- GS-2: Bilateral, Regional and Global Groupings and agreements involving India
Need for an international development cooperation agency
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 efficient delivery of outcomes.
Development assistance and lack of institutional foundation
- In the last two years, India’s assistance to other developing countries has multiplied several times.
- India’s development cooperation 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 helpful image yields 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 .
- 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 setting up of the India International Development Cooperation Agency (IIDCA) 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%.
- In 2015, the government made efforts to bring in operational changes in the way credit lines work.
- 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.
- 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.