Students from SIPA visit India, Meet Indian Prime Minister

(with contributions from my co-organizer Monoswita Saha, and trip participants – Eric Turner, Jiaming Ju, Adrian Talbott and Pablo Alfaro)

India has a way of wrapping its visitors into a bear hug of colors, smells, sights and sounds.  As the organizers, one of the most enjoyable aspects of the SIPA South Asia Association’s first ever SIPA India Trip was watching our 13 trip participants experience India for the first time.  Through their awe, surprise, appreciation, and delight, we saw India through fresh eyes once again.

Starting from January 5th 2012, in 11 days, we traveled from the orderly layout of Delhi to the enchanting city of Agra. We crossed the hectic streets of Mumbai in the quest for cool green coconuts, and finally, it was in Kerala, after a meeting with the chief minister, that time stopped for a moment.  We enjoyed the ocean breeze under the moon light, and quietly took in the sunset while lounging on a house boat in the beautiful backwaters.

Over the course of our trip, we met with ten of India’s foremost public and nonprofit leaders to learn from their experiences in tackling some of the world’s most pressing challenges. Each meeting was as varied as each day we spent in India. Our first meeting was with the Honorable Prime Minister of India, Dr. Manmohan Singh, who framed the problems of India in the right context.

In our subsequent meetings, we focused on the micro realities, for example through site visits to primary school education initiatives run by Pratham in slums of Mumbai. Although India defies summarization, our participants have created vignettes on each destination that provide an overall flavor for the trip.

Delhi

On January 5, after a 25 hour long flight from JFK, fifteen weary Columbia graduate students landed amidst the thick fog of Indira Gandhi International Airport in Delhi. Despite the inauspicious weather, it was the start of a memorable journey – the first-ever, student-planned, student-led SIPA trip to this magical country. The group wasted little time.  Rest, it seemed, was for the weary. After a half-day of some quick sight-seeing, the group visited Hazrat Nizammudin Dargah, where we jostled our way amidst the crowded streets to view a Qawwali performance, a form of Sufi devotional music popular in South Asia that stretches back more than 700 years.

Next day, the country’s Prime Minister, Dr. Manmohan Singh, surprised the group by making time in his busy schedule to welcome our group at his official residence for a twenty-minute question-and-answer session. From there, we quickly hustled to meet Dr. C. Rangarajan, Chairman of Economic Advisory Council to the Prime Minister who gave us a crash-course lesson in the dynamics of India’s burgeoning economy. Our full day of meetings culminated with a session at a nonprofit called PRS Legislative Research, where one of the co-founders, Mr. Madhavan, explained their work on promoting transparency and accountability in the Indian Parliament through watch-dog research.

On our final day in Delhi, we met with Dr. Madhav Chavan, co-founder and CEO of Pratham, the largest NGO providing quality education to the underprivileged children of India.  The scale and efficacy of Pratham, and Dr. Chavan’s legacy, was virtually unfathomable: 2.4 million children had been reached through the organization’s Read India Program, 61,000 teachers had been trained, and 65,000 volunteers had been recruited in more than 47,000 villages across India to achieve this ambitious mission.

Agra

Even though our one-day trip to Agra was our shortest visit to any of the Indian cities, it left the deepest memories in all of us. Our journey began from our hotel at 5 am, watching the empty streets of Delhi while we headed to the train station. Once in the train, the “Brides and Grooms wanted” newspaper sections kept many of us busy. In Agra, we first visited Fatehpur Sikhri, capital of the Mughal Empire for a short time in the 16^th century under the reign of Akbar, and also a filming location for the Bollywood movie “Jodhaa Akbar” (highly recommended!). Soon thereafter, we were heading to the Taj Mahal.

“The Taj”, as it is called by the locals, surprised us with a sight even more beautiful and impressive than our initial expectations. We went into the Taj watching its white marble walls decorated with beautiful figures, made with semi-precious stones perfectly inlayed into the marble as if they were drawings. After taking hundreds of pictures trying to treasure all these memories (jumping, watching the horizon, smiling romantically, etc.), we addressed the impossible mission of getting the perfect marble souvenir at “the fair price”. We tried showing off our bargaining skills, but with limited success. Anyways, this marble craft was one of the most beautiful handicrafts many of us had ever seen.

