India will use the new agency. It may, by focusing on its immediate neighbourhood, be able to use it to build a more stable and prosperous region for which we would all have reason to be grateful - not least the citizens of India who stand to benefit greatly. Bihar and Uttar Pradesh need development, but both would share in the results of a more normalised relationship between India and Pakistan, for instance.

But apart from the question of whether India should see to its own poor first, I have two niggling doubts. Firstly, I wonder what the motivation is behind setting up the agency. As India establishes itself as a superpower-in-waiting, it (like many other countries) has sought opportunities to launch the national brand to the global audience. The Commonwealth Games in Delhi last year is the obvious example, and one that remains controversial here (the billions, says my landlord Mr Mehandru, should have been spent on fixing Delhi's drainage system, not to mention building a decent waiting room at the city registration office). An international aid agency, by its nature, is something only the most successful countries can afford. I'm sure there is more to this initiative than a desire for a prestige project - but I suspect that desire is part of the picture. (Again, I run the risk of double standards here - it would be naive to suppose that this hasn't played a role in the setting up of aid agencies elsewhere.)

My other concern lies more in the theory of aid itself. With corruption and non-accountability prevalent in so much of the developing world, the effectiveness of aid has long been suspect. Many development agencies have switched their focus on to improving governance, to allow for better use of existing resources rather than ploughing more cash into wasteful or crooked systems. Apparently India itself has quite a bit of experience in this, as the country's bureaucrats have been involved in training their African counterparts for decades. But with the country's track record on corruption, which dominates the papers here and arouses enormous public ire, I do find it hard to see this being the new agency's focus. There really is a plank of wood to be seen to here before tackling Africa's motes of dust.

Going back to old models of aid would be counter-productive - and having been on the receiving end of a lot of it over the years, I'm sure the Indian government knows that very well. Alternatively the agency may focus on infrastructure development - but this tends to open up even more opportunities for corruption, as well as raising tricky questions about the fuzzy dividing line between aid and investment. So I wonder what approach the new agency will take. Perhaps we are due to see new models emerging as "South-South" cooperation becomes more common.

Anyway, I will be watching the developments around the mooted new agency with interest, particularly the strategies it decides to pursue. It will be enlightening to see how the Indian population reacts should it officially get off the ground - with pride at their country's rising influence, or with anger at possibly misplaced priorities?

In the long run, though, an outward-looking India can only be a good thing. The country's growing global stature remains fraught with contradictions and difficulties, but however it gets there you can't avoid feeling that it is moving towards its rightful place in the world.