Aid to India? Er…I’m not sure

Last week was aid to India week.  There were three pieces on the subject on the Guardian website, plus the predictable ‘why oh why’ articles in the Daily Mail and the Express , and a five minute slot on the BBC’s ‘Question Time’.  And not forgetting Andy Sumner right here on GD. But you know, I’ve read it all and I still don’t know what I think.  

Let’s leave aside the national interest argument for a minute.  Is there a development case for giving aid to India? And can we put numbers on it?

For some, the fact that one third of all poor people in the world live in India is reason enough to give it aid.  Half of all India’s children are malnourished; our money can help them, so let’s send it over.  And maybe that should be all there is to it.  But for most people, somewhere in the moral calculus of aid is the idea that some countries, as well as some people, are needier than others.

How does India fare on the scale of need at a country level?  India’s (in)famous space programme is of course exhibit A for cutting aid, and its plentiful supply of billionaires is exhibit B.  But hold on a minute.  According to Martin Ravallion of the World Bank, even if marginal tax rates on the Indian middle class were 100% this would still only provide enough money to reduce dollar a day poverty in the country by 20%.  India is not rich enough to end poverty right now with its own resources, space programme or no space programme.

India’s growth rates are also sometimes cited as a reason not to give aid.  The argument is that economic growth, forecast at nearly 9 per cent for next year, will end poverty without our help.   Sadly, not for a very long time.  Growth in India is surprisingly inefficient at reducing poverty.  A comparison between India, China and Brazil found that each percentage increase in GDP reduced poverty by 3.2 per cent in Brazil, by 0.8 per cent in China, but by only 0.3 per cent in India.   So even though the country is growing fast that doesn’t mean that poverty is going to be ending any time soon. 

So – a country that has a space programme but is still too poor to end poverty.  And a country where economic growth is firmly in the fast lane but where poverty reduction is stuck in a tailback behind a caravan.  As ever, it’s the politics, stupid.  Poverty reduction is frequently low on the list of priorities for national and local leaders. Instead, the focus is on showcasing India’s credentials as a big power – that space programme again – and on growing as fast as China, whatever the cost. 

Perhaps all the arguments against aid to India are actually arguments in favour – if India is rich and fast growing but people are still so poor then maybe aid is justified on the grounds that people need support more if their government seems less able or willing to tackle the problem.  But the aid that the UK sends to India is tiny – a fraction of one per cent of GDP.  It can’t plug the gap.  Anyway, some argue that aid can slow down political change by letting the government off the hook – though again, the amounts involved are probably too small to make this a serious problem.   On the other side of the fence, the optimists hope that aid will speed up political change and poverty reduction, by catalysing changes and showing what can be done.  That’s just as plausible.

Last week Andrew Mitchell made his choice clear. For the foreseeable future, aid to India continues.  Politicians have to take these decisions.  The rest of us have the luxury of uncertainty.