Indian attitude to official and private foreign aid has always been ambivalent — sometimes welcoming, at other times hostile. With U.S. President Donald Trump’s targeting of USAID, the death knell, at least for official aid, seems to have been rung. Other European countries may follow suit, thanks to continuing global conflicts, anti immigration sentiments, and the slowing of economic development in the aid-offering countries. The writing on the wall could not be clearer.
In fact, for India, the writing has been clear for several years now, much before Mr. Trump’s action. Western aid-giving nations no longer see India as a country needing aid, given its high growth rate, its oft-vaunted claim of becoming the fifth largest economy by 2047, and the prevailing political and religious ideologies within the country.
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India sought international aid soon after Independence to assist in its task of catching up with the developed world. Most of the aid went to the government, as it was believed that the government should be the lead change agent. The peak period was from 1955 to 1965, and most of it came from Western nations. Some official development aid also went to private organisations, especially from bilateral aid organisations, for both humanitarian and development needs.
However, official developmental aid has shown an almost constant decline, especially from 1970 onwards. After 1990, Official Development Assistance (ODA), as a proportion of either Gross National Product or public investment, became insignificant partly due to the success of India’s growth story.
What India seeks now is Foreign Direct Investment (FDI) and global cooperation in trade, climate change, and technological developments. Thus, declining official aid is not as great a concern as declining private aid to non-government agencies, though it too will have downsides such as unemployment in aid-giving organisations in both donor and recipient countries, wastage of stockpiled food and medicines, and reduced global collaboration in health and environment.
Private non-governmental organisations engaged in development work — referred to as NGOs — will be more affected by a decline in aid, both official and private. NGOs not only take up the slack in government provision at the bottom but also hold up a mirror to the truth in governance.
While public donations sustained Indian NGOs in the pre-Independence period and for some years afterward, since the 1960s onwards, the two major sources for NGOs in development have come to be government grants and foreign aid. It is only since 2013, when corporate social responsibility contributions became mandatory, that corporate money has become somewhat significant.
External aid to NGOs, both from official and private sources, increased continuously, but slowly the amounts received from both have been coming down. Between 2017-18 and 2021-22, NGOs received ₹88,8820 million, but though correct estimates of Foreign Contributions Regulation Act (FCRA) aid are difficult to get, approximate figures indicate that the amount has gone down considerably.
Probable reasons
The reason for the decline is less about the reluctance of foreign donors and more about the ambivalent attitude of the Indian government towards the receipt of foreign aid by Indian NGOs. While allowing NGOs to accept aid, government regulations have hedged it in with several restrictions since 1976, when the FCRA was passed. Even before the declaration of Emergency in 1975, the “foreign hand” had become a bogey phrase. The government began to blame it for anti-government sentiments and activities. The anti-national activities purportedly holding up development included religious conversions to Christianity or Islam, protests against development projects, and various policies of the government.
The FCRA required those receiving or wishing to receive foreign money to register themselves with the Ministry of Home Affairs, and to use the funds strictly according to the rules. This Act and its rules have been amended in 2010, 2011, 2020, 2023, and again in 2024. Each time, the rules have been made more and more stringent, and several NGOs have lost their FCRA registrations.
Certain private foreign donors, such as the Soros Foundation and others, have also been actively discouraged. These factors pushing out aid will slowly but surely toll its death knell.
While foreign aid may have had some drawbacks, such as bringing in ideas not entirely or always suited to India, it has played a valuable role for NGOs. Where government grants are meagre, not easily available, and lacking the flexibility to meet changing conditions on the ground, foreign aid was more generous and allowed more flexibility in use, opened windows to the world outside in terms of new ideas and practices, and built the capacity of Indian NGOs. It also allowed NGOs to play a valuable watchdog role on abuses by the government or market forces by voicing dissent against policies and actions detrimental to poor and vulnerable constituencies.
If foreign aid ceases entirely, not only will there be unemployment in the voluntary sector, but also unfinished projects or shelving of new projects, and a slowing down of social sector development, but more importantly, no correction to government overreach.
While self-reliance is a laudable goal, deliberately killing the golden goose is, in effect, risking harm to India’s national interests.
Pushpa Sundar is the author of Foreign Aid for Indian NGOs: Problem or Solution? ( 2010)
Published – May 05, 2025 01:03 am IST