OVER the last decade, analysts have begun to draw attention to two parallel trends in post-1990 India’s foreign policy that might increase India’s influence abroad: the rise of India’s foreign aid giving, and the potential of India’s soft power. Some have drawn explicit connections between the two phenomena, arguing that foreign aid is an important instrument of India’s soft power.¹ While this is by no means a logically necessary or empirically evident connection, it is important to understand the conditions under which it might hold so that the next Indian government may design appropriate policies to better leverage its foreign aid programme for soft power purposes. In doing so, one must first understand what constitutes foreign aid and soft power respectively, and what the current state of play is with regard to India’s resources and achievements in these related domains.

Foreign aid is defined as economic flows to countries and multilateral institutions provided by official agencies, intended for the welfare of developing countries, and concessional in character, i.e. containing a grant component of at least 25%.² Foreign aid may be connected to, but is not the same as trade, investment, or other tools of economic diplomacy that do not fit the above definition. Soft power is defined as the ability of a state to get what it wants through attraction rather than coercion or payments.³ It is not the power to command others to obey one’s orders; nor is it the power to bribe or buy the support of others through economic inducements. Therefore, it grows neither out of military power nor economic weight in world affairs. Rather, it inheres in the attractiveness of a country’s culture, political ideals and domestic and foreign policies. In this sense, it can be a relatively inexpensive and efficient manner of generating influence in international affairs.

It should already be clear that foreign aid, being a form of economic inducement, does not straightforwardly produce soft power. It may do so when it brings others in contact with a country’s culture, institutions and policies; but even in this context influence depends on the country’s inherent attractiveness – foreign aid can only act as a material go-between a country’s image and part of its intended audience (i.e. the part that receives aid).

 

Conversely, soft power may or may not influence foreign aid giving. As a donor, a country may expect its soft power to attract other countries towards its foreign aid programmes, or perhaps to enhance the effectiveness of ongoing programmes by making recipients more open to using the aid appropriately and efficiently. However, soft power is a double-edged sword – the same qualities that might project a benign image to the world and hence induce other countries to accept one’s aid, may work against the donor when it comes to maintaining firmness regarding the utilization of the aid.⁴ Ultimately, it is not always clear when or how aid impacts soft power and vice versa.

Thorny as these questions are, there are some preliminary empirical questions one can ask that might help clarify the relationship between foreign aid and soft power in the Indian context. We can ask, for example: Is there a difference of opinion of among countries that receive Indian aid and countries that don’t? Is there something in the character of its aid that might make India more attractive to its recipients than other countries? More broadly, what does foreign aid buy for India in terms of influence, prestige, or other things a nation might value?

 

Although various agencies of the Indian government disburse foreign aid in some form or another, none is as generous or in control of the aid agenda as the Ministry of External Affairs (MEA). In 2012, the MEA’s foreign aid budget was just over US$ 1 billion,⁵ and the government established the Development Partnership Administration (DPA) within the MEA, a department with a five-year budget of US$ 15 billion designed to become the main institution in charge of foreign aid of all types. India’s aid giving is largely concentrated in South Asia, whose share in India’s aid budget has remained largely similar over the decades, standing at 89.7% in 2012 and 95.7% in 1966.

Since the early 1990s, India has expanded its aid giving to countries in Africa and Latin America, particularly through lines of credit provided by the Export-Import (Exim) Bank of India.⁶ A recent calculation shows that the share of African countries in lines of credit under the government’s Indian Development and Economic Assistance Scheme (IDEAS) administered by the Exim Bank increased from 32% in 2004 to 53% in 2011, while Asia remained at 42% in both periods. The same study found Sri Lanka, Ethiopia and Bangladesh to be the top three recipients respectively of operative Exim Bank lines of credit between 2005 and 2013,⁷ which suggests that South Asia remains prominent in this category of aid as well.

 

Many observers and analysts of Indian aid have argued that India’s aid giving has a unique character, in that it incorporates the best practices of India’s own successes in economic growth and democratic governance. Moreover, it is argued to be more flexible than the aid of traditional donors (the OECD countries), and more sensitive to recipient needs than the aid of emerging donors such as China, which takes a more mercantile approach.⁸ Claims of this type are misinformed at best. Indian aid, like that of other major donors, is frequently tied to the import of goods, services, and personnel from India.

