In a sweeping overhaul of US foreign assistance programme, aid to India would be cut 35 per cent in 2008 as it has one of the best-performing economies in the world.
India's slice of aid was cut after it was labelled a "transforming" country instead of a "developing" one under a plan developed by Randall L Tobias, a corporate veteran handpicked by Secretary of State Condoleezza Rice to manage foreign assistance, the Washington Post reported.
"India is now taking a different place on the global stage, in terms of diplomacy, politics and economy," the report cited State Department spokesman Sean McCormack. "Aid programmes had not caught up with these evolving realities."
The bulk of the $23 billion in annual US foreign aid goes to a handful of key countries, leaving about 120 nations to battle over $3 billion of the pie. India, for example, is one of the big losers in Rice's foreign aid revolution.
India would now get a total of $81 million, down from around $125 million of previous years.
All US aid to assist India in education, women's rights, democracy and sanitation is terminated under the new system, the Post said.
One promising US-funded programme in India is QUEST, a partnership with tech firms such as Microsoft and Lucent aimed at teaching critical skills in Indian classrooms. With Washington promising about $2 million a year, QUEST expanded from 200 to 2,000 schools in one year.
But without a continued US contribution, the initiative probably will not survive, Aakash Sethi, the programme's executive director, told the daily in a telephone interview from his office in Bangalore.
He said he is mystified by the administration's plan to cut its funding as "This is their baby," Pakistan and Bangladesh are still labelled "developing" countries. Assistance to countries such as Nepal, Congo and the Philippines was also cut, while democracy programmes were reduced in Eastern Europe and Russia.
Tobias abruptly resigned last April as deputy secretary of state after he admitted receiving massages from women linked to an alleged prostitution ring -but not before he created a new system that aims to reshuffle billions of dollars in aid to better reflect the administration's priorities, it said.
Huge sums were devoted to administration priorities in Iraq, Afghanistan and Pakistan. Iraq's aid was boosted fivefold for 2008, while Afghanistan and Pakistan together will receive more than 85 percent of the $2.2 billion aid budget for 12 countries in South and Central Asia.
Rice's choice of Tobias-whom one lawmaker accused of "tycoonitis" for disregarding Congress-for a new post overseeing virtually all foreign aid controlled by the State Department was also criticised.
Tobias had previously overhauled US assistance to combat AIDS worldwide, and Rice wanted him to bring the same sensibility to remaking the full aid budget. Under Tobias's plan, foreign aid should meet corporate standards for measuring inputs, outputs and efficiency.
Under a detailed grid that Tobias developed, every country receiving aid is placed into one of five categories - such as "transforming countries" or "rebuilding countries" - and every aid programme has to help meet one of five objectives, such as building "peace and security" or "governing justly and democratically." Rice added "reducing widespread poverty" after nongovernmental groups protested.
"It shows how reducing poverty was not front and centre in their minds," Post cited Steve Radelet, senior fellow at the Centre for Global Development.