India's geo-political interests and foreign aid: Constraints to policy alignment

Presented at: Australasian Aid and International Development Policy Workshop February 13 – 14, 2014

by Rani D. MullenDirector & Visiting Sr. Fellow, Indian Development Cooperation Research, Centre for Policy Research, India & Associate Professor, College of William & Mary, USA

Data presented has been gathered & analyzed by theIndian Development Cooperation Research (IDCR) group at theCentre for Policy Research, New Delhiwith grant support by The Asia Foundation

Government of India’s Development Partnership: Rising Rapidly

Source: Data collated by the Indian Development Cooperation Research at the Centre for Policy Research, New Delhi based on the Expenditure Budget - Grants and Loans to Foreign Govts, Statement 11 in the Government of India budgets. http://indiabudget.nic.in/vol1.asp

Where is Indian aid going?

Bhutan49%

Afghanistan8%

Maldives3%

Nepal6%

Sri Lanka5%

African Coun-tries4%

Myanmar3%

Eurasian Coun-tries<1%

Bangladesh4%

Others17%

Major recipients of Indian grants & loan programs in percentage out of a total of Rs. 320 billion committed between 2000/01-2013/14

India’s EXIM Bank LOCs, 2007-14

Asia36%

Africa

59%

Europe and CIS2%

Americas2% Oceania

1%

Bhutan54%

Afghanistan11%

Maldives4%

Nepal5%

Sri Lanka5%

African Countries4%

Myanmar3%

Eurasian Countries1%

Bangladesh4%

Others10%

Grants, 2007 - 2014

Within Asia, where are Indian LOCs going?

Indian Line of Credits in US$ millions, 2004-2013

INDIAN DEVL ASST TO SRI LANKA

Strategically important Sri Lanka has become the largest recipient of Indian LOCs totaling over US$1.2 billion (2005-2012). Domestic pressures & geo-strategic concerns will lead India to continue engaging in development cooperation with Sri Lanka

INDIAN DEVL ASST TO MYANMAR

2007

2008

2009

2010

2011

2012

2013

0

10

20

30

40

50

60

70

80

90Indian grant commitments to Myanmar,

US$ million 2007-13

US

D M

illi

on

INDIA has committed > US$ 250 million in grants & US$ 300 million in LOCs to help Myanmar build capacity and infrastructure. 73% of grants & nearly 40 % of the LOCs committed to Myanmar between 2006-13 have been in the transportation & infrastructure sector.

As India aspires to greater strategic & economic relevance in the Asia-Pacific, deepening these development assistance based ties with Myanmar – India’s only land bridge to the geo-strategically important South East Asian region – will be crucial.

Transport 72.52%

Multisector8.71%

Agriculture 5.68%

Industry3.77%

Social Welfare2.60%

Health2.49%

Myanmar: Major Sectors Receiving Indian Grants between 2006/07 – 2013/14

INDIAN DEVL ASST TO VIETNAM

Information & Communicatn

Technology73%

Trade facilita-tion7%

Education7%

Site Preserva-tion7%

Others7%

Sector-wise Distribution of Indian Grants to Vietnam (2007-2013)

Both India & Vietnam are concerned about China’s political posturing in the South China Seas. Both countries also need to access natural resources for their growing economies & want to ensure free & safe shipping lanes.

New Delhi and Hanoi increasingly recognize that deeper development partnerships can be of considerable mutual benefit. In engaging with New Delhi, Hanoi can hope for a greater degree of strategic independence. For India, closer ties with Vietnam could allow it to boost trade with ASEAN and East Asia. It could also allow New Delhi to better assist in countering attempts to assert dominance in the South and East China Seas

INDIAN DEVL ASST TO PACIFIC ISLAND STATES

2005 2011

0

20

40

60

80

100

120

140

Year

Num

ber

of

Slo

ts

ITEC Scholarships offered to the PICs (2005 & 2011)

COOK ISLANDS0.04%

FIJI17.12%

KIRIBATI 0.35%

MARSHALL9.25%

MICRONESIA0.06%

NAURU 3.95%

NIUE0.04%

PALAU0.04%

PAPUA NEW GUNIEA 58.16%

SAMOA 0.58%

SOLOMON ISLANDS 4.05%

TONGA 0.40%

TUVALU 0.58%

VANUATU 5.38%

For India, deeper development partnerships with the PISs could prove immensely rewarding, allowing India greater access to markets further away from it’s shores.

As India seeks to diversify its energy imports, it will increasingly look to enhance its partnerships with countries such as the PIS. Deeper engagement with the PIS is important for India considering the potential for deep-sea mining and Liquefied Natural Gas extraction, for example off the coast of Papua New Guinea (PNG).

INDIAN ASST TO AFGHANISTAN

• Since 2000, Afghanistan has been the second largest recipient of Indian development assistance, with its official US$ 2 bn commitment (& nearly $800 mn in disbursement by the end of 2013) far exceeding Indian commitments to any other country except Bhutan. Furthermore, as of 2014, India gives over 2,000 scholarships/training slots annually for Afghans to study/train in India.

• In addition to humanitarian reasons, India also provided assistance in order to establish access to natural resources, use economic diplomacy to spearhead the entry of Indian private sector companies and services, and support larger geo-strategic objectives of investing in a democratic Afghanistan as a counter-weight to extremist forces in Afghanistan or neighbouring countries.

• Given the importance of Afghanistan to India’s security, energy security, trade, and larger geo-political interests, India’s engagement with Afghanistan is only likely to grow.

Indian and Chinese aid recipients in the Indo-Pacific Region (2005 – 2013): Increasingly both India and China are giving devl asst to the same countries

Indian military engagement/investments in ports = India’s “String of Diamonds” Chinese military engagement/investment in ports = China’s “String of Pearls” -------- Major shipping routes

Seychelles

INDIA’S RISING GEOSTRATEGIC INTERESTS IN THE INDIAN OCEAN RIM AREA

Indian dev coop -- Conclusions• Indian dev coop likely to continue rising• Likely to see greater use of LOCs, also in Asia• Likely to see greater use of economic diplomacy

• Yet India’s Ministry of External Affairs has large capacity constraints…• Size of foreign service officers less than Singapore’s• No plans for large increases in hiring • Capacity issues: moved frequently, little training, no development specialists

• …which has already impacted the efficacy of their development cooperation.

• Given these capacity constraints on one hand and India’s rising dev coop and geo-strategic interests on the other, & given fact that IFIs & UN have not accommodated India’s rising stature, India is likely to pursue BRICS and other alt supra-natl org where they are able to play a greater role. This also presents an opening to established donors to work together with India in third countries.