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by Sue Reid

Last updated at 1:09 AM on 2nd December 2011

At the Rolls-Royce showroom, behind imposing iron gates off dusty Ashoka Road, the chief salesman is pleased with his latest sale of a ?600,000 Phantom to a billionaire Delhi businessman.

Thirty-five Phantoms, the biggest and most expensive Rolls-Royce, have been bought in India already in 2011. by the end of the year, another 35 will be sold to Indian tycoons and Bollywood film stars.

‘There’s always someone here with enough cash to buy a Rolls-Royce, even though the import tax doubles the price,’ the sharp-suited salesman says with pride.

Wealth: Thirty-five Rolls-Royce Phantoms have been bought in India already in 2011

Ferrari, Aston Martin and Land Rover have each opened up showrooms here. on sale too is the king of supercars, the Bugatti Veyron, with an eye-watering price tag of almost three million pounds.

The country is racing up the league of rich nations. indeed, its soaring economy will outstrip the UK’s by 2022. according to financial advisers Merrill Lynch, India has 153,000 dollar-millionaires — a 20 per cent rise in a year, compared with Britain’s own paltry increase of less than 1 per cent.

Indians have squirrelled away more money in Swiss bank accounts (a total of ?900 billion since independence from Britain in 1947) than the rest of the world combined.

And when they were invited recently by the Indian Government to exchange for paper money the gold bars and jewellery stashed in their homes (so pumping cash into the national economy), a horde of ?160 billion was offered up.

Such is the economic power of India that it now gives out more foreign aid than it receives, and has handed over ?3.5 billion to cement relations with impoverished Africa.

Meanwhile, it invests huge sums in ambitious projects: ?2 billion will put the first Indian astronauts into space by 2016, and the annual defence budget tops ?22 billion, with a third aircraft carrier now under construction in an Indian shipyard.

Perhaps the perfect example of the garish spending of India’s newly-rich is the ?2 billion, 27-storey skyscraper in Mumbai built by a local industrialist as a home for his wife and three children. It is the most expensive house anywhere in the world.

But if this is a nation with enormous reserves of wealth, it is also blighted by widespread and endemic corruption at every level of society.

An official report has revealed that 90 per cent of government officials have accepted a bribe for favours, from ripping up a speeding fine to rubber-stamping a building deal. Corruption, as the Indian prime minister confessed the other day, is as much a national sport as cricket.

No wonder that in broke Britain questions are at last being asked about why we are handing billions to India in aid. A new report from an independent watchdog says that the rapid expansion of the UK’s aid programme has left taxpayers’ money at risk from corruption and fraud overseas.

The Independent Commission for Aid Impact (ICAI) this week criticised the work of the British government department that doles out the money as ‘fragmented’ and in need of ‘significant improvement’ to stop millions being squandered.

It also demanded anti-corruption measures to protect funds sent to countries — such as India — where there is a high risk of fraud.

International Development Secretary Andrew Mitchell has committed Britain to spending ?29billion in aid between 2012 and 2015

They are concerning findings, given that David Cameron has decided to give India ?1.4 billion between now and 2015. The sum is almost 1 per cent of Britain’s own ?159 billion debts.

So do we need to re-think our aid profligacy, especially in light of the shockingly grim economic forecast announced by Chancellor George Osborne this week? Despite the fact that Osborne has extended his austerity programme in Britain — which includes cuts to welfare payments and housing benefits — beyond the next election, David Cameron doesn’t seem to think so.

The Government is trimming just ?1.164 billion off the aid budget over the next three years, meaning we are still committed to spending more than ?29 billion on overseas aid between next April and April 2015.

Earlier this week the Government announced that ?330 million of taxpayers cash will be poured into Africa to help them with climate change, funding solar panels and investment in low-carbon transport. A few months ago, he made a speech during a trade visit to Africa admitting that foreign aid has been ‘wasted’, but that it was still imperative for us to shell out more.

But does India really need our funds, and, perhaps more pertinently, what’s happening to it when it gets there?

During my inquiries in India, I discovered that much of our money is frittered away or stolen.

Rajiv Gandhi, India’s former prime minister, estimated a few years ago that only 15 per cent of funds given to the country’s welfare schemes, whether financed by foreign or Indian aid, reach the poor people they are meant to help.

His views were endorsed by Barun Mitra, director of a Delhi-based think-tank, the Liberty Institute, who told me: ‘I am surprised that Department For International Development [DFID] officials work so hard to continue their presence in India. is it really to help some of the poorest Indians, or is it to justify their own existence?

‘Apart from wastage, which is hardly a surprise in India, there seems to be little effort to assess how the money is spent.’

A growing group of ‘aid-sceptics’ go much further. One leading economist and expert on the Third World, Zambian-born Dambisa Moyo, says that aid has made the poor poorer. ‘Aid has been, and continues to be, an unmitigated political, economic and humanitarian disaster for most parts of the developing world,’ she warns.

So are we helping at all? I spoke to politicians, officials, teachers, doctors and parents in four regions of India where the British government’s DFID runs education and health programmes.

The very first primary school I went to — opened this summer in Bhopal, the capital of Madhya Pradesh state in central India — was half empty of pupils.

