Paper: GS – II, Subject: International Relations, Topic: India’s foreign policy, Issue: Rephasing India’s developmental approach towards global south.
Context:
India is redefining its development cooperation with the Global South, focusing on balancing Lines of Credit (LoC), Capacity building, Technology transfer, and Market access. It comes amid global shifts in development financing and ODA (Official Development Assistance) decline.
Key Highlights:
Evolution of India’s Development Finance:
- Initiative: Indian Development and Economic Assistance Scheme (IDEAS).
- Increased assistance: Flow of LoCs grew from $3 billion (2010-11) to $7 billion (2023-24).
Key focus areas:
Challenges:
- Financial constraints: Budget 2025-26 shows signs of tightening LoC allocations.
- Debt vulnerability: Rising debt vulnerability in recipient countries (Global South) poses a risk especially slow repayment rates and LoCs becoming financial burden in the face of shrinking fiscal space.
- Reduced fiscal space: Shrinking global ODA and COVID-induced debt crisis. Further rising cost of borrowing has limited fiscal space in recipient countries.
- Global Decline in Development Finance: Collapse of USAID, DFID (Department for International Development), and Commonwealth Development Office has led to:
- 45% decline in foreign aid flows with the estimated ODA falling to $204 billion (2023).
- OECD’s DAC has turned elitist, constraining finance flows to the Global South.
Role of Triangular Cooperation (TrC): TrC involves a donor (Global North),a facilitator (e.g., India), anda partner country (Global South).
Significance of TrC:
Successful models:
- India-Japan’s developmental partnership in Asia and Africa.
- Germany-EU in Mozambique.
- India-EU-Africa projects under G20 umbrella.
Advantages of TrC Model:
For example, India-Germany TrC: Worked on over 15 projects in 2022 while India-UK and India-Japan partnerships also expanding in this domain.
- India’s evolving approach: During Voice of Global South Summit, PM Modi introduced Concept of Global Development Compact (GDC).
- Aim: Create a harmonious financing approach using both concessional and market instruments. It aims to address shrinking concessional finance, forge deeper partnerships and capitalize on willing and capable partner nations.
- Further steps:
- Develop resilient, localised financing models.
- Promote flexible mechanisms like TrC and blended finance.
- Create shared platforms for result-based implementation.
Conclusion:
India must recalibrate its development finance to move beyond LoC dependence, and adapt to the realities of debt and reduced aid. India must lead global South cooperation through innovative, cost-effective partnerships like TrC and GDC.
https://www.thehindu.com/opinion/lead/rephasing-global-development-finance/article69765160.ece
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