Here’s why and how the Indian government should accept foreign aid

• Earlier this week, Prime Minister Narendra Modi politely refused a ₹7 billion donation from the United Arab Emirates for Kerala’s flood relief efforts.
  
• The central government’s decision has its origins in a policy set forth by the previous Congress administration in December 2004 to not accept funds for disaster relief.
  
• However, aid can be channeled from foreign entities through the foundation route.
  

There was a huge brouhaha earlier this week over whether or not the BJP-led central government should accept donations from foreign countries.

Prime Minister Narendra Modi’s decision to politely refuse a ₹7 billion donation from the United Arab Emirates, which is home to many Indians from the state of Kerala, drew criticism from many parts. Thomas Isaac, Kerala’s finance minister, said that the central government should stump up the same amount of money that it rejects from foreign countries.

The central government’s decision has its origins in a policy set forth by the previous Congress administration. In December 2004, Manmohan Singh, the former Prime Minister, rejected foreign aid in the aftermath of the Tsunami, something that had been common practice in almost every natural disaster on Indian soil up until that point. It was a declaration of India’s growing economic clout and significance on the world stage - something that had multipartisan consensus - as well a desire not to be diplomatically beholden to any country.

An ill-advised move

The move to reject foreign aid for disaster rehabilitation, however, is somewhat ill-advised. India should think less about its global image. The damage in Kerala, so far, is estimated to total ₹210 billion. Hundreds have died, tens of thousands of kilometres of highways have been destroyed, hundreds of thousands have been displaced from their homes and millions of hectares of agricultural land has been ravaged.

In response to the state government’s request for a modest ₹26 billion aid package, only ₹6 billion has been disbursed by the central government. India is currently in the throes of a multi-pronged financial muddle. A widening fiscal deficit, depleting foreign reserves, high oil prices, a depreciating currency and a ballooning debt burden are weighing on the economy. To put it simply, it needs all the help it can get. It isn’t the best time to rely on domestic resources.

And more importantly, this aid isn’t coming from the US’s and UK’s of the world. Its coming from Middle Eastern countries like UAE and Qatar, where millions of Keralans live and work.. It is the recognition of the efforts of the Indian diaspora.

The foundation route

There is, however, a way for India to accept foreign aid without directly violating its policy on foreign aid acceptance. Donations and aid from foreign entities can be channeled through foundations, which can then directly contribute to the Prime Minister’s and Chief Minister’s Relief Fund. While the Indian government does not accept donations for disaster relief, this restriction does not extend to funds for long-term rehabilitation - which is assessed on a case by case basis.

The government can also accept donations from NRIs and persons of Indian origin directly to the PMs and CMs relief fund. For example, a group of UAE-based NRIs pooled in $7 million for the relief programme in Kerala through the UAE President’s foundation - the Khalifa Bin Zayed Al Nahyan Foundation.

In times of disaster, every bit counts. Not only for immediate relief, but to put programmes in place for long-term development. Regardless of what the implications will be of looking like an aid taker, the Indian government should give its policy a rethink.