Policy paper

UK–India development partnership summary, July 2023

Published 17 July 2023

Introduction

The Strategy for International Development (IDS) places development at the heart of the UK’s foreign policy. It sets out a new approach to development, anchored in patient, long-term partnerships tailored to the needs of the countries we work with, built on mutual accountability and transparency. This approach goes beyond aid and brings the combined power of the UK’s global economic, scientific, security and diplomatic strengths to our development partnerships. Our 4 priorities are to deliver honest, reliable investment, provide women and girls with the freedom they need to succeed, step up our life-saving humanitarian work, and take forward our work on climate change, nature and global health. The Integrated Review Refresh (IR23) reiterates that sustainable development is central to UK foreign policy and sets out how the UK will go further and faster on development to reduce poverty and reinvigorate progress towards the Sustainable Development Goals (SDGs). This Country Development Partnership Summary details how the IDS and IR23 will be put into practice with India.

Country context

India is the world’s most populous country and largest democracy. It has achieved high growth in recent years and is set to become the world’s third largest economy by 2050. India’s size, location, and growing economic weight gives it regional and global importance. It is increasingly realising its ambition to play a bigger international role. Its G20 Presidency in 2023 has a focus on development, and India is active in the UN process on climate change. Beyond this, India is looking to play a role in setting new international norms and rules in areas such as technology and cyber.

The Government of India (GoI) is committed to achieving the SDGs and has set the ambitious target of India being a high-income country by 2047. This will need sustained high levels of economic growth to raise incomes from the current average of $2,260 and finish the job on eliminating poverty, which is estimated to be around 10%. India is prioritising growth, especially through investing in infrastructure including digital. Growth will be crucial to generate the revenue to close critical development gaps such as in nutrition, to provide good public services, and to meet the aspirations of the young people entering the workforce each year. Broad-based development will also be important to address the significant differences between states and different groups. For example, girls in Rajasthan receive on average fewer than 5 years of schooling compared to nearly 11 years in Kerala.

The development choices India makes will have global and national consequences. A global Green Transition will be impossible without India, which is already the third largest emitter, and will be the second largest by 2030. India made ambitious commitments at COP26 in Glasgow, committing itself to becoming a low carbon economy, transitioning its energy supply, and achieving net zero by 2070. India is the 7th most vulnerable country to climate change (2019 Climate Risk Index Report). Shifting weather patterns, extreme heat, floods, and droughts will have significant impacts on agriculture and water for example, and these pose risks to India’s development gains.

Growth in India creates trade and economic opportunities for the UK – we support over half a million jobs in each other’s economies. The UK and India have a strong and growing trade relationship. The UK is negotiating a Free Trade Agreement (FTA) with India. India is forecast to be the fastest growing G20 economy this year and next, although growth is slowing and inflation rising because of the global effects of Russia’s illegal invasion of Ukraine, supply chain disruptions, and interest rate hikes in the US and Europe.

The British and Indian Prime Ministers agreed the 2030 Roadmap in May 2021 and elevated the relationship to a comprehensive strategic partnership between the UK and India. Comprising 5 pillars and more than 100 lines of activity, the scope of our shared Roadmap reflects the breadth of our relationship with India.

The 5 pillars are:

1. Connecting our countries and people

2. Trade and prosperity

3. Defence and security

4. Climate

5. Health

Our development work is important for achieving our objectives in several of these pillars.

The UK partners and invests with India in development to tackle some of the biggest challenges nationally, regionally, and globally, in line with the International Development Strategy. The focus of our development partnership is on supporting sustainable and inclusive growth and helping India make a transition to clean energy and tackle climate change. Our main instrument is investment in private sector, and we also deploy expertise to help India to improve development outcomes and mobilise high quality finance. Science, research, and technology are areas of strong collaboration, with UK partnering India on shared priorities. We are also collaborating with India to accelerate the SDGs in poorer countries, both through supporting the deployment of Indian development innovations and through our participation in Indian-led international climate initiatives, such as the Coalition for Disaster Resilient Infrastructure and the International Solar Alliance.

Why and how: UK’s investment and support

Most of the UK’s development assistance is invested through British International Investment (BII). BII’s portfolio in India is over US$2.2 billion. The major sectors are infrastructure, financial services, and healthcare. India is unique in also having a UK equity investment portfolio. To date £330 million of development capital has been committed to invest in smaller, newer Indian enterprises, alongside investment from Government of India or other Indian institutions. The aim is to help enterprises to grow and create jobs in ways that are sustainable and inclusive and get to the point where we can sell our stake and reinvest our finance.

We also provide some targeted support to government by funding technical expertise. For example, with the Ministry of Finance we are providing some expertise on their large-scale infrastructure programme; with the Ministry of New and Renewable Energy we are supporting India’s energy transition including the deployment of new renewables such as India’s first offshore wind initiative.

We support UK scientists, researchers, and innovators to partner with the best Indian science and research institutions to find breakthroughs that benefit the UK, India, and other countries in areas such as health, agriculture, and climate. During the COVID-19 pandemic, Oxford University, AstraZeneca, and the Serum Institute of India working together led to vaccines for over a billion people, saving lives and mitigating the spread of the pandemic globally.

The British Council is working to create opportunity, particularly for disadvantaged young people, through providing access to education and skills which will enhance their life chances. Their work including improving educational outcomes; creating partnerships between the UK and India research and innovation institutions to support investment; and promoting the arts and culture.

