The government will not be making any fresh commitments of aid to India and all donations will cease altogether by 2015, the international development secretary confirmed today.
At present the UK gives £280 million a year to India, despite that fact that India itself gives away more than that in aid to other nations and is expected to see economic growth this year of over five per cent.
The announcement came after a visit by development secretary Justine Greening to the country earlier this week. She confirmed that the government's programme will now focus on developing skills rather than handing out aid.
"Having visited India I have seen first-hand the tremendous progress being made. India is successfully developing and our own bilateral relationship has to keep up with 21st century India. It's time to recognise India’s changing place in the world," she said.
"It is of course critical that we fulfil all the commitments we have already made and that we continue with those short-term projects already underway which are an important part of the UK and government of India's development programme."
It is expected that the winding down of aid commitments to the country will save around £200 million between now and 2015.
But the move has been criticised by Save the Children's Kitty Aire.
"Despite India’s impressive economic progress, 1.6 million children died in India last year - a quarter of all global child deaths," she said.
"We agree that in the longer term, aid to India should be phased out as the country continues to develop, but we believe that the poorest children will need our ongoing help, and to cut bilateral aid in 2015 is premature."
However, the government does not intend to move from its commitment to giving 0.7% of GDP away in aid to poorer nations, despite pressure from some Conservatives.
It signals a sharp change in policy towards India. As recently as three months ago the then international development secretary Andrew Mitchell reiterated the country's commitment to spending money there.
On August 15th he said:"The Indian government has made great progress on tackling poverty but there is still huge need."
Many MPs from both sides of the House have suggested that it is wrong that the UK should have been giving money to a country which is spending hundreds of millions on a space programme.
And there was also anger earlier this year when the Indian government decided to order a fresh batch of fighter jets from French firm Dassault, rather than British manufacturer BAE, in a deal worth $10 billion.