ICAI review of UK aid to India finds lack of coherence and absence of strong development rationale, despite areas of strength in the relationship

14 Mar 2023

• ICAI review examines the UK’s new model of development cooperation with India, covering all UK aid since 2016.
• The review gives an overall score of amber-red, finding that the new model has resulted in a fragmented portfolio without a strong development rationale.
• ICAI finds limited evidence that the portfolio is being managed coherently and making the most of investment, and notes that the ODA budget reductions have had a negative impact.
• It finds some areas of strength within the portfolio, including programme management and delivery and a good relationship with the Indian government, which has resulted in positive influence on India’s policy and investment choices.

• ICAI makes five recommendations to help the UK government to build on these strengths, for as long as it continues to provide official development assistance to India.

The country portfolio review published today, Tuesday 14 March, by the Independent Commission for Aid Impact (ICAI), examines the model of development co-operation with India that has emerged since the UK’s 2012 decision to phase out traditional aid. It covers the entire UK aid portfolio in India since 2016, and assesses its relevance, its coherence across spending channels, and whether it is achieving its intended results.

The aid watchdog finds that while the portfolio reflects the shared interests of the UK and Indian governments, it is fragmented across activities and spending channels, and lacks a compelling development rationale.

The UK provided approximately £2.3 billion in aid between 2016 and 2021, including £441 million in bilateral aid, £1 billion in investments through the UK’s development finance institution British Investment International (BII), £129 million in investments via the Foreign, Commonwealth and Development Office (FCDO), and £749 million through multilateral channels.

ICAI welcomes the efforts made to strengthen internal co-ordination, and recognises the good partnerships with the Indian government and the World Bank, but finds limited evidence that the portfolio is being managed as a coherent whole and making the most of the investment. In particular, it found that much of the BII portfolio lacks strong “financial additionality” (given India’s relatively mature financial markets) and does not have a clear link to inclusive growth and poverty reduction. In addition, it found that there is little UK support for Indian democracy and human rights, despite negative trends in these areas.

ICAI chief commissioner Dr Tamsyn Barton, who led the review, said:

“India was the 11^th 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.”

“Despite concerns about the model that has emerged in India, there are areas of strength to build on if the UK and India want to continue this partnership. The UK has provided innovative support on climate change and clean energy, showing the value of combining support for policy reforms with well-targeted development investments.”

ICAI makes five recommendations to help the UK government build on the strengths it has identified within the India country portfolio.

Recommendation 1: The UK should focus its aid portfolio to India on a limited number of areas where UK aid can help make India’s economic growth more inclusive and pro-poor, with clear theories of change to guide the design of aid programming and development diplomacy.

Recommendation 2: The UK should build on its emerging success story in climate finance and green infrastructure, looking for opportunities to combine technical assistance, research partnerships, development investments and multilateral partnerships for greater impact and value for money.

Recommendation 3: UK development investments should have a greater focus on mobilising private finance at scale to address climate change, particularly from large institutional investors based in the City of London

Recommendation 4: British International Investment should reassess its approach to ensuring additionality in its India portfolio.

Recommendation 5: The UK should look for opportunities to support coalitions of Indian research institutions and non-governmental organisations working on social issues, in support of the UK India Country Plan goal of championing open societies and democratic standards.