University of Antwerp
The history of development
cooperation
(with a focus on India)
Hasselt University
February 2014
Robrecht Renard
University of Antwerp
Outline
1. Some basic facts about aid and India
2. Does India deserve more aid: the equity
argument
3. What about national redistribution?
4. How efficient is aid to India?
5. Optimal mix of policy instruments
6. Aid and public goods
7. Conclusion
2• slide 2
Robrecht Renard
University of Antwerp
1. Some basic facts about aid and India
3• slide 3
Robrecht Renard
University of Antwerp
2. The equity argument
2008-2010 averages
Bangladesh
Bolivia
Burundi
Cambodia
China
Congo, Dem. Rep.
Ethiopia
Haiti
India
Indonesia
Laos
Nicaragua
Nigeria
Rwanda
South Africa
Sri Lanka
Tanzania
Vietnam
4• slide 4
aid per
capita ($
per year)
11
69
70
52
1
40
44
171
2
5
73
125
11
94
22
33
63
36
GNI per
capita ($)
620
1,610
190
700
3,630
180
310
650
1,170
2,200
870
1,400
1,190
470
5,890
2,000
490
1,130
aid per population aid % GNI
poor
(million)
person
(1.25$)
25
146
1.7
443
10
4.0
86
8
32.2
230
14
7.2
6
1,331
0.0
45
64
29.4
112
81
12.1
278
10
25.8
7
1,208
0.2
29
237
0.2
214
6
7.7
1,047
6
8.8
16
155
0.9
148
10
18.8
158
49
0.4
462
21
1.6
93
44
12.8
212
86
3.3
Robrecht Renard
University of Antwerp
But be aware of poverty dynamics
•
Source: Chandy and Gertz, 2011
5• slide 5
Robrecht Renard
University of Antwerp
3. What about national redistribution ?
• There may be more poor people in India than in SSA, but
it also has more billionaires than the United Kingdom
• Implicit marginal tax rate (World Bank):
– Indian GNI/cap is less than $4 per day, and 42% population
under poverty line of $1.25
– Required tax would be close to 100%  no billionaires left,
or higher middle class !
• For comparison
– China: 37%, Peru <2%, Ecuador <5%
– Conclusion: from $4000 GNI/cap onwards internal
redistribution feasible, before that economic growth plus
international solidarity required
6• slide 6
Robrecht Renard
University of Antwerp
4. How efficient is aid to India?
• In theory, we may expect aid to India to have
good impact on the poor, because (1) good
absorption capacity and democratic government
(2) no aid dependency or diminishing returns to
aid
• From this perspective, aid to India may be more
efficient than aid to some African countries
• Difficult to confirm empirically because of lack
of rigorous synthesis evaluations
7• slide 7
Robrecht Renard
University of Antwerp
5. Optimal mix of policy instruments
• Aid just one of many policy instruments of rich
countries that affect prospects of poorer
countries
– Aid is effective but not very efficient (for political and
institutional reasons on both donor and recipient sides)
• Other instruments may be more efficient for
recipients, and less costly for donors
– Trade, macroeconomic policies, financial supervision,
immigration policies, etc can have powerful effect on
development
• But it depends on country
– Non-ODA policies very important for India
– Aid is more important for Burundi
8• slide 8
Robrecht Renard
University of Antwerp
6. Public Goods
• Equity dictates that developed countries
contribute proportionally more
– Some of this financing is ODA eligible
• Some of this financing concerns countryfocused programmes
–
–
–
–
Fighting HIV/AIDS, other contagious diseases
Bio-diversity and climate change related actions
Fostering cross-border knowledge transfers
Preventing state failure and regional conflict,…
• Application to India: south-south scientific
cooperation, global warming
9• slide 9
Robrecht Renard
University of Antwerp
7. Conclusion
• It is difficult to say whether in general aid to
India has been effective and efficient
• But its impact has been marginal because of its
modest relative size
– As in China, success is due to domestic policies
• More aid may be justified
– Large number of poor people
– Efficiency may be higher than elsewhere
– Yet other policy instruments will probably be more efficient
• But more official aid is an unlikely scenario
– Because of the reluctance on part of India and donor
countries alike
10
• slide 10
Robrecht Renard