The UK will end giving financial aid to India by 2015, announced the International Development Secretary, Justine Greening.
She announced that no new grants will be made from immediate effect and the ongoing programme will be restructured and phased out by 2015.
"After reviewing the programme and holding discussions with the Government of India this week, we agreed that now is the time to move to a relationship focussing on skills-sharing rather than 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.
"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."
India was the largest recipient of UK aid until last year, which has been a concern for many Tory MPs, as it is one of the world’s fastest economies and even has a multi-million pound space programme.
Last year the UK gave India nearly £280 million in aid, while India spent £2.2 billion on defence and £780 million on its space programme. Around £70 billion is spent on social welfare.