Foreign aid, domestic politics

SANJAYA BARU

THE mindless controversy generated in Indian mainstream media by US President Donald Trump’s decision to wind up the US Agency for International Development (USAID) was one more indicator of the increasing superficiality of media commentary. Trump’s decision was bad for the US and, especially, for USAID staff who have been made redundant. However, India is a marginal beneficiary of USAID funds. The controversy at home was blown out of proportion, for purely political reasons.

Much of the focus initially was on the accusation that the Biden administration had deployed USAID funds to benefit the political opposition in India. The worm turned quickly. The political opposition put the government on the backfoot after Trump said that the $21 million that had gone to India was actually meant for his “friend Modi”. After claim and counter-claim, the controversy died down.

There are three relevant issues that have received less attention. First and foremost, the fact that foreign aid is no longer such a big source of funds for India. In fact, it has been an increasingly marginal source, accounting according to some estimates for less than one percent of Indian national income. Second, that India itself is now an aid giver. In fact, the aid India gives has been in excess of what it receives. Finally, that foreign aid enters the country only with Union government approval and more often than not goes to official entities of the Union and state governments. The idea that such aid plays a politically subversive role is passé, at least in India given the quantity of foreign aid.

It was the Atal Bihari Vajpayee government that took the decision to reduce India’s reliance on foreign aid after countries like the US, Japan, Denmark and the Netherlands cut off aid to India as part of the economic sanctions imposed after the nuclear tests of 1998. Union Finance Minister Jaswant Singh took the bold decision to refuse foreign aid and the government launched the Resurgent India Bonds to mop up some of the required foreign exchange. Prime Minister Manmohan Singh adopted the same stance when he declined foreign assistance in dealing with the economic impact of the tsunami in December 2004. Foreign aid regained salience in public discourse during the Covid pandemic. Then too, India was both a giver and receiver of foreign assistance.

India has emerged as a major source of aid both in its neighbourhood and among several less developed economies in Asia and Africa. India has taken pride in the fact that it does not just give out cash, imposing a debt burden, but has offered assistance in kind in the fields of medical care and education. The Indian aid budget now exceeds the foreign aid India receives and so India is a net aid giver. It should, therefore, be prepared for controversy around Indian aid overseas just as overseas aid generates controversy at home. Growing up imposes certain burdens.

Finally, all official assistance, coming from agencies such as USAID, DFID (Department for International Development — the British aid agency) and other such funding agencies of foreign governments, is in fact processed by the Ministry of Finance and requires government approval before disbursal. The political activists of the BJP who thought they may be able to fling mud at the Congress party by referring to reports that USAID money may have gone to the latter may have been ignorant of the fact that all such funding enters the country only with official approval.

In fact, after the Modi government tightened the screws on foreign funding in general, the government keeps a close watch on all external financial assistance, be it from official or non-official sources and given to government or non-government organizations. Hence, the government in India has to be answerable for the sourcing and utilization of all foreign aid. Why some thought they could tar the government’s critics with USAID mud is, therefore, not clear. No wonder the controversy died quickly once the facts were out.

Doubts about both the necessity and utilization of foreign aid are understandable. The role of foreign aid in general, and USAID in particular, as an instrument of diplomacy and external influence has long generated controversy. Teresa Hayter’s famous book, Aid As Imperialism (Penguin, 1971), drew attention, in particular, to the political agenda pursued by the United States in Latin America through the instrument of funding. The Soviet Union had its own aid window through which it pursued its global political agenda. Members of the Congress party and the Communist Party of India (CPI) were named as recipients of assistance in some Soviet papers. The Jana Sangh was often accused of getting funding from western sources.

With the Indian diaspora becoming an important source of both foreign investment and external assistance, both for governments and non-government organizations, including political parties, greater scrutiny of who is funding whom is required. However, what we often get is such information pertaining to the critics of the government and not its supporters. This bias then gets reflected in the way media too views issues pertaining to foreign funds.

While the Trump decision on USAID is not a big problem for India, it has hurt many in America badly and will hurt many in less developed economies who are dependent on this assistance for access to basic necessities including food, healthcare, medicines and livelihood security. The richest nation in the world is pinching the pockets of some of the poorest people in the world.

Sanjaya Baru is a writer and Distinguished Fellow at the United Service Institution of India