London: India is to set up a central foreign aid agency to prevent funds from being misused and delays in aid delivery. India's aid commitments have soared in recent years as the country seeks to improve its strategic, political and economic clout on the world stage, especially as China extends its hand. The agency will reportedly be called the Indian Agency for Partnership in Development, overseeing $11.3bn (Rs 50,000 crore) over the next five to seven years.
The move has been welcomed by policymakers who say a central agency will halt leakages, curb delays, slash operation costs and prevent projects being rushed through by individuals misusing their discretionary powers. Furthermore, aid would no longer be driven by territorial divisions and regional interests, making way for a cohesive aid strategy.
Rajiv Sharma, secretary general of the Federation of Indian Chambers of Commerce and Industry (FICCI) said: "The creation of an aid agency is a recognition by the Indian establishment that India has arrived as a global player with strategic interests. In the past we have ducked this issue because we were one of the largest recipients of aid."
Gopalaswami Parthasarathy, a former diplomat and member of the Centre for Policy Research said an agency is urgently needed, as one person currently handles aid to Bangladesh, Sri Lanka, Maldives and Burma. "How can you have one joint secretary to deal with aid to some of our biggest recipients? He would have political and diplomatic work to conduct too," he said.
The agency will have to ensure quick decision-making and insulate aid from political considerations if it is to deliver aid effectively. Experts say that India's legal framework monitoring government procurement should be strengthened to boost accountability and to prevent it from falling prey to corruption.
The concerns over aid management are timely. Earlier this year, the government auditor revealed that $22.6bn (Rs 1 lakh crore) in foreign aid given to India was lying unused due to poor planning by various ministries.
The creation of the aid agency, believed to be modelled on the US international development agency, USAid, raises the question of whether India should be dishing out aid at all when it still receives international aid and suffers from rampant poverty and poor development. But supporters of India's foreign aid programme say aid helps the country's domestic agenda indirectly by opening economic doors, ensuring regional peace and boosting business opportunities in recipient countries.
Gurpreet Bhatia of the Research and Information System for Developing Countries said: "Aid will pacify India's neighbours and change their perception about us, sending out a message that we are here to help and protect them."
Aid has already helped foster India's interests in countries such as Afghanistan, Bangladesh and some African countries including Somalia and Ethopia. Pakistan and India have long been jostling for influence in Afghanistan, and, in May 2011, India pledged $500m to Afghanistan in addition to its existing commitment of $1.5bn, acquiring considerable goodwill. Also in May this year, $5bn was promised to African countries to reach its development goals, following an injection of $5.4bn in 2008 for infrastructure development.
Africa provides widescale business opportunities to India as well as China, which is also vying for a slice of the continent's economic resources. In January 2010, India announced a $1bn line of credit for Bangladesh, the highest one-off amount to any country from India as a reward for its co-operation in dealing with terrorism and insurgency.
* By Nishika Patel