Context

• India’s engagement with the Global South has witnessed a dynamic transformation over the past decade.
• The country has not only increased its financial commitment but has also diversified its modalities of development cooperation.
• However, the changing contours of global finance, worsened by a mounting debt crisis in the Global South and shrinking traditional aid flows, necessitate a strategic recalibration.
• Within this evolving framework, Triangular Cooperation (TrC) has emerged as a potent mechanism to augment and redefine India’s development outreach.

Rising Trends of India’s Development Cooperation and Shifting Financial Realities

• Rising Trends in Development Cooperation
  • India's development partnership with the Global South has grown both in scope and volume.
  • Between 2010-11 and 2023-24, India nearly doubled its development outflows from $3 billion to $7 billion.
  • These flows have been channelled through a variety of modalities, including capacity building programmes, technology transfer, and duty-free access to Indian markets.
  • However, the cornerstone of this engagement has been the Lines of Credit (LoCs) extended under the Indian Development and Economic Assistance Scheme (IDEAS).
  • LoCs have allowed India to support infrastructure and development projects in partner countries at concessional rates.
  • India borrowed from international capital markets and lent to partner nations at softer terms, absorbing the difference through state subsidies.
  • While effective in the past, this model is facing headwinds in the current global context of fiscal uncertainty and rising debt burdens.
• Shifting Financial Realities and the Debt Conundrum
  • The budgetary provisions for 2025-26 hint at a significant rethink.
  • The Finance Ministry has raised concerns about the continued viability of LoCs.
  • At multilateral forums such as the G-20, India has voiced apprehension over the ballooning sovereign debt across the Global South, signalling a cautious turn in its financial strategy.
  • This prudence is justified. The global financial environment has become increasingly volatile, making capital market borrowing less predictable and raising the risk of default among recipient countries.
  • Furthermore, traditional sources of development finance, especially Official Development Assistance (ODA), are witnessing a dramatic decline.
  • The total ODA is projected to fall from $214 billion in 2023 to $97 billion, a staggering 45% reduction.

India’s Proposal Towards a Balanced Modality Framework and Emergence of Triangular Cooperation

• India’s Proposal Towards a Balanced Modality Framework
  • In response, India is advocating for a more balanced and nuanced engagement
  • During the third Voice of Global South Summit (VoGS) in 2024, Prime Minister Narendra Modi proposed a Global Development Compact (GDC).
  • GDC is an integrated framework that harmonises five key modalities: capacity building, technology transfer, market access, grants, and concessional finance.
  • This reflects a strategic shift from over-reliance on LoCs toward a diversified model rooted in long-term sustainability, mutual growth, and risk-sharing.
  • To strengthen this approach, India is also focusing on forming wider and deeper partnerships, particularly those that can operate effectively in third countries.
• The Emergence of Triangular Cooperation (TrC)
  • One of the most promising frameworks in this new paradigm is Triangular Cooperation (TrC).
  • This model brings together a traditional donor from the Global North, a pivotal partner from the Global South (like India), and a recipient developing country.
  • The purpose is to co-create development solutions that are context-specific, cost-effective, and mutually beneficial.
  • TrC offers a distinct advantage by pooling resources, expertise, and best practices. While comprehensive data is still emerging, preliminary estimates suggest TrC projects are valued between $670 million and $1.1 billion.
  • Countries like Brazil, Indonesia, Japan, and Germany have already built a portfolio of successful TrC engagements, working collaboratively in regions such as Southeast Asia, Africa, and Latin America.

India’s Strategic Use of TrC

• India has actively embraced TrC as a vehicle for expanding its development diplomacy.
• A landmark moment came in 2022 with the signing of a Joint Declaration of Intent with Germany, aiming to implement TrC projects across Africa, Asia, and Latin America.
• Projects are now underway in countries such as Cameroon, Ghana, Malawi, and Peru, focusing on sectors like energy, education, and healthcare.
• These initiatives showcase how infrastructure investment can create ripple effects on social outcomes.
• Improved energy grids, for instance, boost digital connectivity and access to online education and health services.

Conclusion

• While LoCs have historically underpinned its engagement, changing financial realities, sovereign debt pressures, and a shifting aid landscape necessitate a strategic reset.
• The Global Development Compact and the embrace of Triangular Cooperation represent forward-looking solutions.
• By leveraging its diplomatic capital, technical know-how, and a collaborative ethos, India is well positioned to co-create a resilient and equitable development architecture, one that balances ambition with realism, and partnership with pragmatism.