For example, although the Exim Bank itself emphasizes ‘the objective of sharing India’s development experience’ and ‘creating socio-economic benefits in the partner country’ through lines of credit,⁹ the Ministry of Finance states that, ‘As a rule, goods and services for minimum 75% value of the contracts covered under these loans must be sourced from India.’¹⁰

A wider look at types of projects shows India sponsoring activities that are largely in its economic and strategic interest, i.e. not necessarily taking the developmental needs of recipient countries into account. Of the US$ 4.65 billion committed by India to developing countries in the period from 2005 to 2010, one-third was spent on energy generation and supply, 17.5% on transport and storage facilities, and 11% on ‘other commodity assistance’, largely the purchase of commodities from India.¹¹

 

In South Asia, India’s high value projects (above US$ 10 million each) fund a variety of infrastructure projects – primarily roads and railways – across almost all recipients, as well as projects in power generation, health, education, administrative support in the case of Bhutan and various civil society programmes and tourism development in the case of the Maldives. Connectivity being a major issue for Indian firms seeking markets in South Asian countries, the priorities of Indian aid in this region are unsurprising.

With a sense of the amount, distribution and nature of Indian aid, we can now investigate its soft power impacts. Measuring soft power is notoriously difficult given the subjectivity of individual perceptions, differences between individual perceptions and the perceptions of different levels of social aggregation from the household to the nation, and the empirical slipperiness of a concept such as ‘attraction’. Nonetheless, various analysts have relied on public opinion polls as one measure of a country’s attractiveness. Others have constructed elaborate indices of soft power based on a country’s quality of governance, business environment, tourism infrastructure, among others. On both counts, although India does not come off well in terms of global opinion and rankings, it does receive consistent support and approval from Sub-Saharan African and South Asian countries.

There are broadly two dimensions on which available public opinion surveys that include developing countries evaluate India: international influence, and the domestic performance of its leadership. With regard to international influence, in a global survey of more than 26,000 individuals across 24 countries in 2013, although worldwide only 33% of respondents rated India’s influence positively and 35% rated it negatively, the Sub-Saharan African countries in the sample (Nigeria, Ghana, Kenya) were mostly above average in their positive ratings and below average in their negative ratings of India.¹²

 

With regard to domestic performance, in a 2010 Gallup Poll across 110 countries, 44% of respondents worldwide did not know about the job performance of India’s leadership, while 27% disapproved of it. Again, however, among the 22 Sub-Saharan African countries in the sample, only 9% didn’t know and fully 46% approved (though 41% disapproved as well). The average approval rating was even higher, at 49%, among the three South Asian countries in the sample – Afghanistan, Sri Lanka and Bangladesh.¹³

Similarly, another Gallup Poll of Asian countries in 2010 showed people in Afghanistan, Nepal, Sri Lanka, and Bangladesh approving most highly of India’s leadership, with those in East and Southeast Asia largely ignorant or unwilling to comment.¹⁴ By and large, Sub-Saharan Africa and South Asia handily outstrip other countries and regions in their approval of India’s domestic leadership.

 

Aside from opinion polls, one can indirectly measure the attractiveness of a country’s culture and domestic institutions by considering the number of individuals who visit the country for education, immigration and tourism. The number of foreign students in India dipped considerably in the 1990s, going from over 13,000 in 1993 to just over 5,000 in 1998; it then rose to almost 22,000 in 2008.¹⁵ In terms of composition, between 2005 and 2008, most foreign students came from the Middle East and South Asia, and a small number of African countries.¹⁶ South Asia also dominates the sources of migration into India, with 98% of the 5.3 million migrants living in India in 2010 coming from neighbouring countries.¹⁷ India has done well in terms of tourism, increasing intake by 24% between 2007 and 2011; as one might expect, most tourists are from Europe, the Americas and East Asia. By and large, however, the stock of foreign students, migrants and tourists in India are low compared to other major countries. Moreover, India’s attractiveness does not extend beyond South Asia, Sub-Saharan Africa, and the Middle East.

 

These findings are a challenge for India’s soft power more broadly, particularly when one draws comparisons to the attractiveness of other major countries. For example, in a 2013 ranking of country brands in tourism, India came in 26th, down three places from the previous year and behind China, Turkey, Malaysia, Mexico, and Egypt.¹⁸ In a similar ranking of country brands for FDI (Foreign Direct Investment) potential, India ranked 10th, up five places from the previous year but still behind China and Brazil.¹⁹ India’s overall image in the world suffers from similar problems. A 2012 ranking of country brands based on a composite index of a country’s governance, investment climate, human capital, growth, sustainability and influence put India in 42nd place out of 118 countries.²⁰ The same report also listed a set of fifteen countries that showed future promise on the metrics listed above. India came in 13th on this list, behind countries such as Colombia, Thailand, Malaysia and Chile.

