Development cooperation: a vital foreign policy tool for India
Development cooperation: a vital foreign policy tool for India
WRITTEN BY MEGHA PARDI
26 June 2020
In September 2019, India announced a $1billion line of credit for Russia’s Far East Region. Through this announcement, Prime Minister Narendra Modi also announced the launch of India’s new ‘Act Far East Policy’. The deployment of a credit line to Russia, along with the decision of associating it so closely with the Act Far East Policy’ clearly indicates that India is now increasingly using development cooperation as a foreign policy tool for its strategic interests.
Understanding India’s development strategy
Firstly, development cooperation has long been a tool of diplomacy for many countries. While terminology varies from country to country from ‘humanitarian assistance’, ‘development assistance’, to ‘development aid’; long term or short-term strategic interests are always on the table. Either through generating goodwill, gaining support at the United Nations or other multilateral forums, laying the groundwork for further economic cooperation or providing an impetus for domestic industries etc development is a key tool within foreign policy. In the context of India’s foreign policy it prefers the term ‘development cooperation’. The term indicates New Delhi’s preference to be seen to be working in an equal partnership with the recipient country.
Whichever the term New Delhi may (or may not) prefer; India under Modi sees herself as an active player in international affairs and wants to highlight herself as a responsible actor. The establishment of the Development Partnership Administration (DPA) in 2012 signalled India was ready and eager to transition from a development recipient to a donor and hence reflecting India's desire to showcase its own economic strength. Consistent with this vision, the Indian government decided not to accept official aid from other countries in 2013 and requested countries to redirect the aid to non-government entities.
Although the largest number of projects financed through lines of credit are in Africa, the total amount allocated is highest in India's neighbourhood of South Asia. As of April 2020, India granted $12.4 billion to five neighbourhood countries.
Secondly, development cooperation as a foreign policy tool is a relatively new path trodden by India. New Delhi established the DPA in 2012 but before that, the development cooperation efforts of India were largely carried out on an ad-hoc basis. The first recorded instance of India extending credit for assistance measures was a Rs 75,000 loan given to Indonesia in 1948. Since then India has extended development cooperation to many countries in South Asia, Africa, Oceania, and now Northeast Asia.
Currently, New Delhi provides development assistance to Least Developed Countries (LDCs), Middle-Income countries (with and without IMF minimum binding concessional requirement), and other countries on demand. India's development assistance comes mainly in the form of Line-of-Credits (LOC), Grants, Small Development Projects (SDPs), and through the Indian Technical and Economic Cooperation (ITEC) programme. LOCs are the chief instrument of Indian developmental cooperation assistance. New Delhi began providing LOCs and key development assistance to countries in the early 2000s. The EXIM Bank shows the earliest recorded LOC extended by New Delhi for development was in the fiscal year 2003-04.
A closer inspection of India’s development cooperation initiatives reveals the priorities of the state. Data shows that India accords the highest priority to her neighbours in terms of total development assistance, largely in the form of LOCs. Although the largest number of projects financed through LOCs is in Africa, the total amount allocated is highest in India's neighbourhood of South Asia. For example, as of April 2020, India granted a total of $12.4 billion to its five neighbourhood countries, whereas in Africa where the number of projects is highest, $9.7 billion was granted as of writing. This is a testament to the Modi government’s 'Neighbourhood First' policy. Fourthly, New Delhi maintains that development assistance is need-based and provided under larger principles of the South-South cooperation framework, but a closer look at the assistance provided by India highlights strategic undercurrents in New Delhi’s wider policy goals.
For example, Myanmar is key to the success of New Delhi’s ‘Act East’ policy and the ambition to forge a stronger economic relationship with ASEAN. The success of the Kaladan Multi-Modal Transit Route project and the India-Myanmar-Thailand friendship highway depends heavily on cooperation from the Myanmar government. Hence, the increase of credits, grants, and other technical cooperation is not a surprise.
In 2013, India announced $500 million in credit for Myanmar. In 2018, EXIM Bank of India agreed to the transfer of $198 million to the Myanmar Foreign Trade Bank. Furthermore in 2019, India also agreed to provide a LOC in order to acquire a diesel-electric Kilo Class submarine and subsequently trained sailors of the Myanmar Navy with the help of the Indian Navy. Myanmar reciprocated by announcing that it would not allow its territory to be used for hostile activities against India. As a South Asian state of huge strategic importance for New Delhi’s ‘Neighbourhood First’ and ‘Act East’ policy, development cooperation partnership between India-Myanmar is bound looks set to increase further, with an eye on balancing China’s growing influence in the Bay of Bengal.
Fifth, the development cooperation policy has the potential to be an effective instrument to achieve India's bid for a permanent seat on the United Nations Security Council. New Delhi has been championing reforms in the international body for a long time. External Affairs Minister of India Dr S. Jaishankar recently released a 'priorities paper' outlining India's key priorities as a UNSC non-permanent member if elected in the upcoming election. The key priorities of India include 'New Opportunities for Progress', 'An Effective Response to International Terrorism', 'Reforming the Multilateral System', 'a Comprehensive Approach to International Peace and Security', and 'Promoting Technology with a Human Touch as a Driver of Solutions'. New Delhi will need support to realise these goals.
