Demise of foreign aid in India
NEWS: India has
traditionally held an ambivalent attitude toward foreign aid—accepting
it when necessary, while often maintaining a cautious and sovereign stance.
WHAT’S IN THE NEWS?
Historical Stance on Foreign
Aid: Ambivalence and Shifts
- Between 1955 and 1965, India witnessed a peak
inflow of foreign aid, particularly from Western nations such
as the US, UK, and multilateral agencies like the World Bank.
- Post-1991 economic liberalization, with accelerated
GDP growth, India’s dependence on Official Development Assistance
(ODA) reduced significantly.
- India increasingly projected itself as a donor
nation rather than a recipient, as seen in its aid to neighboring
countries and Africa.
Decline in Official Development
Assistance (ODA)
- Perception Shift: Donor countries now view
India as a self-reliant, rising power, reducing the moral and
strategic imperative to offer aid.
- Political Context: India’s rise in nationalistic
discourse and strong assertion of strategic autonomy has led to
increased scrutiny of foreign funding, especially in sensitive
sectors.
- Global Donor Fatigue:
- Donor
nations face economic slowdowns, rising populism, and anti-immigration
sentiments, diverting resources inward.
- Geopolitical
tensions (e.g., Ukraine crisis, West Asia conflicts) have shifted
focus away from development aid.
- US
under President Donald Trump criticized USAID and cut
funding—triggering a global rethinking on aid efficacy.
- The European
Union is also reassessing its aid priorities, with indications of
reducing support to large economies like India.
Decline in Private Foreign Aid
to NGOs
- Private foreign contributions to Indian NGOs
have also seen a decline, aggravated by policy and legal restrictions.
- Between 2017 and 2022, NGOs collectively
received ₹88,882 million in foreign aid, though actual inflows are
believed to have declined sharply post-2020.
- Causes for the decline include:
- Regulatory
restrictions under the Foreign Contribution Regulation Act (FCRA).
- A hostile
political climate toward foreign-funded civil society actors.
- Donor
fatigue and reallocation of funds to crisis-hit regions globally.
FCRA Crackdown: Legal and
Regulatory Dimensions
- The FCRA (1976) governs the receipt and use
of foreign aid by Indian individuals, associations, and NGOs.
- Amended successively in 2010, 2011, 2020, 2023,
and 2024, the Act has become more stringent and opaque.
- Government justifies these amendments on grounds of
national security and sovereignty, often citing:
- Alleged
involvement of NGOs in religious conversions, mass
mobilizations, or anti-development protests.
- Key developments include:
- Mass
cancellations of NGO registrations, impacting thousands of
organizations.
- Targeting
of major donors, such as the Soros Foundation and other
rights-based philanthropic entities.
- Restrictions
on re-granting funds, administrative overhead limits, and
mandatory Aadhaar verification for office-bearers.
Role of Foreign Aid in NGO
Functioning
- Foreign aid historically played a supplementary
role in development, especially in areas underfunded or underserved by
the government.
- It enabled:
- Greater
flexibility in designing and piloting innovative models of development.
- Capacity
building, training, and exposure to global best practices.
- Timely
funding for emergencies (e.g., disasters, pandemics).
- A watchdog
function, wherein NGOs acted as a check on government or corporate
overreach, promoting transparency and accountability.
Consequences of Aid Withdrawal
- The abrupt or gradual withdrawal of foreign aid is
likely to have serious social and institutional consequences:
- Unemployment
in the voluntary/non-profit sector due to closure of NGOs or downsizing
of operations.
- Stalled
or unfinished projects, especially in remote or conflict-prone areas
where state services are limited.
- Reduced
quality and reach in service delivery related to health,
education, gender rights, environmental conservation, etc.
- Shrinking
civic space and weakening of platforms for democratic dissent,
particularly in human rights and environmental advocacy.
7. Self-Reliance vs. Strategic
Myopia
- The push for Atmanirbhar Bharat reflects
India's aspiration to be economically and strategically autonomous.
- However, a blanket rejection of foreign
aid—even from neutral philanthropic actors—can lead to:
- A vacuum
in critical services if domestic funding mechanisms are not strengthened
concurrently.
- Missed
opportunities for global collaboration on transnational challenges
like climate change, epidemics, and food security.
- Muzzling
of independent civil society voices, weakening the democratic
ecosystem.
Source: https://www.thehindu.com/opinion/op-ed/demise-of-foreign-aid-in-india/article69537438.ece