Rephasing Global Development Finance

GS2 – International Relations

Context:

In light of a global aid crunch and rising geopolitical challenges, India is turning to Global South partnerships and Triangular Cooperation (TrC) to reshape international development finance.

Challenges in Development Financing

• Declining Official Aid:
  Global ODA is projected to fall sharply from $214 billion (2023) to $97 billion, a 45% drop.
• Sovereign Debt Crisis:
  Many low- and middle-income nations are facing debt stress, making loan-based aid risky.
• Rising Borrowing Costs:
  Global interest rate hikes have made development finance costlier and risk-prone.
• SDG Financing Gap:
  The shortfall for achieving SDGs has widened—from $2.5 trillion in 2015 to over $4 trillion in 2024.

Triangular Cooperation (TrC): A Strategic Alternative

• Definition:
  A collaborative model involving:
  1. A traditional donor (Global North)
  2. A pivotal partner (like India from the Global South)
  3. A recipient country (from the Global South)
• Core Objectives:
  Promote inclusive, locally driven development, and South-South solidarity.

India’s TrC Initiatives

• During G20 Presidency:
  India promoted TrC through multilateral platforms and bilateral projects.
• Key Projects:
  • India-Germany TrC across Africa and Latin America.
  • Global Innovation Partnership (GIP) with the UK.
  • Trilateral dialogues with the EU, France, Germany, and the US to explore grant-based and investment-driven aid.

Significance of TrC

• Bridges North-South Divide:
  Encourages equal partnerships rather than donor-recipient hierarchies.
• Scalable and Cost-efficient:
  Shared burden makes it economically viable and replicable.
• Addresses Social Infrastructure Gaps:
  Improves energy grids, education, healthcare, and digital inclusion.

Way Forward for India

1. Deepen TrC Engagements:
   Strengthen strategic ties with countries like Brazil, Japan, and Indonesia.
2. Emphasise Localised Development:
   Tailor projects to suit local needs and community priorities.
3. Balance Modalities:
   Align efforts with all five engagement modes under the Global Development Compact.
4. Institutionalise TrC:
   Build robust frameworks to implement, monitor, and evaluate development partnerships effectively.