Finally as hinted at previously, countering the influence of China also seems to be one of the main goals of India's development cooperation policy. China is extending its influence far into India’s neighbourhood using its substantial economic resources. Sri Lanka’s Hambantota story for example is well known by now. China is also helping Bangladesh to build its first marine base at Cox’s Bazar and Rabnabad. A cursory look at the geomapping of Chinese projects by AidData proves that India’s concerns are not unfounded. As per the research conducted by AidData, China has committed $12.7 billion to Sri Lanka, $10.3 billion to Bangladesh, $1.58 billion to the Maldives, and $1 billion to Nepal, totalling $126 billion in the South and Central Asian regions from 2007-2017.
Furthermore, China is using its economic diplomacy as a tool to align important actors in recipient countries with its policy goals. Although, the AidData study didn’t find any convergence between aid received and UN General Assembly voting pattern for South and Central Asian countries, another report by AidData concluded that “for every 10% increase in voting support within the UN, China increased aid by an average 86% ”.
Shortcomings
If India provides the highest development assistance to neighbourhood countries, one can argue current international political scenario in India’s neighbourhood does not seem to present an effective picture of New Delhi’s development cooperation policy in terms of outputs. But rather than assessing it as a failure of India's policy, one can conclude it as the success of other nations efforts to woo India’s neighbours. India’s relations with her neighbours are still not corrupted beyond repair. Situated between two emerging powers, nations in India’s neighbourhood are displaying cold war era leveraging behaviour.
Furthermore, as a new entrant, India has a lot to learn from the experiences of existing actors. New Delhi would not want to follow the path that led to Beijing being accused of ‘debt trap’ diplomacy. Till now, India has been sensitive to the concerns of the recipient country while providing aid and is committed to putting the needs of recipient countries first. Moving ahead, India will have to maintain this delicate balance while pursuing its strategic objectives. Moreover, countering China is an uphill battle. Development assistance alone would not suffice to assuage neighbouring countries’ worries and fulfil their demands. Also, until India’s economic prowess is on par with China, New Delhi’s efforts are limited due to its capacity.
Lastly, the DPA does not command an authoritative role comparable to that of its counterparts in other countries. The need for DPA to have a more authoritative role in India's development cooperation strategy has been highlighted by scholars like Urvashi Aneja and Tanoubi Ngangom. In a 2017 paper they argue that “the success of Indian development agency will depend on traditional factors like size, role, clarity of mandate, and the staff’s level of specialisation, as well as the readiness among leadership to adapt to new environments and structures”. The India Development and Economic Assistance Scheme (IDEAS), published in 2015, guides India’s development assistance policy on LOCs, but there are no other policy guidelines for other types of projects. Moreover, the DPA also needs to engage experts from academia and think tanks to assess the utility and impact of the existing initiatives.
Way ahead
India is continuously strengthening its development cooperation processes taking lessons from its experience. For example, the government of India set up a Project Preparation Facility (PPF) in 2018 to assist partner countries to prepare Detailed Project Reports (DPR) or Project Formulations Reports (PFR). The Project Preparation Facility (PPF) provides free-of-cost Indian consultancy support to requesting countries.
Moreover, in 2019-20, the Government of India launched new initiatives under ITEC to ‘reflect an economically emergent and technologically advanced India.’ These initiatives include e-ITEC, ITEC-Onsite and ITEC Executive, and enhanced facilities to participants. New Delhi has also roped in premier institutes like IITs & IIMs and private institutions for this purpose.
Lastly, in January 2020, the Ministry of External Affairs India established DPA-IV is a new sub-division. This division is envisioned to undertake development partnerships abroad for culture and heritage conservation projects; collaborate with international and national institutions for museology, temple restoration, manuscript preservation and intangible cultural heritage preservation; and develop and disseminate a repository of information in this area. Creation of this division emphasizes New Delhi is keen on exploring its historical ties with other countries. The recent discovery of a 9th Century Shiv Linga at UNESCO world heritage site of Mỹ Sơn in Vietnam provides an additional impetus for this initiative. How New Delhi uses this newly discovered ‘civilisational connect’ remains to be seen.
Even though development cooperation is an instrument of soft diplomacy, its strategic importance as a foreign policy tool is self evident. As New Delhi expands the ambit of initiatives under this policy, the success of development cooperation will depend upon how India manages the delicate balance of recipients’ needs and its own strategic interests.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Megha Pardhi is pursuing a Master of Arts in Politics and International Relations from Jawaharlal Nehru University, Delhi. She has worked as research intern at Development Partnership Administration Division at Ministry of External Affairs, India. Image credit: EU Humanitarian and Aid/Flickr.