Modi has done the smart thing refusing UAE’s aid for Kerala. Stop the politics over it

Trees and houses partially submerged in floodwaters, Alappuzha, Kerala | Prashanth Vishwanathan/Bloomberg

The Modi government, however, would do well to dispel misgivings that it might let partisanship control its purse strings.

The ongoing public debate on whether India should accept foreign aid to help Kerala recover after the flood disaster reminds me of an incident that occurred in December 2004.

A couple of days after the devastating tsunami had ravaged India’s coastlines leaving hundreds of thousands displaced, I sought a meeting with Alok Prasad, India’s high commissioner to Singapore at that time. Several of my friends in the city-state were in the process of setting up collection points for relief materials, and I offered to help the high commission to use the internet to coordinate such efforts.

Prasad’s response angered me. He said it wouldn’t be necessary and that the high commission would not encourage the NRI community to send relief material. Instead, he suggested that I direct people to donate to the Prime Minister’s National Relief Fund (which, in the event, many of us did). I recall Indian banks waived the usual remittance charges for such contributions.

Towards the end of the meeting, I learned that the Manmohan Singh government was about to announce that India will decline all foreign aid to help the country tide through this unprecedented calamity.

I mention this episode to highlight my own mixed emotions at that time. On one hand, as a strong supporter of NDA finance minister Jaswant Singh’s proposal to stop receiving official foreign aid, it made me happy to see India boldly discard the tag of a needy nation. On the other, in the immediate aftermath of the massive tsunami, it didn’t seem right to refuse humanitarian assistance wherever it might come from.

What eventually swung the balance for me was the UPA government’s commitment to raise the resources internally, and disburse them as the situation demanded. What the Vajpayee government intended, the Manmohan government had fulfilled.

Rejecting foreign aid is not merely nationalist bravado. It has a solid basis in the political economy of public finance: if foreign donors pay for important things like poverty alleviation, public health, education and social welfare, the Indian government has additional funds available for spending on other things like running airlines or chronically loss-making public sector units, and giving wasteful subsidies.

It is only when budget constraints are stark that governments are forced to prioritise expenditure. In some ways, foreign aid is akin to financing the dope habit of irresponsible, profligate governments.

Things have moved since then, and India has been a net donor of foreign aid for some years now. According to government figures, India gave over Rs 7,700 crore in foreign aid, and received around Rs 2,200 crore from foreign countries and multilateral institutions. We give more than we receive.

What baffles the mind though is that we still accept foreign aid – not for emergencies and humanitarian relief, but for ongoing social programmes.

The argument that it is sensible to take aid in the form of loans with low cost of capital doesn’t really wash because if that were so, we might just as well accept donations that carry neither interest nor a requirement to repay. If there is an area to be totally self-reliant in, it is in the ability to finance basic human development.

Now, the distasteful politics of the times has muddied the waters around the Modi government’s decision to not accept the UAE government’s purported offer of Rs 700 crore in emergency assistance for Kerala.

Let me try and clarify matters so that we don’t make every future tragedy a political football.

It is in India’s interests to decline the UAE government’s offer. The Indian government has the financial wherewithal and ought to finance the recovery itself. I say this after acknowledging that the UAE and Kerala have a special relationship, and also that unlike development assistance, it is okay to accept humanitarian aid in emergencies.

India has come a long way from 2004, our international image is different, and we can be confidently open to foreign humanitarian aid. For Kerala, though, domestic resources are likely to be sufficient.

Having declined foreign assistance, the Union government must now ensure that it adequately provides for the recovery effort. The Modi government would do well to dispel misgivings that it might let partisanship control its purse strings.

Unfortunately, the numbers thrown around in the public discourse — damages worth Rs 20,000 crore, Rs 600 crore of Union assistance and so on — obfuscate the complex reality.

The capital assets damaged are both private and public, insured and uninsured, defunct and new. The livelihoods and ecosystem damaged could be temporary or permanent.

Above all these, there are opportunity costs. Some of these costs will be immediate, some incurred over the long-term. The truth is that we just do not know what the real cost of the disaster is. So it’s not a matter of cutting a cheque for Rs 20,000 crore and treating the matter as closed.

What is required is a co-operative and non-partisan Union-state relationship that ensures that each stage of the recovery and rebuilding is adequately funded over several years. It means jointly developed, detailed rebuilding plans that are discussed at the National Development Council, Finance Commission and other Union-state forums.

Partisans might care little beyond point-scoring for social media and television mileage, but patriots ought to ask if a narrative of antagonism will be helpful given the massive task of rebuilding that lies ahead.

Also, let’s not forget that the government is merely one player — albeit an important one — in Kerala’s recovery. Witness the diversity of private contributions from individuals, corporations and civil society groups that have swung into action. This includes NRIs, foreigners, foreign corporations and NGOs that have quickly stepped forward to help.

The fact that Indian government doesn’t accept aid from other governments doesn’t mean India and Indians do not accept help from their foreign well-wishers. Like that day in December 2004, I’m sure Prasad’s successors around the world today are advising concerned people on how best to channel their goodwill.

Nitin Pai is director of the Takshashila Institution, an independent centre for research and education in public policy.