Most of the world’s poor now live in middle-income countries like India (photo: Meanest Indian)
Should Britain give aid to India? For a hefty majority of people in this country, the answer is clear: it is absurd to keep handing our money to one of the world’s biggest economies. India is a fast-growing, middle-income nation rich enough to lavish money ($1.3bn by next year) on a space programme and to have its own aid agency with a budget worth $11.3bn over the next five years.
So India has become the prime battleground in the dispute over whether Britain should spend rising amounts on aid while enduring austerity at home. This booming nation remains the biggest recipient of bilateral development assistance. The row, which erupted yet again in October during a House of Lords debate, was fuelled by Pranab Mukherjee, now India’s president, who has dismissed foreign assistance as “peanuts.”
What India demonstrates so clearly is how the aid debate has been mugged by economic reality, wrong-footing both sides. Critics are wrong to argue there is no point giving money to wealthier nations; it is no longer the case that the world’s poor are found in the poorest nations. But supporters are wrong to focus on foreign intervention to end poverty; the issue is now domestic inequality.
The coalition, responding to the hammering it received following Mukherjee’s comments, has indicated that the current tranche of aid to India—£1.6bn over eight years, ending in 2015—will be the last. As the government reacts to voters’ concern and seeks to boost the effectiveness of aid, it is also scaling back handouts to other thriving middle-income countries such as Indonesia and Vietnam.
This might seem to make sense. Poor people live in poor places, right? But studies by Andy Sumner, an increasingly influential economist at King’s College, London, show the flaw in this approach. He reveals that, while two decades ago 93 per cent of the world’s poorest people lived in the poorest nations, three-quarters now live in middle-income countries.
Partly, this reflects astonishing growth in the developing world. Almost 30 countries have gained middle-income status this century, with Zambia and Ghana among the latest success stories. Yet for all the stellar growth enjoyed by a country such as India, according to Sumner’s findings it remains home to more than one-third of the world’s most…