Britain has sent £2.3 billion in aid to India since 2016, despite ministers having given the impression that the country would receive no more money, a report reveals.
The Government’s aid watchdog, the Independent Commission on Aid Impact (ICAI), said many people “would be surprised” to see money continuing to go to India at this level.
They said the huge amounts still going to India were poorly targeted, with not enough going towards priorities such as poverty reduction and human rights.
In one example of waste, millions were given to an Indian bank to loan to the poorest – but instead, the bank spent the money on business loans and providing the wealthy with credit cards.
ICAI gave the UK’s India aid programme a score of amber-red, the second-worst available.
Unclear ‘development rationale’
Dr Tamsyn Barton, ICAI’s chief commissioner, said: “India was the 11th largest recipient of UK aid in 2021, receiving more aid than countries like Bangladesh and Kenya, so it is all the more important that every penny is well spent or invested.
“However, we found that the portfolio wasn’t coherent and that the development rationale for it wasn’t clear.
“And while we appreciate that democracy and human rights in India is a sensitive area for the UK, we were surprised to find out that the UK had largely ceased supporting work at the local level.”
In 2012, the British Government pledged to end bilateral aid to India by 2016 as part of a move away from funding middle-income countries.
India has its own space programme and Pranab Mukherjee, the country’s former president, prompted anger in 2012 when he described British aid money as “peanuts”.
But despite the pledge, Britain still sends millions to India in the form of technical assistance, research grants and investments through the Government’s British International Investment (BII) body .
The report from ICAI said: “When BII investments are taken into account, we estimate that India received approximately £2.3 billion in UK aid between 2016 and 2021 although it should be noted that the £129 million of Foreign, Commonwealth and Development Office (FCDO) investments within this figure have generated some returns to the UK taxpayer.
“Many stakeholders may be surprised to see UK aid to India continuing at this level, a decade after the UK announced its transition away from its traditional development partnership.
“While the UK Government stated at the time that development investment and technical assistance (which, in the aid statistics, includes research funding) would continue, the clear expectation was that overall aid volumes to India would decrease faster than they have.”
Doubt over ‘best use’ of UK aid budget
The report also found that the money was not being spent wisely.
“It is not clear that the pattern of UK aid to India that has emerged from this transition represents best use of the UK aid budget,” it said.
“Rather than a coherent portfolio focused on India’s most pressing development challenges, it consists of a set of activities that is fragmented across objectives and spending channels, and lacks a clear development rationale.”
The £2.3 billion of aid spending between 2016 and 2021 is made up of £441 million in bilateral aid, £1 billion of investments through BII, £129 million in FCDO investments and £749 million through multi-lateral channels such as the World Bank.
The report highlighted one of BII’s investments in a mid-size Indian bank, which it cannot name.
The investment body gave the bank £160 million between 2014 and 2020 to support microfinance lending – that is lending to poor customers.
However, BII’s investments were not ring-fenced for microfinance, and were instead used to fund expansion of the bank’s entire business.
By March 2022, microfinance accounted for just 9.8 per cent of loans, and credit cards accounted for 36 per cent of loans.
“This is an example of an investment without a convincing link to poverty reduction,” the report said.
The Foreign, Commonwealth and Development Office was approached for comment.