Rephasing global development finance

General Studies Paper-2

Context: India’s development cooperation with the Global South has been showing a rising trend for the last several years.

India’s development cooperation with the Global South

• India has emerged as a key advocate for the Global South, leveraging its democratic credentials and economic growth.
• Historically, it played a leading role in The 1955 Bandung Conference, advocating decolonization and equality.
  • The formation of the Non-Aligned Movement (NAM) in 1961.
  • Establishing the G-77 in 1964 to promote South-South cooperation.
• India continues this legacy through initiatives like Proposing African Union’s inclusion in G20, which was accepted at the 2023 Delhi Summit.
• India’s development cooperation with the Global South has grown significantly, with funding nearly doubling from $3 billion in 2010-11 to $7 billion in 2023-24.
  • Key engagement methods include capacity building, technology transfer, market access, grants, and concessional finance, particularly through Lines of Credit (LoCs) under the IDEAS scheme.

Challenges

• The Global South faces challenges like food insecurity, poor health infrastructure, debt, conflict, and lack of fair representation in global policymaking.
• With rising global debt concerns and liquidity crises, India is re-evaluating the role of LoCs due to increased risks and costs.
• Traditional development assistance providers (ODA) are facing budget cuts and a shrinking aid environment, with a steep decline in global aid expected from $214 billion in 2023 to around $97 billion.
• This reduction threatens progress towards Sustainable Development Goals (SDGs), which require over $4 trillion annually by 2024, amid costlier and less predictable borrowing.

Alternatives

• Triangular Cooperation (TrC)—a partnership model involving a Global North donor, a Global South pivotal country, and a third partner country—offers a promising alternative.
• Countries like Japan, Germany, Indonesia, and Brazil have successfully implemented TrC projects, promoting shared learning and tailored solutions.
• India and Germany have initiated TrC projects in Africa and Latin America, supported further by collaborations with the US, UK, EU, and France during India’s G-20 presidency.
• These partnerships demonstrate how combining technical, financial, and human resources in TrC can effectively re-phase global development finance to achieve impactful, cost-effective results in the Global South.

Suggestions and Way Ahead

• India’s approach is rooted in its vision of inclusive development—“Sabka Saath, Sabka Vikas” and “Vasudhaiva Kutumbakam” (One Earth, One Family, One Future)—emphasizing partnership, empowerment, and shared growth for a sustainable future.
• India can help shape a more inclusive and resilient global order amid rising global inequalities and weakening development finance