USAID's New Partnership Sets the Stage for a Post Assistance Relationship with India

Over the next several years, foreign assistance is going to come under increasing pressure. Hard questions from taxpayers and elected officials are going to put a premium on innovation, effectiveness and resources leveraged/catalyzed. At the same time, this period of retrenchment provides the foreign policy and development communities to rethink US relations with middle income countries. "Graceful exits" from middle income countries are going to be the path of least political resistance and make sense if done correctly. As in the case of other "graduate" countries such as South Korea or Costa Rica, the United States is going to have on-going cooperation interests with middle income countries far beyond traditional government aid transfers using a traditional set of instruments and approaches such as a significant US Government staff presence in country (most often in the form of a US Agency for International Development (USAID) mission).

Sectors of cooperation interest with middle income countries include: entrepreneurship, science and technology joint research, enabling environment for civil society and local charitable giving, "graduates" as aid donors, and people to people exchanges. Strong "graduates" of USAID programs make for strong security and excellent US trade partners.

Sooner or later, India will stop receiving US foreign assistance. At the same time, India is a major strategic ally of the United States and maintaining vehicles to leverage Indian assets and Indian interests while allowing us to signal our commitment to US India relationship. At the same time, India's economic size and its ability to fund its own development make traditional US assistance program less tenable in the future.

Earlier this week, USAID and FICCI announced a new partnership to establish a "India-U.S. Innovation Partnership for Global Development" ("IPGD") which will seek to leverage Indian creativity, expertise, and resources to source and scale innovations being developed and tested in India with the potential to benefit vulnerable populations across India and the world. Each will put up $7.5 million for a total of $15 million and will seek to raise a total of $50 million (another $35 million) from the India private sector. Many of these innovations will be transferable to other developing countries and many of these innovations will have a commercial model to ensure scale and sustainability.

Q1: Why is this announcement important?

A1: First, new models of engagement need to be developed with India and this is a promising first step to rethink our cooperation interests with India further deepening the US-India relationship without the need for a large US assistance program.

Second, one of the big strategic cooperation opportunities with India is the successful development of "frugal innovations" and helping disseminate them to the world.

Q2: What are "Frugal Innovations"?

A2: India has been a leader in what has been called frugal innovations. Frugal innovations is a term to describe a process by which companies, non-profits, entrepreneurs and research institutions adapt products and services to meet the preferences, tastes and buying power of poorer consumers in developing countries. There are many examples in India and many large consumer companies have developed products and services to meet the needs of the India market. For example, ketchup sized sachets of shampoo for poor consumers who live in small living spaces. Other examples include rice husk water filter systems or bare bones EKGs for rural countryside contexts.

Q3: Why is Innovation in Development Important?

A3: IPGD seeks to take advantage of innovations because they are central to human progress by changing millions of lives at the fraction of the usual costs. Given the budget environment, it is smart to invest monies in ways that will ensure efficiencies and identify cheaper, easier ways to solve problems. For example, the Green Revolution came about as a result of research that was then disseminated widely in South Asia saving millions of lives. The presence of cell phones in developing countries has revolutionized societies and has created businesses, prosperity, connectivity for billions and offers an additional bulwark against dictatorships through text messaging and new ways to communicate. IPGD is modeled on USAID´s DIV program (Development Innovations Ventures) based in Washington. DIV and IPGD a long line of proposal around innovation in development. For example, the HELP Commission on International Development in 2007 called for a DARPA like vehicle to spur innovation. In many ways, DIV and IPGD respond to the call for new, proven, scalable technologies. Given India´s comparative advantage in development innovation, IPGD will help accelerate development innovation over the coming years.

Daniel Runde is William A. Schreyer Chair and Director of the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, DC.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Daniel F. Runde
Senior Vice President; William A. Schreyer Chair; Director, Project on Prosperity and Development