'Terror links', helping oust Communist govt, 'election funds': USAID, shut after 60 years, had a controversial history in India

The American aid agency USAID has shut down and merged its remaining operations under the State Department, 60 years after its founding. USAID's end on July 1 came after President Donald Trump raised questions about several of its activities and funding allotments, including one which he alleged was for 'voter turnout' in India. While it was later clarified that the funds were meant for Bangladesh, USAID's history in India was not without controversy. Created around the time of the Cold War, USAID was accused of helping oust elected Communist governments in India, working with the US intelligence agency CIA, and was even linked to funding groups associated with the Mumbai attack perpetrator, the Pakistan-based Lashkar-e-Taiba terror group. Here is a recap of the most controversial events associated with USAID in India.

USAID's development aid marred by controversies - The Kerala story

One of the earliest allegations against USAID in India was the political interference in Kerala in the 1957–59 period. The allegation was that the US used CIA and USAID to help destabilise the Communist government in Kerala. This was the first-ever elected Communist government in the world, led by chief minister EMS Namboodiripad. The political movement by the opposition and some community organisations to oust the Communist government was called ‘Vimochana Samaram’ in the local Malayalam language, meaning Liberation Struggle. In his 1978 memoir A Dangerous Place, the former US ambassador Daniel Patrick Moynihan admitted that the US had provided funds to the Indian National Congress to counter the Communist Party in Kerala and West Bengal.

While the Kerala events predated USAID’s formal establishment in 1961, it involved the United States Information Service, which is often linked to USAID in later narratives due to its role as a US aid agency.

The Vimochana Samaram protests eventually led to President's rule in Kerala, followed by elections in 1960, which were won by the Indian National Congress. Moynihan claimed in his book that the funds were paid directly to Congress leaders, though Indira Gandhi, the Congress leader and former Indian PM, denied receiving such funds.

USAID: What was the ‘election fund’ controversy?

In February this year, Trump alleged that some $21 million in grants were allocated for 'voter turnout' in India. It caused a political uproar in India, with USAID in focus. India’s ruling Bharatiya Janata Party (BJP) and opposition Congress engaged in a political row. BJP accused foreign-funded NGOs of undermining India’s sovereignty . The Congress alleged that the BJP benefited from such funds in the past. In its initial reactions, India’s foreign ministry called the allegations 'deeply troubling' and initiated investigations.
But Trump's claims were later found to be based on a misunderstanding, as he had misnamed the country for which the voter turnout funds were allocated. It was in fact, for Bangladesh, though it still amounts to interference in the affairs of another sovereign nation.

When USAID faced ‘anti-national’ NGO funding allegations

Over the years, BJP and several nationalist groups and their media outlets have been critics of USAID, accusing it of funding NGOs with political motives. This included the so-called Joshua Project that allegedly collected sensitive data, and the Organised Crime and Corruption Reporting Project (OCCRP), which targeted a top Indian businessman and alleged his links to the Indian Prime Minister, Narendra Modi, without proof. A group with links to USAID, Freedom House, was also under the lens of the BJP and nationalists, after it downgraded India’s democratic credentials. Such incidents fueled suspicion and allegations that USAID had an anti-national, political agenda in India.

The alleged Mumbai attacks terrorist group connection

Reports in a section of the Indian media had alleged that the USAID inadvertently funded a group associated with Lashkar-e-Taiba, the terror group behind the Mumbai attack of 2008. The group, Helping Hands for Relief and Development (HHRD), was ostensibly a Michigan-based charity organisation. According to allegations made at the time, USAID funded HHRD, which eventually went to Pakistan-based Falah-e-Insaniat Foundation (FIF), a front for LeT.

The espionage case of Rabinder Singh

The USAID was also linked to an espionage case in the early 2000s, though proof remains scant. Rabinder Singh, an Indian intelligence officer who defected to the US, allegedly passed classified documents to the CIA via a relative employed by USAID. This led to suspicions that USAID personnel could serve as conduits for intelligence activities. There is, however, no evidence of such systematic collaboration involving USAID.

USAID history in India

Active in India since the 1950s, USAID initially provided emergency food aid under the India Emergency Food Assistance Act of 1951. USAID was formally set office in India in 1961. In subsequent decades, it supported infrastructure, agriculture, health programmes, and economic reforms. For instance, more than $650 million was provided between 2010 and 2011 for health, education, and disaster relief. As per the USAID, these efforts helped advance India’s development, such as establishing the Indian Institute of Technology and supporting immunisation programmes.

Since he came to power, the Modi government tightened regulations on foreign-funded NGOs, several of them with links to USAID. Despite this, official records show appreciation for its development focus. Officially, India has acknowledged USAID's contributions in health, sanitation and renewable energy, with a 2023–24 finance ministry report detailing its seven projects worth $750 million.