Amid rising geopolitical complexities, the traditional flow of global development finance is facing a significant decline. There is an urgent need for a collective, strategic effort to rethink and repurpose development finance, ensuring it remains relevant, responsive, and impactful.

About Global Development Finance

• Global Development Finance involves the mobilization of financial resources from various international institutions and donor countries to support development projects, such as infrastructure, education, healthcare, and climate change mitigation.
• The need for such financial resources is increasing due to the global challenges such as poverty, inequality, and climate change.
  • As per UN, to achieve the 2030 SDGs, over 4 trillion dollars are needed to close the global financing gap
• There are several global development finance initiatives that have emerged to address these needs.
  • For instance, the Official Development Assistance (ODA) provided by OECD countries has historically been a major source of development funding.

Global Development Finance Initiatives

India’s Contribution to Global Financing

India, as a rapidly growing global player, has significantly contributed to the development finance landscape, especially in the Global South. Here are five key ways in which India has engaged in global financing:

• Indian Technical and Economic Cooperation (ITEC): Launched in 1964, this flagship program provides training and technical expertise to personnel from developing countries, helping them enhance their human capital.
• India-UN Development Partnership Fund: This fund, in partnership with the United Nations, supports projects in developing countries across sectors such as healthcare, education, and climate change, promoting sustainable development.
• Lines of Credit (LoC): Under the India Development and Economic Assistance Scheme (IDEAS), India has extended concessional loans to developing nations, primarily in Asia, Africa, and Latin America
  • India has offered over 300 Lines of Credit (LOCs) worth approximately US$ 32 billion to 68 countries.
• South-South Cooperation: India advocates for collaboration and knowledge-sharing among developing countries. By promoting South-South cooperation, India focuses on mutual benefit and non-conditionality in development partnerships.
  • India’s aid to the Global South has grown from $3 billion in 2010–11 to $7 billion in 2023–24, mainly through lines of credit under IDEAS , along with capacity building, tech transfer, and duty-free access.
• Climate Finance Advocacy: India has consistently called for increased climate finance to help developing countries tackle climate change.
  • This is reflected in its support for the New Collective Quantified Goal (NCQG) on climate finance, aimed at ensuring sufficient funds for mitigation and adaptation projects.
    

Challenges of Global Development Finance

Despite the significant strides made by countries like India in global development finance, several challenges persist:

• Shrinking Official Development Assistance (ODA): Traditional ODA sources, primarily from Western countries, are facing budgetary constraints due to factors like collapse of United States Agency for International Development (USAID) and decline of the Foreign, Commonwealth and Development Office (FCDO).
  • The ODA level, which stood at approximately $214 billion in 2023, is projected to decline sharply to around $97 billion, indicating a near 45% reduction.
• Rising Sovereign Debt: Many countries in the Global South are grappling with rising sovereign debt levels, making it difficult for them to service existing loans and access new financing.
• Geopolitical Instability: Geopolitical tensions have affected the predictability and flow of global development finance.
  • The ongoing crisis in Ukraine and the shifting global power dynamics are creating an uncertain financial environment.
• High Costs of Development Aid: Western aid often comes with high consultancy fees and administrative costs, which can consume a significant portion of the allocated funds, reducing their impact.
• Increased Borrowing Costs: As global liquidity tightens, borrowing costs have risen, making it more expensive for developing countries to access capital for development projects.
  

Measures to Rephase Global Development Finance

To address the challenges of global development finance, several measures can be taken, and India has already been a key player in implementing these strategies:

• Enhancing Multilateral Cooperation: Strengthening multilateral institutions such as the World Bank, UNDP, and regional development banks to pool resources and coordinate financing efforts will ensure better resource allocation and focus on collective global development goals.
  • Expanding partnerships among emerging economies, including India, Brazil, and China, to play a more significant role in financing development projects in the Global South.
• Triangular Cooperation (TrC): A collaborative model involving Global North donors, Global South pivotal countries, and recipient countries can bridge the resource gap.
• • For instance, Germany and India have signed joint declarations for TrC projects, focusing on Africa, Asia, and Latin America.
  • This mechanism ensures that development projects are tailored to local needs while promoting shared learning and mutual respect.
• Refocusing on Lines of Credit (LoC): Given the current financial climate, India must re-evaluate the LoC model, which offers concessional loans to partner countries.
  • With rising debt risks, India should focus on more sustainable financing solutions, leveraging its strong economic position to support development without overburdening recipient nations.
• Increased Funding for Capacity Building: Programs like ITEC are critical to empowering developing nations.
  • Expanding such initiatives can help countries build local capacities, reduce dependency, and foster self-sustaining development models.
• Promoting Debt Restructuring Initiatives: At the G-20, India expressed serious concerns over rising sovereign debt levels across the Global South.
  • Moving forward, India advocates for global debt restructuring mechanisms to help nations manage their financial burdens without stalling development.
• Blended Finance: Combining concessional funding with private sector investment can mitigate risks and stimulate large-scale funding for development projects, particularly in energy infrastructure, health, and education sectors.
• Enhanced Private Sector Engagement: Public-private partnerships (PPPs) can play a crucial role in financing development projects, especially in infrastructure and climate action.
  • India should focus on fostering collaboration between government agencies, private enterprises, and multilateral financial institutions.
• Leveraging Digital Platforms for Development: Digital platforms can offer cost-effective solutions to development challenges.
  • India should explore digital development tools and technologies, especially in sectors like education, healthcare, and governance, to promote inclusive growth in partner countries.
• Expansion of the GDC : Building on the concept articulated by Prime Minister Modi at the Voice of Global South Summit (VoGS), India should work towards the expansion of the Global Development Compact (GDC).
  • GDC emphasizes a balance between five modalities of engagement, including grants, technology transfer, market access,  concessional finance, and capacity building.
    

Conclusion

India has transitioned from aid recipient to key global development partner, championing mutual benefit, non-conditionality, and demand-driven aid. Through triangular cooperation, reformed credit lines, and capacity building, India drives inclusive, sustainable, and cooperative global development finance. 

DOWNLOAD PDF