India has seen remarkable economic growth over the last 25 years, but in per capita terms, the average income is still only one twentieth of that in the UK, and over 400 million people still live on less than 80 pence per day.
Chair of the Committee Malcolm Bruce MP said:
"The test of whether the UK should continue to give aid to India is whether that aid makes a distinct, value-added contribution to poverty reduction which would not otherwise happen. We believe most UK aid does this.
The Indian Government has primary responsibility for poverty reduction. It has put up taxes and increased its social spending, but the poverty there is on such an extreme scale that it will take many years for India to achieve internationally agreed Millennium Development Goals.
Poverty levels remain high in some parts of India and these are states where UK funding is targeted."
It has been argued that because India is now classed as a middle income country, it can afford to pay for its own programmes to alleviate poverty. The inquiry found, however, that the Government of India invests significant funds in social programmes for health, education and employment and that total aid constitutes less than 0.3% of GNP. The UK’s direct contribution is only 0.03% of GDP.
Malcolm Bruce MP added:
"Our funding is small in relation to the Indian economy. DFID rightly focuses on demonstration projects which can be replicated and scaled up."
India’s space programme is often cited as an example of the country’s wealth and further justification for cutting UK aid. The MPs acknowledge that India needs a credible defence policy, and point out that the country’s space programme also delivers important socio-economic benefits, including mapping weather patterns and the extent of floods, both of which help development.
While backing continued aid spending in India the Report makes a number of recommendations that MPs believe will improve results. The Committee is calling for more effort to be focused on the following areas:
- Improved sanitation
- Tackling malnutrition
- Challenging social exclusion
Sanitation is the first step to improving health outcomes, yet DFID only spends 1% of its budget on it. The Committee is calling for resources to be switched from health to sanitation and for it to be given a much higher priority in the UK’s aid programme.
Progress has been slow in reducing malnutrition especially among the under-twos. The Committee welcomes DFID’s new emphasis on the 'first 1,000 days' of a child's life and is recommending that DFID make this central to its funding in India.
The Committee also wants DFID to focus more widely on challenging social exclusion. Certain castes, tribes or religious groups, and people living with disabilities continue to be discriminated against and this has resulted in high levels of poverty amongst these groups. DFID must place greater emphasis on tackling inequalities throughout its programmes.
DFID's proposals to fund pro-poor private sector investment met with most concern. The Report says these must be more carefully thought through before large sums of money are allocated in this way. The report recommends that after 2015 DFID's aid relationship should fundamentally change. DFID should continue to provide technical assistance where requested, but the Report argues that the funding mechanism should change.
Malcolm Bruce MP concluded:
"The UK has a responsibility to help India achieve the millennium development goals. It is also in our long term interests to nurture development and promote growth there.
As India emerges as a serious economic and political power our ties to the country will become increasingly important."