Who we work with

Investment into the private sector is the main bilateral instrument in India. BII is investing strategically in the sectors, geographies, and people where financial gaps are impending development and requirements are going unmet. On development capital, FCDO works with GoI and other Indian institutions to co-invest.

After BII, the UK’s core contributions to the World Bank Group and Asian Development Bank are the most sizeable of our Official Development Assistance (ODA) investments in India. Together they lend and invest approximately $7 billion a year, as well as providing expertise and analysis to help India achieve its development objectives. Recognising the need for more finance, particularly for climate change, the UK has provided a guarantee to the World Bank to enable it to lend India an additional $1 billion for green projects.

Our partnerships with government include the following Ministries: Finance; Power; New and Renewable Energy; Environment, Forests and Climate Change; External Affairs; Science and Technology. Other bilateral governments with significant development programmes and investments in India are Japan, the US, and Germany.

Key programmes

BII’s investments in India directly support over 500,000 jobs and the businesses they invested in paid over $500 million in taxes to the Government of India in 2021. Two examples of BII’s investments in India are:

• Ayana Renewable Power, which was funded in 2018 by BII to invest in clean energy, and
• Roserve Enviro, which provides end-to-end wastewater treatment and recycling solutions to industrial clients

This will accelerate the expansion of the market for water service companies and a lead to a corresponding increase in recycling rates.

Our next largest bilateral instrument is capital investment. The most sizeable is the Green Growth Equity Fund (GGEF) which works to catalyse private sector investments to infrastructure projects in India, addressing a key constraint to inclusive growth. The UK and Indian governments committed £120 million each, and the fund has since grown to $720 million. An example of a GGEF investment is Radiance Renewables Private Limited which develops, owns, and operates distributed renewable energy generation projects (rooftop, ground-mounted, behind the meter, and open access) to supply energy to Commercial & Industrial (‘C&I’) customers. C&I customers account for 51% of the total power consumed in India. Radiance’s target is to build a renewable energy generation platform that exceeds 2.5gw of energy by 2025.

The UK-India Tech Start-up Fund is a £38 million programme running from 2019 to 2032 which aims to improve the success of new start-ups in under-funded job-creating technology-driven enterprises. The funding is directed towards technology for climate action, agriculture, and health.

The Accelerating Smart Power and Renewable Energy Programme (ASPIRE) is an example of delivering expertise. ASPIRE contributes towards India’s low carbon energy transition through supporting the Ministry of Power and the Ministry of New and Renewable Energy to standardise policy and regulatory frameworks; to develop new, sustainable business models to encourage more investment; to introduce new and innovative technologies; and to build the capability of key stakeholders in the energy sector.

The UK and Indian Prime Ministers announced the Global Innovation Partnership in 2021 – a trilateral development initiative to accelerate the SDGs in Africa and the Indo-Pacific region. This is a single programme, match-funded and jointly designed and implemented, to foster, transfer, and scale up climate smart innovations from India to poorer countries, accelerating their development.

Our regional programmes also benefit India. The biggest programme is Climate Action for a Resilient Asia (CARA), which works across the Indo-Pacific region to build the resilience of economies and vulnerable communities to climate change, improve the natural environment, and promote low carbon growth. CARA’s work in partnership with India includes tackling regional air pollution, developing urban infrastructure such as public transport that is resilient to future climate shocks, delivering weather information and forecasting that is useful to farmers, and helping to protect the unique Sundarbans, the largest intact mangrove forest in the world.

Financial information

Initial allocations have been set internally to deliver the priorities set out in the International Development Strategy (May 2022) and the Integrated Review Refresh 2023, based on the FCDO’s Spending Review 2021 settlement.

The department’s spending plans for the period 2022 to 2023 to 2024 to 2025 have been revisited to ensure His Majesty’s Government continues to spend around 0.5% of Gross National Income (GNI) on ODA. This was in the context of the significant and unexpected costs incurred to support the people of Ukraine and Afghanistan escape oppression and conflict and find refuge in the UK, and others seeking asylum. The Government provided additional resources of £1 billion in 2022 to 2023 and £1.5 billion in 2023 to 2024 to help meet these unanticipated costs. The government remains committed to returning ODA spending to 0.7% of GNI when the fiscal situation allows, in line with the approach confirmed by the House of Commons in July 2021.

The country development partnership summaries include the breakdown of programme budgets allocated to individual countries for 2023 to 2024 and 2024 to 2025. These allocations are indicative and subject to revision as, by its nature, the department’s work is dynamic. Programme allocations are continually reviewed to respond to changing global needs, including humanitarian crises, fluctuations in GNI and other ODA allocation decisions.

It should be noted that these figures do not reflect the full range of UK ODA spending in these individual countries as they do not include spend delivered via core contributions to multilateral organisations, or regional programmes delivered by the FCDO’s central departments. Other UK government departments also spend a large amount of ODA overseas. Details of ODA spent by other UK government departments can be found in their annual report and accounts and the Statistics for International Development.

FCDO Official Development Assistance allocation

36% programmes are marked as principally or significantly focused on promoting gender equality, and 27% are marked as principally or significantly focused on disability inclusion.

Allocated ODA budget for financial year 2023 to 2024	Indicative ODA budget for financial year 2024 to 2025
Bilateral £38 million	Bilateral £57 million

Figure 1. Allocation by themes for financial year 2023 to 2024: climate and nature, 75%; British Investment Partnerships, 24%; global health, 1%