The surprise

A recipient

The change

The diplomacy

India announced a $1 billion line of credit (concessional loans) for the development of the resource-rich Far East region of Russia on Thursday. This came during Prime Minister Narendra Modi's visit to Russia for the 20th India-Russia annual summit with Russian President Putin and the fifth meeting of the Eastern Economic Forum.Extending development assistance is not new for India and about half of the foreign ministry's budget is made up of grants and loans to foreign governments, especially India’s neighbours. In fact, the amount of such loans has doubled in the last five years from $11 billion in 2013-14 to $28 billion in 2018-19. However, it has usually gone to countries in Asia, Africa and Latin America that are economically weaker than Russia.In the India-Russia context, India (currently ranked 5th in the world by GDP) has gone from being one of the major recipients of Russian aid, to now being a donor to the world's 12th largest economy.India survived on international aid to develop its industry and agriculture for a long time (starting 1956 when India’s foreign exchange reserves had collapsed and it needed money to fund the second Five Year Plan) till foreign investment began to flow in after the market reforms of the 1990s (around the time the USSR was breaking apart). India cornered about a quarter of the aid the USSR gave to developing countries.Several factors with global ramifications, both economic and political, have adversely affected the Russian economy in recent years. It has been struggling since 2014, weighed down by the international sanctions that followed the annexation of Crimea and the collapse in oil prices five years ago. The economy has grown just 2% in these years leading to a fall in disposable income of Russia’s workers while the taxes have gone up. The economy was one of the reasons behind the protests in Moscow this summer.And this is where India has stepped in, with a diplomatic tool the country has used to good effect in the recent past- soft loans. The term refers to money that seeks to fill a demand raised by the recipient country, made on very favourable terms.Soft loans have been important in sustaining political influence in the neighbourhood and beyond as well as to counter the growing Chinese presence, especially in Africa. The term refers to money that seeks to fill a demand raised by the recipient country. This is in contrast to the Chinese Belt and Road model which threatens to put many countries in a debt trap.The increase and decrease in grants also sometimes reflects the politics of the times. For instance, while the flow of funds to Nepal has been consistent, it went up for Maldives after the change in government last year.