Context

Enhancing the efficacy of India’s development cooperation endeavours has been a challenging issue for the past several decades. The country, therefore, needs to expedite work on a specialised agency for proficient delivery of outcomes.

Development assistance and lack of institutional foundation

• 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, a development compact that has five modalities — capacity building, concessional finance, technology sharing, grant and trade wherein duty-free and quota-free access to the Indian market is provided.
•  India’s benevolent image does yield tremendous goodwill globally, but quality project delivery is yet to become the country’s USP.
• 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 does not give aid like OECD members.
• India has been supporting the developmental endeavours of several partner countries in Africa and Asia, even before Independence.
• However, this process lacks a firm institutional foundation.

Efforts 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).
• Subsequently, 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), which never took off.
• Meanwhile, in 2018, China founded its international development cooperation agency.

Changes in concessional financing

• At this point, concessional financing in India’s development cooperation portfolio is close to 70 per cent.
• So any major change would require alterations in the way LOCs (Line of Credit) have been working.
• In 2015, the government made efforts to bring in operational changes in the way credit lines work.
•  As of now, the EXIM Bank raises global resources and the Government of India absorbs the interest differential.

Way forward

• Countries have sovereign and non-sovereign windows for promoting infrastructure financing abroad — both have their own place.
• A non-sovereign window would provide greater flexibility and bandwidth.
• 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 may also 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.
• Post-pandemic, countries worldwide are exploring ways to reinvigorate their development cooperation efforts.
• India’s own development experience is also 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.

Conclusion

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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