A relatively clear picture emerges from these measures of India’s soft power. India is largely unknown or unattractive to the people of many countries in the world, but this is certainly not the case in Sub-Saharan Africa and South Asia, which also happen to be the prime destinations for India’s foreign aid. What remains unclear is whether aid creates soft power or whether the prior existence of soft power in a relationship drives the aid allocation decision. In particular, it could be the reverse influence of the soft power of Sub-Saharan African and South Asian countries on India – a relationship of mutual attraction, as it were – that drives the latter’s aid decisions.

 

The evidence could also be the result of a variety of confounding factors that have nothing to do with foreign aid but produce soft power for India in these parts of the world nonetheless. Chief among these are India’s own cultural and institutional soft power resources which, according to various analysts, include India’s sports, music, art, film, literature, beauty pageantry, anti-colonial history, democratic institutions, free press, independent judiciary, vibrant civil society, multi-ethnic polity, secularism, pluralism, skilled English speaking workers, food, handicrafts, yoga, status as a responsible nuclear power, the rapid growth of the information technology sector in places such as Bangalore, and the existence of a large Indian diaspora in certain western countries.²¹ Although there appears to be little coherence in a laundry list this long, it is important to separate the putative effects of such assets on India’s attractiveness from the effects of foreign aid.

Despite these ambiguities, one can make a few clear observations about what foreign aid buys for India in terms of the overarching goal of both soft and hard power, which is influence over the decisions of other actors. First, although it may be the case that Indian aid or economic diplomacy more broadly fosters positive opinions (or soft power) among the publics of recipient countries, this goodwill would still need to translate into desirable policy outcomes, and the evidence for the latter is scant. In fact, many of India’s neighbours have frequently made major decisions in recent years that go against India’s interests, be it Bhutan’s overtures to China, the arbitrary behaviour of the Maldivian government towards Indian company GMR in the nationalization of the Male airport, the setting up of Chinese ports in strategic locations in Bangladesh and Sri Lanka, or the consistent strain of anti-Indian sentiment and policy emanating from Nepali politics. At critical moments, therefore, neither cash nor attraction has produced influence for India even in its own neighbourhood.

 

Second, aid by its very nature creates an adversarial relationship between donor and recipient. Although the vocabulary of Indian aid has softened over the decades since independence from ‘subsidies’ and ‘assistance’ to ‘cooperation’ and ‘partnership’, Indian aid is overwhelmingly given for Indian interests, chief among them being energy security and market access for Indian firms. Consequently, Indian aid becomes a lightning rod in neighbouring countries for nationalist claims about sovereignty violation, exploitation and domination. This results in a situation where the recipients of Indian aid may cognitively dissociate their attraction to India from Indian aid, seeing the former in a positive light but not the latter. Aid in this case therefore is unlikely to produce any foreign policy gains.

Finally, aid works best for producing influence when there is a direct and tight relationship of accountability between donor and recipient. This relationship is most often weakened by the existence of outside options, i.e. other sources of revenue for the recipient. For India, China has long been a powerful and rich outside option, providing generous amounts of aid to South Asian countries, especially the Himalayan kingdoms of Nepal and Bhutan. Presently, China’s so-called string of pearls strategy is predicated on aiding countries on the Indian periphery in developing commercial shipping facilities, with Beijing going as far as offering to develop Iran’s Chabahar port, which India has already undertaken to do. In such an environment Indian aid is unlikely to produce much influence even in the presence of soft power.

 

There are four policy changes that a new government might undertake to improve the currently loose linkages between India’s foreign aid programmes and its soft power among recipient countries. First, accepting that aid alone can rarely be effective in producing soft power, the MEA needs to better integrate its aid and public diplomacy departments. Public diplomacy aims to create direct relations between a government and the people of another country, with the intention of building long-term relationships and creating an enabling environment for the government’s foreign policies.²² In particular, aid programmes that bring recipients into contact with the positive, universal and liberal aspects of Indian culture and political values are likely to produce soft power in recipient countries. The Indian Technical and Economic Cooperation programme is particularly well suited to such integration.

Second, better and more targeted domestic investment in improving India’s attractiveness as a tourist and business destination would go a long way to increasing global influence. This is not just a matter of advertising campaigns, but real changes in the regulation of the hospitality industry, urban law and order, public infrastructure, licensing, and incentives for FDI. Third, a serious effort is required to collect systematic and reliable data on the implementation of Indian aid programmes abroad, and their impact on the perceptions of various actors in recipient countries, including programme beneficiaries, government officials, and the general public. Given that soft power operates at a psychological level, it is important to understand which types and aspects of foreign aid produce it, and how long these effects last. Information of this nature would be invaluable in designing future aid policies and priorities.

