David Cameron was under intense pressure last night to slash the £1billion in aid Britain gives to India after the country said it no longer wanted the money.
India's finance minister Pranab Mukherjee said the booming country should 'voluntarily' give up the £280million a year it receives from Britain.
He told the Indian parliament: 'We do not require the aid. It is a peanut in our total development spending.'It also emerged that in a leaked memo dating from 2010 India's then foreign minister Nirupama Rao suggested India should not accept any further aid from Britain's Department for International Development because of the 'negative publicity of Indian poverty promoted by DFID'.
Sources in Delhi suggested British officials begged India to accept the aid. One commented: 'They said British ministers had spent political capital justifying the aid to their electorate.'They said it would be highly embarrassing if [India] pulled the plug.'
The revelations raised fresh questions last night for ministers who have been struggling to defend the Indian aid programme in the face of criticism from the public and Conservative MPs.
They also risk raising fresh questions about the Coalition's controversial decision to pour billions more into foreign aid at a time of deep spending cuts at home. Tory MP Philip Davies called for the Indian aid programme to be cancelled immediately.
Mr Davies said: 'India spends tens of billions on defence and hundreds of millions a year on a space programme – in those circumstances it would be unacceptable to give them aid even if they were begging us for it.
'Given that they don't even want it, it would be even more extraordinary if it were to be allowed to continue.
'There will be millions of hard-pressed families wondering why on earth the Government is wasting money in this way.'
Fellow Tory Douglas Carswell said: 'This is concrete proof that Britain's aid programme is run in the interests of Whitehall officials and the DFID machine.
'The fact is that India's economy is growing much faster than our own. We should be encouraging free trade with them and trying to learn from them rather than handing out patronising lectures.'
Tory MP Peter Bone urged ministers to abandon the 'vanity project' of pursuing a target to hand out 0.7 per cent of the UK's entire national income in aid.
He said: 'India has its own foreign aid programme so it is absurd for us to be still giving them aid. They are more than capable of looking after their own issues.
'As for the 0.7 per cent target, it is a vanity project that is being pursued for no good reason at all. I do not understand the Government's position on this and I don't think the British public do either.'
Some critics in India have also questioned the value of the aid, warning that much of it is lost to corruption and bureaucracy.
As recently as 2010 the country was the biggest net recipient of British aid, receiving £421million.
Despite India's rapid economic development the International Development Secretary Andrew Mitchell decided last year to approve a further £1.1billion in aid over the next four years.
The timing of the latest revelations is particularly embarrassing for ministers, coming in the wake of India's decision last week to reject the British-built Typhoon fighter jet as preferred candidate for a £13billion defence deal.
Mr Mitchell said last year that the continuing aid programme was partly 'about seeking to sell Typhoon'.India has named the cheaper but less capable French-built Rafale as its preferred option.
Supporters of Britain's aid programme to India point out that, despite rapid economic development, the country remains home to about a third of the world's poor.
DFID claims that its programme saves 17,000 lives a year. International development minister Alan Duncan said last week that scrapping the aid programme 'would mean that hundreds of thousands, if not millions, of people will die who otherwise could live'.
Last week it emerged that plans to enshrine the 0.7 per cent aid target in law have been delayed because of fears of a public outcry.
International Development Secretary Andrew Mitchell said: 'India itself has got 60 million children into school in recent years with their own money but more than 30 per cent of the world's poorest people live there.
'There are states the size of Britain where half of all children suffer from malnutrition. We will not be in India for ever but now is not the time to quit.
'Our completely revamped programme is in Indian's and Britain's national interest and is a small part of a much wider relationship between out two countries.
'We are changing out approach to India. We will target aid at three of India's poorest states, rather than central Government. We will invest more in the private sector, with our aid programme having some of the characteristics of a sovereign wealth fund.'
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