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Do the Poor Matter? A Comparative Study for Poverty Reduction in India

Working paper

Working paper

There is a peculiar dearth of studies on the role of aid in India. To the extent that there are studies, the academic as well as the political debate focuses primarily on the role of the international financial institutions, the World Bank and the IMF - and in particular such controversial issues as conditionalities and sanctions. In contrast neither the aid from UN agencies nor the aid from bilateral donors is hardly ever subjected to analysis or debate. One reason for this obviously is that aid only plays a marginal role in the Indian economy. But that is not the same as saying that aid is unimportant or irrelevant for India's development. Apart from its macroeconomic effect, aid often plays a vital role in certain sectors and localities, providing much needed resources for productive activities or basic social services. In spite of this there are few well-documented studies of the role of aid. Lipton & Toye's 'Does Aid Work in India?' from 1990 still stands out as the only authoritative book. Our study of six European donors' development cooperation with India aims at partly filling the void. While Lipton and Toye's study in particular focuses on the macroeconomic effects of aid, our study is more focused on donor strategies and approaches as well as on analysis of a large number of European funded projects and programmes. The main question is: to what extent does the aid from European donors contribute to what is seen as India's overriding development concern, namely poverty reduction.

The India study has been carried out by Aidan Cox, Overseas Development Institute, London, Lau Schulpen, Third World Centre, Catholic University, Nijmegen, Steen Folke (study coordinator) and Neil Webster, both from Centre for Development Research, Copenhagen - in collaboration with eleven Indian researchers, namely: Dr. (Ms.) S. Banerjee, Consultant, Delhi; Dr. S. Benjamin, Consultant, Bangalore; Dr. (Ms.) Kripa A.P., Consultant, Mysore; Dr. D. Manti, Institute of Rural Studies and Administration, Guntur; Dr. K.N. Ninan, Institute for Social and Economic Change, Bangalore; Prof. M.A. Oommen, Institute of Social Sciences, Delhi; Ms. Rajamma G., Consultant, Secunderabad; Dr. D. Rajasekhar, Institute for Social and Economic Change, Bangalore; Dr. Somasekhara Reddy, Indian Institute of Management, Bangalore; Dr. R.S. Srivastava, Department of Economics, University of Allahabad; Dr. N.V. Varghese, National Institute of Educational Planning and Administration, Delhi.

The aim of the India study is to investigate the effectiveness of aid from the European Commission and selected EU-countries in contributing to poverty reduction. By poverty reduction we do not just mean improvement in income or consumption of the poor, but also amelioration of the conditions that are important for such improvement (e.g. health, education). We have conceptualised poverty reduction as a multi-dimensional phenomenon which involves changes in livelihoods, resources, knowledge and rights. We have selected six donors who have in common that they want to strengthen the poverty orientation of their development assistance, namely the European Commission, Denmark, Germany, The Netherlands, Sweden and United Kingdom. Among EU countries these donors, incidentally, are the most important in terms of the volume of aid they provide to India (among the remaining EU countries only France really matters). The study has assessed the donor strategies, the donor-recipient dialogue, the recipient's perception of aid as well as the effectiveness in terms of poverty reduction of the programmes as such and a number of selected interventions in nine different 'sectors': watershed, irrigation, forestry, drinking water, primary health, primary education, women's training, urban housing and self-help projects (NGO-supported). In each sector 3-5 projects supported by one or the other of the EU-donors have been selected and assessed from a poverty perspective. Most of the 33 projects under study are found in Uttar Pradesh, Orissa, Andhra Pradesh, Karnataka and Tamil Nadu, but one project is located in Madhya Pradesh, one in Rajasthan and one in Kerala.

The study was prepared in the autumn of 1996 and field work was carried out in the first half of 1997. In January the researchers involved held a planning-cum-methodology workshop in Delhi, and a second workshop, where preliminary results from field work were discussed, was held in Delhi in April. Most of the Indian researchers involved have spent 1.5-2 months working on the project. Half of that time has generally been spent in the field, assessing the selected 3-4 projects in a particular sector, i.e. roughly one week per project (incl. travel time). This has resulted in nine 'sector reports', containing analysis and assessment of the projects as well as comments about the relevance of the aid to that particular sector. The sector reports have been written by the following: K.N. Ninan: Watershed; Somasekhara Reddy: Irrigation; Kripa A.P.: Forestry; D. Manti: Drinking water; S. Banerjee: Primary health; N.V. Varghese: Primary education; Rajamma G.: Women's training; S. Benjamin: Urban housing; D. Rajasekhar: Self-help (NGOs).

Two further studies were also carried out. R.S. Srivastava has written a report entitled 'Poverty in India: A review of Nature, Trends and Eradication Strategies'. M.N. Oommen has written a report entitled 'Foreign Aid and Poverty Reduction. Towards Understanding the Indian Perspective'. We want to take the opportunity to thank all our Indian colleagues and collaborators for their enthusiasm during the research project and their invaluable contributions to the results.

The four European researchers involved in the project have planned the research in December 1996-January 1997, carried out field work in March-May 1997 and prepared the consolidated report afterwards. Apart from visits to projects our main task during field work has been interviewing numerous persons engaged in the aid administration either on donor or recipient side. These include a number of staff members in the embassies and aid agencies in Delhi, officers both in the Ministry of Finance and in the line ministries and other government institutions in Delhi as well as a number of government officers in the five states where almost all the projects are located, i.e. Uttar Pradesh, Orissa, Andhra Pradesh, Karnataka and Tamil Nadu. We thank all those interviewed for their readiness to use their time and share their experiences and views with us.

An incomplete draft version of this report was prepared in 1997 and presented and discussed in three well-attended meetings in New Delhi in September 1997, one with Government officials, one with donor representatives and one with staff members of a range of multilateral donor agencies (organised by the UNDP). The many valuable comments we received during those meetings have informed the final version of our report.

Since the research was undertaken in India in 1997, Sweden, Denmark, Germany and the Netherlands have imposed sanctions by freezing or cutting back their aid to India after the nuclear bomb tests in May 1998. The UK and the EU - although protesting verbally - have adopted a 'business as usual' attitude in terms of the aid. None of the donors, however, has opted out of India, so the projects and programmes studied here are still very much at the heart of the aid from EU donors for poverty reduction in India. There remains a shared hope among the EU countries that the Government of India will adopt policies (e.g. by signing the Comprehensive Test Ban Treaty) that will enable them to resume aid at full scale.

It is our sincere hope that this study will contribute to strengthening the poverty reduction objective in interventions in the various sectors dealt with - whether or not these interventions are supported by foreign donors. But of course we hope especially that the donors whose programmes we have studied will find inspiration in their endeavours to strengthen the poverty orientation of their aid.

Aidan Cox, Steen Folke, Lau Schulpen, and Neil Webster