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Aid and Private Funding in Development

Development Aid in India

Development aid is financial aid given by governments and other agencies to support the economic, environmental, social and political development in developing countries. It involves long term strategy to alleviate poverty.

• Foreign experts call India a ‘development paradox’. India is one of the largest economies with high growth rate. It spends substantial amount on the defense expenditure. Yet, it seeks development aid. It has created quite a debate at international level.

Foreign Aid to India

• The term “foreign aid” is derived from the concept of “Overseas Development Assistance” or ODA. In UN parlance ODA is a commitment assumed by developed countries, members of the OECD, to extend development assistance to developing countries. Currently, developed countries are committed to transferring 0.7% of their GDP as ODA to developing countries, though few have achieved this target.

• The India was the sixth largest recipient of foreign aid in 2011 and continues to be one of the highest recipients. According to the data on World Bank’s website, it received $3.2 billion in 2011, $1.6 billion in 2012 and $2.4 billion in 2013.

• The top donors have been- World Bank, Japan, Germany, Asian Development Bank, United Kingdom, France, Global Fund (to fight AIDS, tuberculosis and malaria), United States and European Union.

• However in recent times foreign aid coming to India has declined significantly. It partly due to India’s rapid economic progress and partly due to ever-changing geo-political axis.

Foreign Funding and NGOs

Being non-profit organizations, NGOs entirely depend upon contribution – foreign or domestic – for their functioning. In recent times, many NGOs have come under the government scanner.

The Foreign Contribution (Regulation) Act, 2010 (FCRA) and Foreign Contribution (Regulation) Rules, 2011 (FCRR) framed thereunder regulate the receipt and usage of foreign contribution by non-governmental organizations (NGOs) in India.

Foreign Contribution Regulation Act, 2010

This act replaced the Foreign Contribution (Regulation) Act, 1976 (FCRA). The act seeks to regulate the acceptance and utilization of all foreign funds through donations, gifts or grants.

Scope and objective of FCRA:

  • The intent of the Act is to prevent use of foreign contribution or foreign hospitality for any activity detrimental to the national interest.
  • It has a very wide scope and is applicable to a natural person, body corporate, all other types of Indian entities (whether incorporated or not) as well as NRIs and overseas branches/subsidiaries of Indian companies and other entities formed or registered in India. It is implemented by the Ministry of Home Affairs, Government of India.
  • Prohibits acceptance and use of foreign contribution or foreign hospitality by a certain specified category of persons such as a candidate for election, judge, journalist, columnist, newspaper publication, cartoonist and others.
  • Regulates the inflow to and usage of foreign contribution by NGOs by prescribing a mechanism to accept, use and report usage of the same.

Foreign Aid from India

India has been one of the major receive of development aid. But over the last 3 years, India has has given more aid to foreign countries than it has received.

Development Aid to foreign countries not only serves economic objectives but also as a strategic tool.

• India wants to project itself as major economic power and rightful claimant to permanent membership to UNSC.

Neighborhood First Policy: The neighborhood is the biggest recipient of aid from India. Bhutan for years have received the biggest chunk of Indian aid with Rs. 5,368.46 crores in 2015-16, primarily aimed at developing hydro-electric power. Also India is 2nd largest donor in Afghanistan.

Ethnic Issues: In Sri Lanka, India is undertaking the construction of houses for rehabilitation of Tamil population displaced by nearly three decades long war.

Soft Power: India offer aid to extend the reach of its soft power.

• Another major reason is to counter the influence of China in India’s neighborhood.

• South Asia is disaster prone and many countries in the regions can’t carry out relief work on its own.

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July 2022
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