Britain to curb £200m of financial aid to India by 2015

Britain to push for "trade not aid" based relationship with former colony.

LONDON: Britain's government said on Friday it will stop all aid to India in 2015 and slash its remaining handouts, bowing to domestic pressure over its foreign development budget at a time of austerity.

International Development Secretary Justine Greening said the move, which will save Britain around around £200 million ($320 million) from 2013 to 2015, recognises India's "changing place in the world".

Prime Minister David Cameron has faced growing opposition at home to the aid commitment to India, with commentators often pointing out that Britain's booming former colony is able to fund its own space programme.

International Development Minister Justine Greening said that after visiting India this week with Foreign Secretary William Hague, the relationship with India would now focus on "trade not aid."

"India is successfully developing and our own bilateral relationship has to keep up with 21st century India," Greening said.

"It's time to recognise India's changing place in the world."

As she made the announcement, British drinks group Diageo announced a $2 billion deal to buy up to 53.4 per cent of India's leading spirits maker, giving it a commanding presence in the world's biggest whisky market.

Conservative Cameron's coalition government is trying to save money as part of its efforts to reduce a record deficit.

British aid to India was reduced last year as part of the widespread austerity measures, but still committed London to spending £280 million a year until 2015.

Total spending between 2013 and 2015 will now be £200 million less than had been planned previously, although Britain would complete all of its aid programmes in India, Greening said.

The Department of International Development confirmed in a statement: "Justine Greening will not sign off any new programmes, and financial aid programmes to the country will end completely in 2015."

Cameron has rejected growing pressure from lawmakers in his centre-right party to scrap his pledge to spend 0.7 per cent of national income on overseas aid.

But while he has previously defended aid to India on the basis that tens of millions of Indians live in poverty, an end to the payments has been on the cards for sometime.

Britain was stung in February when New Delhi announced a big contract to buy French warplanes instead of the UK-backed Eurofighter Typhoon.

That came despite intense efforts to expand trade with India, with Cameron leading a huge business delegation to India in one of his first trips after taking office in 2010.

The same year however Britain suffered another snub when India's then-finance minister Pranab Mukherjee - now the president -reportedly dismissed the aid from Britain as a "peanut".

On Thursday, Indian Foreign Minister Salman Khurshid had signalled the country would soon stop receiving aid from Britain after holding talks with Hague.

"Aid is the past and trade is the future, so we are looking to the future," Khurshid told reporters in New Delhi after meetings with Hague.

"We discussed a lot of trade, investment and cooperation issues and I think that is how we see our relationship grow."

Aid groups however said the decision to cut the handouts was premature.

Phil Bloomer of Oxfam said the agency was concerned that completely withdrawing British aid to India by 2015 was "too hasty".

"Despite the fact India is a country of growing wealth it is also a hugely divided country with extreme levels of poverty and inequality. The scale of the challenge remains huge," he said.