FINANCE MINISTRY TO FORMULATE NEW GUIDELINES FOR BILATERAL AID
IN CONSULTATION WITH DEVELOPMENT PARTNERS
The Finance Ministry
will frame a new set of guidelines which will govern future bilateral
aid flows to India. While framing the guidelines the Ministry
will invite inputs from bilateral aid partners.
Following the finance
Ministry’s decision to reduce bilateral aid flows through the
government, the Finance Secretary today met representatives of
several countries likely to be affected by the new decision. He
expressed Government’s deep gratitude to all the donors for their
generous development assistance over the years which has benefited
India greatly. The Finance Secretary explained that the new decision
sought to take into account changing realities in the field of
development cooperation. It was clearly stated that the ongoing
economic development cooperation projects/programmes shall continue
ensuring that there is no disruption/dislocation with the projects
being allowed to run their stipulated course. He said that unlike
the past, development needs are large but have localized and geographical
singularities. Institutional needs have also changed. The involvement
of government leads to universalisation of development models
which is counter-productive in today’s scenario. Thus the government
has decided that bilateral assistance that is no longer routed
through the government machinery could be accessible to the institutions,
projects NGOs etc. directly. This was expected to improve the
efficiency of the development effort.
It was stated by
the Ministry of Finance and was generally appreciated that the
development cooperation should be appropriately seen as a dynamic
process recognizing the changing realities. The external aid,
in order to be meaningful and efficacious, must result in an end
to the requirement of further aid. India, that is fast emerging
as a systematically improved player in global economy, has therefore
decided to reorient its aid policies. It would also result in
ODA getting released in favour of developing countries in need
greater than India of external aid. This objective is also being
strengthened by India establishing ‘India Development Initiative’
with which developing countries would be sought to be helped with
grants and credits besides a debt write off in favour of highly
indebted poor countries.
It would also
be more efficient as the bilateral partner would as a rule have
interaction with government only at the beginning of the financial
year when the total bilateral assistance package will be discussed
and finalized. The Finance Ministry would be primarily interested
in addressing India’s security concerns and overall development
priorities. Thereafter the bilateral partners would be free to
interact with the beneficiaries. However, it was emphasized that
such aid flows would normally be in the form of grants rather
than loans and government commitments to repay loans would be
kept to a minimum.
Explaining the
reasons behind early repayment of bilateral debt, the Finance
Secretary said this was entirely a commercial activity based on
the overall fiscal management policy of the government of India.
It had no connection to any bilateral relations with any donor
country, with all of whom India has very good bilateral relations
that India greatly values. India proposes to repay approximately
1.6 Billion Dollar equivalent of bilateral debt in the current
fiscal year.
Following the
announcement of the decision to readjust bilateral cooperation,
the Finance Ministry proposes to issue detailed guidelines on
how the decision will become operational. In the process of framing
the guidelines, the Finance Ministry will take into account the
views of India’s bilateral partners in development. The nodal
officers in the Ministry have been asked to meet the representatives
of the bilateral partners to address their specific and unique
concerns.
The meeting was
attended by representatives of diplomatic missions and aid agencies
of 14 countries including Denmark, France, Netherlands, Italy,
Switzerland, Australia, Canada, Czech Republic, Slovak Republic,
Belgium, Kuwait, Norway, Sweden and Austria. Senior officers of
the Ministry of Finance and External affairs were present at the
meeting.