London, Feb. 5: Union finance minister Pranab Mukherjee has said India “does not require” British aid, describing it as “peanuts”.

Mukherjee and other Indian ministers tried to terminate Britain’s aid to their booming country last year but relented after the British begged them to keep taking the money, The Sunday Telegraph can reveal.

India is the world’s top recipient of British bilateral aid, even though its economy has been growing at up to 10 per cent a year and is projected to become bigger than Britain’s within a decade.

Last week, India rejected the British-built Typhoon jet as preferred candidate for a £6.3-billion warplane deal despite the development secretary Andrew Mitchell saying that Britain’s aid to Delhi was partly “about seeking to sell the Typhoon”.

Mukherjee’s remarks, previously unreported outside India, were made during question time in the Rajya Sabha last August.

“We do not require the aid,” he said, according to the official transcript of the session. “It is a peanut in our total development exercises (expenditure).” He said the Indian government wanted to “voluntarily” give it up.

According to a leaked memo, former foreign secretary Nirupama Rao proposed “not to avail (of) any further DFID (British) assistance with effect from 1st April 2011,” because of the “negative publicity of Indian poverty promoted by DFID”.

But officials at DFID, Britain’s Department for International Development, told the Indians that cancelling the programme would cause “grave political embarrassment” to Britain, according to sources in Delhi.

DFID has sent more than £1 billion of UK taxpayers’ money to India in the last five years and is planning to spend a further £600 million on Indian aid by 2015.

“They said that British ministers had spent political capital justifying the aid to their electorate,” one source said. “They said it would be highly embarrassing if the Centre then pulled the plug.”

Amid steep reductions in most British government spending, the National Health Service and aid have been the only two budgets protected from cuts.

Britain currently pays India around £280 million a year, six times the amount given by the second-largest bilateral donor, the US. Almost three-quarters of all foreign bilateral aid going to India comes from Britain. France, chosen as the favourite to land the warplane deal, gives around £19 million a year.

In India, meanwhile, government audit reports found £70 million had disappeared from one DFID-funded project alone.

Most aid donors to India have wound down their programmes as it has become officially a “middle-income country,” according to the World Bank.

India now gives out only slightly less in bilateral aid to other countries than it receives from western donors.

Supporters of British aid say that India still contains about a third of the world’s poor. DFID says its programmes — which are now focused on the country’s three poorest states — save at least 17,000 lives a year.

British junior development minister Alan Duncan said last week that cutting off British aid to India “would mean that hundreds of thousands, if not millions, of people, will die who otherwise could live”.

However, Mukherjee told Parliament foreign aid from all sources amounted to only 0.4 per cent of India’s gross domestic product. From its own resources, the Indian government has more than doubled spending on health and education since 2003.

Last year, it announced a 17 per cent rise in spending on anti-poverty programmes. Though massive inequalities remain, India has achieved substantial reductions in poverty, from 60 per cent to 42 per cent of the population in the last 30 years.

Emma Boon, campaign director of the TaxPayers’ Alliance, said: “It is incredible that ministers have defended the aid we send to India, insisting it is vital, when now we learn that even the Indian government doesn’t want it.”

As long ago as 2005, MPs on the international development select committee found that India “seems to have become increasingly tired of being cast in the role of aid recipient”. In their most recent report on the programme last year, they said that British aid to the country should “change fundamentally,” with different sources of funding. Mitchell last night defended British aid, saying: “Our completely revamped programme is in India’s and Britain’s national interest and is a small part of a much wider relationship between our two countries.… We will not be in India forever, but now is not the time to quit.”

In response to the media reports, the spokesperson of the Indian High Commission to the UK was quoted by the PTI as saying: “Yes, we have currently an aid programme with the UK. We are in ongoing consultation with the British government on the nature, future direction, priority and manner of disbursal (of the aid).”

DFID declined to comment.