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Synopsis: Development assistance provided to other countries is an important component of India’s soft power. But there is an urgent need to restructure and institutionalize it.
India, right from its inception, has assisted many small and developing nations on their path towards development. This has earned India tremendous goodwill. Providing monetary assistance as part of development assistance is an important component of India’s soft power.
However, there are often many challenges on the project delivery front. This calls for the need for a specialized agency for the efficient delivery of projects and outcomes.
History of India’s developmental assistance
India has been supporting development efforts in many African and Asian countries. India was among the first nation in 1952 to launch India Aid Mission (IAM) in Nepal. The IAM was soon converted into India Cooperation Mission (ICM). Unlike OECD countries that give aid, India partners other countries for developmental cooperation.
Coming to finance, India provides about $6.5 billion of assistance to other countries and receives about $6 billion as official development assistance from other countries. Thus, one can see that India’s development assistance to other countries has multiplied manyfold.
How has India’s institutional framework for developmental assistance evolved?
With India Development Initiative (IDI) in 2003, India made its first effort towards institutionalization. After this, the Indian Development and Economic Assistance Scheme (IDEAS) was launched in 2005 for managing credit lines. This was followed up with the creation of a development partnership division within the Ministry of External Affairs. In 2007, India even announced the setting up of the India International Development Cooperation Agency (IIDCA), but this could never take off.
How is India’s developmental assistance structured?
India’s developmental assistance is composed of 5 main pillars – capacity building, concessional finance, technology sharing, grant and trade wherein duty-free and quota-free access to the Indian market is provided. India’s assistance is composed of a mix of these components. There have been instances, like in Mozambique (solar panel production) or Ethiopia (reviving sugar units), where all 5 components have merged.
What should the IIDCA provide?
In terms of financing, the agency could look at all the available means of financing. Many countries have sovereign and non-sovereign windows for promoting infrastructure financing abroad. For example, the Japan International Cooperation Agency and Japan Bank for International Cooperation in Japan.
In terms of operations, the proposed new entity can also provide handholding to select performing Indian social enterprises to operate in other countries as well. These enterprises would further facilitate development partnerships between India and other countries.
In the post-pandemic era where the countries are exploring means and ways to secure development and finance, India can make the best use of opportunities to enhance its soft power. But all this requires India to institutionalize IIDCA for developmental and financial assistance.
Source: This post is based on the article “Why India needs an international development cooperation agency” published in Indian Express on 21st October 2021.