New report justifies aid to India and other Middle Income Countries


Gareth Thomas MP (Labour, Harrow West) is the shadow universities minister and a member of the Labour Friends of India policy forum

A recent report (pdf) has highlighted the need for aid to be maintained to Middle Income Countries (MICs), in spite of economic difficulties in the United Kingdom and other donor nations. The report, authored by the Overseas Development Institute, argues that aid to Middle Income Countries plays a vital role in assisting the world’s poorest people.

Aid-to-India
The report, titled “The Role of Aid to Middle Income Countries: a contribution to evolving European Union (EU) development policy”, comes at a particularly important time in the debate about overseas aid, with international development secretary Andrew Mitchell’s review of aid recipients and a European Union Green Paper on the topic both in progress.

The continuation of aid from the United Kingdom to India has been under fire recently, with critics citing India’s rapid economic growth, its status as a middle income country and occasionally its space programme as reasons to cut the aid. This report outlines the reality that lies behind these arguments.

Whilst India has made impressive headway in combating poverty, aid from countries like the United Kingdom remains an essential resource. The ODI report outlines reasons why the Department of International Development must maintain its India programme past 2015.

The most important fact is that MICs contain the vast majority of the world’s poor – 76.7% in total. One third of the world’s poor live in India and it is these people that UK aid is helping. If we are to target money at those most in need, we must continue to give aid to India.

The report also highlights the importance of funding sub-national governments in regions with gross disparities in wealth. This is reflected in the allocation of UK aid; 48% of all aid to India is spent in the four poorest states – Bihar, Madhya Pradesh, Orissa, and West Bengal – and is aimed at providing slum dwellers with access to clean water and sanitation. By 2015, two thirds of aid to India will be spent in these states.

Another crucial function of aid to MICs is the ‘spill over effect’. Aid to these countries benefits the recipient countries’ neighbours through trading opportunities and institution building. This is particularly relevant given India’s neighbours are some of the world’s poorest nations, including Nepal, Bangladesh and Burma, as well as some of the world’s most unstable, such as Pakistan and Afghanistan.

This spill over effect is one way of ensuring maximum returns on aid, whilst another is making sure it is used effectively. Aid is far more effective in MICs, where corruption levels are lower and structures facilitating its use are already in place.

As the report says:

“[Middle income Countries] will generally have better governance structures, institutions and oversight mechanisms, meaning that aid is more likely to be put to good use.”

The benefits of aid to India are not merely financial. The ODI report also outlines how aid to middle income countries can incentivise progressive decision making. The risk of aid dependence in countries such as India is much lower due to the negligible amounts of aid received in proportion to their overall incomes. For example, UK aid to India accounts for just 0.03% of their GDP.

The benefits of aid are not limited to India and its neighbours. MICs such as India are increasingly prominent on the world stage and are, as the report notes, “vital to achieving global public goods”. Development aid is an incentive to maintain a high level of engagement with the wider international community, facilitating contributions to areas such as peacekeeping missions and fighting climate change.

There can be little doubt as to the value of UK aid to India – projects supported by British aid have put 30 million children in primary schools since 2003, saved 17,000 lives per year by improving healthcare and since 2005 have lifted 2.3 million people out of rural poverty.

We do not fund India’s economic expansion, nor do we rely on outdated concepts of which countries require aid. We are helping ensure that some of the poorest people in the world have access to basic necessities; it is crucial we continue to do so into the future.

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  • Robert

    Middle income countries, does that mean that the UK should be getting Aid soon then, perhaps as a disabled person I can do as they do in India beg.

    I’m sorry if you can afford to send people to the moon as they are now planning, by having a space agency, then my god you can afford to pay for poverty.

    As a chap from India stated last night on TV, you need to have poverty to ensure the equilibrium of the country, Totally agree

  • Robert

    Sorry Aid is used for what?, you mean the billion we gave to Saudi Arabia was morally right, my ass.

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  • Northern Worker

    I’ve been to India twice on business in the last two years. There I saw some of the worst poverty I’ve ever seen and I’ve been around in my 60-odd years. On the other hand, I also saw wealth and lots of it, and far more widespread than you might expect.

    So I’m torn. On the one hand I now directly support the education of a child in the suburbs of Mumbai (£250 per annum); on the other hand I see old people in the UK on their uppers. But then I also witnessed overwhelming corruption in India so I find it hard to believe that the aid we give ends up with the right people. The same goes for Africa and other well-known pits of corruptions. Conclusion: we should spend half what we spend now on aid; spend it here on the deserving poor; and we should direct overseas aid to make sure it gets to the right people.

  • Mr. Sensible

    Fully agree, Mr Thomas.

    I think there’s a lot of misinformed nonsense about foreign aid in the right wing press.

    The fact is that it should not be used as a cover for the Coalition’s choice to cut too far and too fast.

  • Robert

    India has just spent £20 billion on New weapons £1.25 billion on setting up it’s new space program which of course the Americans are desperate to see go forward, so they can pull away from the Russians.

    The UK have stated they will pay £1 billion to India which comes from cutting aid to other countries who are a dam sight poorer then India.

    We also know the UK is desperate to sell the EU Fighter to India, India would rather buy more F16 fighters, but you never know what a few bribes can do.

    I suspect what we call aid would be called bribery in most other countries.

    Simple put if India put 10 billion of the money it uses for arms into it’s own poverty plan then I suspect it would be gone within a week into the pockets of the slippy slimy MP’s who the people are now marching in India on anti corruption battles.

    No sorry this has nothing to do with right wing press, I give every month £20 to the British Red Cross and the salvation army in my area for all they do with homeless, but like it or not corruption is rife. But again so many charities are now more big business then actual charities

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