The government primary school in Rahul Nagar slum in Bhopal, funded by British aid money. It has no desks or chairs

It had not one desk or chair because they had never been delivered and are presumed stolen from the factory where they were made or from the lorries taking them to school.

The children sat on the concrete floor, which was riddled with holes because the builders had put too much sand into the concrete mix so they could, I was told, sell off the spare concrete.

Officials admit that ?70 million of the ?388 million given by Britain towards a national flagship education programme called Sarva Shiksha Abbiyan (‘education for all’), which promises free classes for every child from the age of six to 14, has been squandered though widespread corruption and theft.

Standards of writing, reading and arithmetic are down since the education programme began. Half of ten-year-olds cannot read a sentence, and only a third can perform a simple sum. Meanwhile, teachers in a quarter of primary schools are routinely absent because they take part-time jobs outside school to compensate for low pay.

In another scandal, India’s auditor-general discovered ?14 million of DFID aid had simply been snaffled by Indian officials and never reached schools.

Education chiefs used the money to buy themselves cars. an estimated 8,000 colour TVs bought for schools never arrived. in any case, many would never have worked because few of the classrooms have electricity. What’s more, tens of thousands of pounds were ‘allocated’ to schools that don’t even exist.

As a result, even poor parents scrimp to send their children to private schools to escape the government-run ones which receive British aid. A recent report by Indian vice-president Shri Hamid Ansari revealed that British taxpayers’ money spent on education has been wasted. ‘Close scrutiny reveals a sobering truth, that this large investment has been spent poorly,’ he said bluntly.

Certainly, many Indians I met scoffed at DFID’s boast that: ‘because a third of the world’s poor people live in India, this has been our largest programme for more than a decade. It is our bold ambition to give every mother the healthcare she needs to give birth in safety and raise a healthy child who has a chance to learn.’

In a country with such deep-rooted poverty (despite the inexorable rise of the rich) that is a mountain to climb.

Indian cities are riddled with slums and there are 500 in Bhopal alone. Thousands of families — even those from the middle classes — live in squalor. Sewage runs down the muddy streets lined with shacks made of corrugated iron with no front doors.

It was in one such slum — Rahul Nagar — that I found the new primary school with no furniture. on the walls were posters of the English alphabet and nursery rhymes. on a Tuesday morning, only 170 of the children on the roll of 350 turned up. in the class for eight and nine-year-olds there were 21 children instead of the expected 70.

The headmistress Ratnaprabha Verma says she is not surprised because the pupils have nowhere to sit, apart from the floor, and their parents object to this. 

Rush: Schoolchildren in Bhopal (pictured) enrol in schools for free uniforms and meals

‘At five or six, the children enrol in a big rush. The parents know we give out free uniforms, books and pencils. But within days they begin to drop out, one by one. Some simply come for the free midday meal and leave before classes start again. There are no toilets here. Even with the aid money, no one thought to build them.’

All this begs the question: why does DFID insist that our money gives millions of Indian children free schooling and their families a better life?  As youth worker Sen Vijay, 27, said with a concerned look as we travelled to the Bhopal school: ‘we think your government is playing a game with statistics. It means they can boast they are helping India. But it is a lie.’

His words are echoed by one of India’s most respected academics, Delhi University’s former dean of education. Professor Anil Sadgopal told me: ‘I don’t know what the British mean when they say their free school project is ‘proving very effective and making remarkable progress. 

‘I think the British people should be asking their Government why it is funding such bad-value projects out of your public exchequer.’

His question is equally pertinent when it comes to Indian maternity services, which have received ?60 million in British aid.

At the first maternity clinic I visited, an operating theatre with thousands of pounds of equipment was gathering dust because a surgeon, anaethetist and theatre nurse cannot be hired as there is no money to pay them.

A rare oversight? not at all, Sudhir Pattnaik, an editor and political commentator in the impoverished north-eastern state of Orissa, has revealed: ‘in the health sector, the British Government provides infrastructure which is unused. so what is the point of putting the money in? When somebody comes with a big money bag and says: “I will support this,” the state government here will say yes. But there is no practical plan.’

He added: ‘At one city hospital, the medical officer took me to an intensive care unit. Inside, there were six beds and life support units but no patients. The equipment was bought with your aid money, but there was no manpower to operate the machines. This is happening in all other areas, too.’

Back in the Madhya Pradesh region, thousands has been spent on giving pregnant women cash incentives to persuade them to travel, often miles, to a clinic to give birth. But what do they find when they get there?

The region’s health officer, Raj Gopal Nair, told me that women often give birth by candlelight because there is no electricity. many of the clinics’ doctors have quit because of poor pay.

I visited a small maternity clinic in busy Bhopal. It has five beds, although it caters for 250,000 people. The operating theatre on the first floor has a new anaesthesia machine which is still in its plastic cover, the instructions in an unopened manual. The theatre bed is unused. not one child has been delivered here since it was opened a few years ago.

‘we do not have the money to pay for medical staff to perform an operation, such as an emergency Caesarean in the operating theatre. we can only deal with the uncomplicated births at our clinic,’ says Dr Rajasree Bajaj, the medical director, bluntly. ‘The expensive equipment bought with your aid money has been wasted.’

Then she adds, with sadness: ‘None of your Government people has been to see what is happening here. You are the only British person to come and ask where your country’s money has gone.’