India needs an international development cooperation agency
Enhancing the efficacy of India’s development cooperation endeavor, has been a challenging issue for the past several decades. India’s benevolent image yield tremendous goodwill globally, but quality project delivery is yet to become the country’s USP. Therefore, India needs to expedite work on a specialized agency for proficient delivery of outcomes.
Development Assistance Provided by India
- In the last couple of years, India’s assistance to other developing countries has multiplied several times.
- India’s development cooperation has converged to an all-encompassing integrated framework, having five modalities
- Capacity building
- Concessional finance
- Technology sharing
- Grant and trade
- Duty-free and quota-free access to the Indian market.
- On average, India provides development assistance of $6.48 billion and receives assistance of $6.09 billion annually from key partners as Official Development Assistance (ODA).
- Under Indian Cooperation Mission (ICM), India partners for development cooperation and although it did not give aid to other countries like OECD members.
- India has been supporting the developmental endeavors of several partner countries in Africa and Asia, even before Independence.
- However, this process lacks a firm institutional foundation.
Resolution to form an Institutional Framework
- The first effort by India to shape a framework was in 2003 with the announcement of the India Development Initiative (IDI).
- The Indian Development and Economic Assistance Scheme (IDEAS) was launched in 2005 for managing credit lines.
- The IDI was suspended in 2007 and the announcement about the setting up of the India International Development Cooperation Agency (IIDCA), never took off.
- Meanwhile, in 2018, China founded its international development cooperation agency.
Concessional Financing
- When India helped Ethiopia in reviving its sugar units in 2006, the concessional financing in India’s development cooperation portfolio was close to 70 %.
- Concessional finance is below market rate finance provided by major financial institutions or countries to developing countries to accelerate development objectives.
- Due to such large share, any major change in India’s development cooperation would require alterations in the way LOCs (Line of Credit) have been working.
- Thus, in 2015, the government made efforts to bring in operational changes in the way credit lines work.
- These reforms promoted the most competitive Indian firms.
- As of now, the EXIM (Export Import) Bank raises global resources and the Government of India absorbs the interest differential.
Road ahead
1. Sovereign and non-sovereign windows
- Countries have Sovereign and non-sovereign windows for promoting infrastructure financing abroad, both having their own place.
- A non-sovereign window would provide greater flexibility and bandwidth.
2. Investment Ecosystem
To become a leading strategic investor in commercially viable and financially attractive public-private partnership infrastructure projects, the fund may build an investment ecosystem in Africa with support from leading Indian firms.
- The proposed new entity will provide handholding to select performing Indian social enterprises to operate in other countries as well.
- Besides making an immediate economic impact, these enterprises can facilitate development partnerships between India and other countries.
3. Cooperation Efforts
- Post-pandemic, countries worldwide are exploring ways to give new strength to development and cooperation efforts.
- India’s own development experience is evolving with programmes like the JAM trinity, Ayushman Bharat and other initiatives like Gati Shakti- the learnings from which should be absorbed in the portfolio to be shared with fellow developing countries.
It is high time India restructures its development finance apparatus for deeper and effective engagement and to address the rapidly evolving newer competitive development financing landscape.
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