 

Finally, the aid giving administration needs to prioritize the creation of long-term relationships and value for both India and recipient countries. This means not placing too many conditions on aid, and not exerting excessive control on the process of disbursement and evaluation of projects. Although longer-term gains are by their nature more uncertain, aid money would be better invested in a manner that produces lasting effects and minimises the scope for opposition based on claims of nationalism or exploitation.

India’s aid programme has grown by leaps and bounds in recent years. So have claims about India’s soft power. The causal link between the two is nebulous, yet one does observe greater approval of India in countries where it focuses its aid activities. There remains much potential for integrating public diplomacy and foreign aid both conceptually and institutionally to produce a coherent policy that uses aid with the single-minded strategic purpose of getting other countries to view India favourably. Once this base is built, it can provide a platform for influence of the kind that has eluded India thus far.

 

Footnotes:

1. Rani D. Mullen and Sumit Ganguly, ‘The Rise of India’s Soft Power’, Foreign Policy, 8 May 2012.

2. Carol Lancaster, Transforming Foreign Aid: United States Assistance in the 21st Century. Institute for International Economics, Washington, DC, 2000, p. 9.

3. Joseph S. Nye, Soft Power: The Means to Success in World Politics. Public Affairs, New York, 2004.

4. In a different context, this point is made by Jacques E.C. Hymans, ‘India’s Soft Power and Vulnerability’, India Review 8(3), 2009, pp. 234-265.

5. Calculated from ‘Demand No. 32: Ministry of External Affairs’, Notes on Demands for Grants, 2013-14, Union Budget of the Government of India, 106. Dollar figure based on average weekly exchange rate for 2012.

6. Lines of credit are not strictly foreign aid because the intention behind them is to promote Indian exports rather than socioeconomic welfare abroad. Nonetheless, they are an increasingly important part of the government’s overall economic diplomacy tool kit, and the government itself frequently views Exim bank disbursements as part of foreign aid (Subhash Agrawal, ‘Emerging Donors in International Development Assistance: The India Case’, International Development Research Centre, 2007).

7. Rani D. Mullen, ‘The State of Indian Development Cooperation’, Centre for Policy Research, New Delhi, 2013.

8. Dweep Chanana, ‘India’s Transition to Global Donor: Limitations and Prospects’, Real Instituto Elcano (ARI), 2010, p. 3.

9. Export-Import Bank of India website, ‘Government of India supported Lines of Credit’, http://www.eximbankindia.in/?q=loc, accessed 17 November 2013.

10. Department of Economic Affairs, Ministry of Finance, ‘Terms and Conditions and Procedure to be adopted in respect of Government of India (GOI) Supported Exim Bank Lines of Credit (LoCs)’, F.No.21/6/2008-CIE-II, Government of India, 23 July 2010, p. 3.

11. Calculated using data collected by Michael J. Tierney, Daniel L. Nielson, Darren G. Hawkins, J. Timmons Roberts, Michael G. Findley, Ryan M. Powers, Bradley Parks, Sven E. Wilson and Robert L. Hicks. ‘More Dollars Than Sense: Refining Our Knowledge of Development Finance Using Aid Data’, World Development 39(11), 2011, pp. 1891-1906.

12. BBC World Service, ‘Views of China and India Slide While UK’s Ratings Climb: Global Poll’, 22 May 2013.

13. Julie Ray, ‘India’s Leadership Unknown to Much of World’, Gallup, 30 November 2010.

14. Cynthia English, ‘U.S. Leadership More Popular in Asia Than China’s, India’s’, Gallup, 5 November 2010.

15. Calculation based on data from www. indiastat.com and the Association of Indian Universities.

16. Calculation based on data from Project Atlas of the Institute for International Education.

17. Calculation based on data from the World Bank’s bilateral migration matrix.

18. Bloom Consulting Country Brand Ranking: Tourism Edition 2013.

19. Bloom Consulting Country Brand Ranking: Trade Edition 2013.

20. Future Brand Country Brand Index, 2012-2013.

21. Nicolas Blarel, ‘India’s Soft Power: From Potential to Reality?’IDEAS reports – special reports; Nicholas Kitchen (ed.), SR010, London School of Economics and Political Science; David M. Malone, ‘Soft Power in Indian Foreign Policy’, Economic and Political Weekly XLVI(36), 3 September 2011, pp. 35-39; Uma Purushothaman, ‘Shifting Perceptions of Power: Soft Power and India’s Foreign Policy’, Journal of Peace Studies 17(2-3), April-September 2010; Hymans, ‘India’s Soft Power’, op. cit., fn. 4; C. Raja Mohan, ‘Indian Diaspora and "Soft Power",’ The Hindu, 5 January 2003.

22. Nye, Soft Power, op. cit., p. 107.