
Explained | Will the freeze on USAID funding affect India?
India's growing economy may mitigate the impact of USAID's closure, as India has transitioned from being an aid recipient to a global development partner
In a radical decision in line with his "America First" policy, US President Donald Trump has ordered the closure of the US Agency for International Development (USAID).
According to Elon Musk, the Tesla CEO who is spearheading the newly-created Department of Government Efficiency (DOGE) in the US, the USAID was "a ball of worms" that had to be got rid of. "It's beyond repair," he said last week. Musk added that he discussed USAID in detail with President Trump, and "he agreed we should shut it down".
During a media briefing, when asked about USAID, Trump called the organisation "a group of radical left lunatics".
These remarks were followed by the administration’s decision to place two senior security officials at USAID on leave after they declined to hand over classified materials from restricted areas to Musk’s government inspection teams, according to a couple of US officials in a report by The Associated Press.
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What is USAID?
Established in 1961, USAID has been the primary US agency responsible for administering foreign aid. Its mission encompasses promoting democratic values and improving global living conditions. The agency has been involved in various sectors, including global health, education, economic development, and disaster assistance.
USAID's work in India
In recent years, USAID's financial assistance to India has seen a decline, reflecting India's economic growth and reduced reliance on foreign aid. In 2022, US foreign assistance obligations to India was approximately $117.7 million.
This funding supported various sectors, including health, education, and economic development. In 2023, USAID contributed $200 million to India's COVID-19 relief efforts. It is reported that India was supposed to receive $140 million during the current fiscal year.
According to media reports, USAID has directed its partners working in India to halt projects, saying "the recipient shall not resume work under this agreement until notification has been received in writing from the Agreement Officer (USAID) that this award suspension has been cancelled".
Overall, while USAID's contributions have been big, they constitute a small fraction of India's GDP, indicating the country's reduced dependence on foreign aid.
Implications for India
Yet, the closure of USAID could have several implications for India:
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Health Initiatives: USAID has funded numerous health programmes in India, such as HIV/AIDS prevention and maternal health initiatives. The cessation of funding may disrupt these services, potentially affecting vulnerable populations.
Educational programmes: Educational initiatives supported by USAID, particularly in rural and underserved areas, might face challenges due to the withdrawal of resources.
Economic development projects: Infrastructure and economic development projects backed by USAID could experience delays or cancellations, impacting regional development plans.
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Environmental and climate initiatives: Programmes aimed at environmental conservation and climate change mitigation may face setbacks due to funding gaps.
However, some experts believe that India's growing economy may mitigate the impact of USAID's closure. India has transitioned from being an aid recipient to a global development partner, reducing its reliance on foreign aid. An official from the Indian government, speaking on condition of anonymity, said, "India's development trajectory has reached a point where the impact of USAID's closure will be minimal."
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Bottom line
While the shutdown of USAID represents a massive shift in US foreign aid policy, its impact on India is expected to be limited due to the country's economic resilience and evolving role in global development.
Nonetheless, certain sectors, particularly health and education, may face challenges that require attention from both governmental and non-governmental stakeholders to ensure the continuity of essential services.