Mumbai

Descending into Mumbai, with its sprawling slums and high-rise buildings lining the horizon, the contrasts with Delhi were immediately apparent. The weather was perfect for an afternoon tour that featured the Gateway of India, a public bus ride down Marine Drive, Gandhi’s residence in the 1920s, the seemingly endless open-air laundromat or Dhobi Ghat, and one of Mumbai’s most impressive structures, the Chhatrapati Shivaji Terminus.

Mumbai was an ideal setting to address major urban policy issues, which we had the opportunity to discuss with the city’s Municipal Commissioner, Mr. Subodh Kumar. As the leading policymaker for the city, Mr. Kumar emphasized the difficulty involved in managing a city with over 15 million residents, 53% of who live in slums. Soon after, we met Ms. Chetna Sinha and her colleagues from Mann Deshi Bank. They traveled for 10 hours by bus to meet us, and provided us with an overview of the microfinance services they provide to rural women entrepreneurs in India. Their bus also serves as the Mobile Business School for rural women. It was exciting to be able to board the bus, and observe participants learning computer processing skills side-by-side with women sewing handbags and other crafts.

Next day, we visited a relocation facility of the nonprofit organization – Society for the Promotion of Area Resource Centers (SPARC), which advocates for housing rights of the neediest slum-dwellers and the homeless. This was followed by a visit to pre-school learning centres operated by the NGO Pratham in slums of Mumbai. The evening ended with a networking reception organized by the Columbia Alumni Association for our group. It was good to see many past and current SIPA students join us for this event.

Kerala

The warmth immediately embraced us upon our arrival in Kerala. The abundant coconut plantations, sweet sunshine and verdant landscape made Kerala the perfect final destination.  On our ride from the airport, communist flags and political banners signaled an upcoming election but were in strange contrast with the overall relaxed atmosphere.

At first glance, Kerala doesn’t seem to be a place of interest for policy wonks. But the state with the highest literacy rate and gender equality in India has been on the frontier of human development for years. We had the opportunity to meet with Mr. Oommen Chandy, Honorable Chief minister of Kerala. Mr. Chandy touched on challenges such as low growth, and the difficulty to maintain a healthy eco-system with a tourism driven economy.  To gain a different perspective, we visited the Center for Development Studies, India’s leading development economics institution. Here, Prof. Joseph Tharamangalam gave a historical overview of the Kerala development model, and suggested solutions to the challenges ahead.

Kerala is famous for its sandy beaches, flavorsome cuisine and unique culture. The mouthwatering fish fried in coconut oil, crunchy mango pickles and fresh stir-fry were a refreshing change from the curry dishes. The colorful Kathakali performance, Kalari Payattu (Kerala martial arts) and the traditional Ayurvedic massages gave us a sense of the incredible diversity and culture Kerala is home to. After a long bus ride, our trip ended with an overnight stay at a houseboat on the quiet and scenic backwaters of Kerala.

Should India Receive Development Aid?

(Cross-posted from The Morningside Post, November 18, 2011)

Last month, Japan announced that it will make significant cuts to its Overseas Development Assistance (ODA) program to other Asian countries, with the exception of one – India. Despite a declining economy and the twin calamities of the tsunami and Fukushima nuclear disaster, Japan has increased its commitment to fund development projects in India to the tune of $2.6 billion this year, making India the largest recipient of ODA funds from Japan for eight years in a row.

Japan’s decision underlines an important yet surprising trend in the murky and sometimes comical world of international development aid: as India continues to register strong economic growth and accumulates vast amounts of foreign reserves, it is rising to become world’s largest borrower of bilateral and multilateral development aid funds.

India’s sovereign external debt has risen steadily over the last decade to $ 78 billion, with an average growth of 18% over the last two years. Last year, India was the single largest borrower of funds from the World Bank ($9.3 billion) and the Asian Development Bank ($2.1 billion). Besides Japan, the UK too has been a longstanding bilateral donor to India. Notwithstanding the Euro zone crisis or its domestic budget cuts, UK recently announced a $1.6 billion aid package to India to be disbursed over next 5 years.

The other half of the story is even more interesting.

The Indian economy has grown at an impressive rate of 7 to 8% since 2000, resulting in growing national wealth and a rapid rise in government expenditure in infrastructure and social programs. Last week, India’s central bank reported a total of $320 billion held in foreign exchange reserves, making India the world’s seventh richest country by the size of its reserves, above Germany, South Korea, and France.

