There are strong arguments for reforming how the UK provides aid to India and for reducing the amount over time. But stopping it altogether within three years is too drastic a move

Does a country with a space programme and an international development budget of its own really need British aid?

India is one of the fastest growing economies in the world and is home to a large and increasingly prosperous middle class and many successful international businesses. This side of India’s story was no doubt on the mind of the UK’s international development secretary Justine Greening when she announced in November that all British aid to India would stop by 2015.

But there is another side to the story. India has among its population one-third of the world’s poor (more than all of sub-Saharan Africa combined).  Currently 37% of its population live on less than $1.25 per day.  And its position on the Human Development Index has fallen, with progress on issues such as child mortality, hunger and corruption stalling.

This is why the Institute for Public Policy Research, in a new paper called  In Aid of India?, questions the idea that India has outgrown Britain’s help altogether.

Of course, giving aid to any country, never mind one like India, is a hard political sell at a time of austerity at home.  We should therefore applaud the Coalition’s ring-fencing of the Labour-set development budget even when opinion polls and Conservative backbench sentiment is hostile.

One can understand why Greening felt under pressure to do something about aid to India.  There are strong arguments for reforming how aid is spent and reducing the amount over time. But stopping aid altogether within three years is too drastic.

Instead, this government – and future governments – need a clear and imaginative exit strategy, which refocuses help on the areas of greatest need and gradually runs the aid budget down while other development projects are built up.  Exit must be based on development need and not political calculation.

One aspect of this strategy could be leveraging of the massive and growing amount of private remittances that flow from the UK to the sub-continent. In 2010, remittances amounted to some £2.5bn, ten times the size of the Department for International Development’s annual budget for India.

The weakness of remittances is that they are often used for private consumption.  But imagine if just 10% of the total sum were channelled through mutual funds for development purposes.  This would make a huge difference and would offset the ending of the DfID programme completely.

Another aspect of a reforming aid to India could be support for more projects that partner with the country’s burgeoning private sector. Despite high-profile trade missions and other initiatives, UK investors are still not taking full advantage of the opportunities that the Indian market offers – and this includes projects that would have a development dimension.

Looking at more traditional development projects, the focus of UK aid should shift more heavily to areas like health, HIV and good governance in the poorest states that are not changing despite India’s growth.

India is a paradox: a rich country, but with a huge population of poor people. In this context, cutting and running is a crude response. The UK should be looking to scale down its aid spending in India over a longer time frame, and in the meantime reshape the way it gives help to India’s poorest.

Tessa Evans is a researcher at the IPPR