Issue Brief

India in Afghanistan: Understanding Development Assistance by Emerging Donors to Conflict-Affected Countries

in Program

India is increasingly becoming an important donor also to conflict-affected countries. Indian development assistance is important to understand, since India is the world’s third largest economy in purchasing power parity terms (PPP), one of the fastest-growing countries in the world, and has an expanding development assistance program. In U.S. dollar terms, India’s foreign aid program is not as large as that of traditional donors or as large as that of other emerging donors such as its neighbor China. Yet, a purely dollar-focused comparison of Indian aid underestimates the comparative advantage of Indian aid, both in PPP terms, as well as in terms of cultural affinity and sustainability particularly for neighboring countries. Since the majority of traditional donors, such as the United States, distribute assistance through the donor country’s citizens and contractors, often using materials sourced from the donor country, a U.S. dollar (USD) of aid “buys” significantly less of American goods and services than does the U.S. dollar equivalent of aid from emerging donors such as India. As seen in figure 1, Indian aid (grants and loans) in 2015-16 totaled approximately USD 1.36 billion. Yet in PPP terms it totaled over USD 5 billion – equivalent to approximately USD 4.6 billion of Canadian aid and significantly more than the USD 2.76 billion of Australian aid during 2015 in PPP terms.3 Moreover, even the PPP estimates of Indian aid underestimate its value to the local recipient, particularly with regards to technical assistance and training. When the U.S. provides aid in the form of technical training, bureaucrats from recipient states are trained at U.S. universities and institutes at market rates. On the other hand, Indian aid in the form of tuition for training at Indian public institutes can “cost” as little as USD 20 for a four-week training program. This is largely because Indian public institutes have extremely low tuition rates and because some of the rates negotiated by the Indian government with public institutions date back to the 1970s.

Indian development cooperation, like that of many other rising donors, builds on lessons from its own and ongoing. However, unlike traditional donors, it does not differentiate between conflict-affected, post-conflict, and stable developing countries. This is because of its own development experience as a country that has continued to face internal conflict in parts of the state since its independence seventy years ago. This fundamentally different outlook on development and development assistance explains India’s early and continued engagement in development cooperation in conflict-affected states such as Afghanistan.

Indian development assistance to conflict-affected countries is particularly important to understand because Indian aid does not have the same high aid delivery costs, such as high security overheads, that traditional donors do. The difference in approach and lower aid delivery costs provides India as well as other emerging donors, with a comparative advantage in assisting reconstruction and development in conflict-affected countries. It also underscores why development assistance by traditional donors would go further and prove more sustainable if they joined forces with emerging donors to deliver more assistance for each dollar pledged – an outcome that would create a win-win for all three parties.

This policy brief analyzes Indian development assistance to Afghanistan, arguing that India has a significant comparative advantage in aid delivery and that traditional donors such as the United States could greatly benefit from increasing their collaboration with India in delivering aid to Afghanistan. Today, Afghanistan is the second-largest recipient of Indian aid. India is also the fifth largest donor to Afghanistan and the largest regional donor. As seen in figure 2, India provided over half a billion dollars in development assistance to Afghanistan in PPP terms in 2015/16 – a significant amount at a time when traditional donors have been decreasing their aid to Afghanistan and delivery of aid project had become more costly and difficult due to rising insecurity.

By analyzing Indian development assistance to Afghanistan, this policy brief addresses four main questions. First, this analysis illustrates that India’s increased involvement in conflict- affected states like Afghanistan is reflective of specific domestic concerns as well as an overall increase in India’s development partnerships since the early part of this century. Second, Indian aid does not differentiate between development assistance to conflict and non-conflict affected states, since from the Indian perspective most developing countries experience internal conflict. Thus, Indian assistance to countries such as Afghanistan does not differ significantly from its assistance to countries that have experienced less conflict such as Bhutan.Third, it also prides itself on having “demand-driven” development assistance without explicit conditionalities — aid that is requested by the recipients rather than determined by the donors and has no specific “conditions” that need to be met by the recipient government before disbursement.” Fourth, since Indian assistance to conflict-affected countries differs from that of traditional donors in its approach and lower costs, countries like India are rapidly attaining a comparative advantage in aid delivery to conflicted affected states. Fifth, given the advantages countries like India have in delivering aid in conflict affected states, it would behoove traditional donors to engage with emerging donors to better deliver aid to developing countries struggling with conflict and insecurity.

After providing an overview of India’s development partnership with Afghanistan, this policy brief analyzes the reengagement with Afghanistan since 2001. Next, it examines whether there has been a change in the nature of India’s engagement since 2014, when elections led to a change in government both in India and Afghanistan and the political calculus outside and inside of Afghanistan changed with the decreased presence of international troops. Finally, it provides examples of triangular cooperation between India and traditional donors in Afghanistan.

Click here for the full series “Changing Landscape of Assistance to Conflict-Affected States: Emerging and Traditional Donors and Opportunities for Collaboration.

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