Over the past few years, India has steadily increased its aid commitments to countries in Africa and South Asia. This year, India confirmed its intention to join the ranks of big donor countries by announcing plans to set up its own development aid agency on the lines of USAID to disburse $11 billion in aid over the next five to seven years. If this wasn’t enough, India also decided to contribute $2 billion to the fund setup to fund bailouts of troubled Euro nations.

This paradox in India’s foreign aid policy has upset many analysts.

Writing in the Wall Street Journal’s blog, Rupa Dahejia questions the need for India to receive charity to build its roads when it can afford to splash money on Commonwealth Games, or for the World Bank to continue giving interest free loans to India when the money is more badly needed in the poorest nations of sub-Saharan Africa. The UK’s decision to extend aid to India was heavily criticized by its national media and politicians. Gerri Peev, writing for the Daily Mail, noted, “surely it is madness for us to be channeling precious funds to a country which… is the fourth largest economy in the world… and chooses to have prestige projects (nuclear and space programs) that are beyond our own means.”

Is India’s foreign aid policy really contradictory? Should India set its record straight, stop receiving outside development assistance and start financing its projects through its own money?  Perhaps not.

Even though India is amongst the world’s top emerging economies, over 40% of its population is still below the poverty line, far exceeding the number of poor in the entire sub-Saharan Africa region. In its 12th five year plan covering the period 2012 to 2017, the Planning Commission of India has outlined an investment need of $1 trillion in infrastructure. Undoubtedly, the government will face a tough challenge marshalling the resources to fund India’s development – social and economic – and will need to tap suitable external sources.

So the question boils down to this: What is the most efficient way for India to access global finance to fund its developmental needs? Against the popular perception, India receives very few grants or “free money”. Most of the development assistance channeled to India is in the form of long-term low interest loans.

It is true that unlike some countries, India has the option of raising funds directly from the capital markets by issuing sovereign bonds. However, India’s bonds do not receive the highest rating, and hence must pay a larger interest rate than bonds issued by the World Bank or ADB to raise funds that are eventually loaned out to borrowing countries. Simply put, it is cheaper for India to borrow from bilateral and multilateral donors than to raise funds directly. The difference in interest rates might not seem much, but adds up to significant amounts when the money being loaned runs into the tens of billions.

But what explains the fact that institutions like World Bank have steadily increased their loans to India, at the expense of funding other poor and more deprived nations?

The reality is that in today’s increasingly multi-polar world, countries tend to secure their interests through a complex web of bilateral relations and regional affiliations. Most multilateral institutions are battling to stay relevant, and see good reason in aligning themselves with countries like India that are fighting extreme poverty, yet have a significant say in shaping the future global economic order. Besides, with political turmoil in Africa and a deepening global economic crisis, India – with its excellent track record of debt repayment – is a more reliable borrower than other countries.

This leaves us with one final, and seemingly the most contradictory of India’s foreign aid policy decisions. If India is really serious about its development, shouldn’t it stop giving out vast amounts of aid to other countries, and use its scarce resources to fund its own road construction and anti-poverty programs?

India’s response here is better understood from the viewpoint of its national interest than a normative view of the country’s responsibility towards its citizens. Unlike the past, “bilateral aid” today is largely a political and diplomatic tool to advance the foreign policy interests of both aid-giving and aid-receiving nation. As India joins the league of the world’s top economies, it is eager to assert its dominance in the region and in the world. The world too sees a good trade partner in India, and is keen to have a counter-balance to the growing dominance of China. Hence it plays in.

Further, most critics who argue that India should spend all its money on internal development projects fail to acknowledge the biggest challenge that India faces – the sheer lack of capacity to implement large scale development projects. Earlier this year, in March 2011, India’s auditor general released an incriminating report which revealed that India is sitting on $2 billion worth of unused foreign aid for water supply and sanitation projects. In fact, during the period 2009-10, India ended up paying $16 million in fines to the World Bank and ADB for delay in utilisation of approved assistance.

“With such high foreign reserves and an open access to capital markets, surely India doesn’t need this money,” says Dr Arvind Panagariya, an economist and a professor at SIPA who teaches a course on Indian economy. Dr Panagariya is right. India doesn’t need this money, but it surely wants it. And the world has its own reasons to give it to India.