The United Kingdom would phase out giving financial aid to India by 2015, signaling a significant shift in the bilateral ties between both the countries, the British government announced Friday.  

Acknowledging India’s growth as the third largest economy in Asia, International Development Secretary Justine Greening said in a statement that England was looking forward to strengthening the trade relations with India while ending the monetary aid.

"It's time to recognize India's changing place in the world... Now is the time to move to a relationship focusing on skills-sharing rather than aid,” Greening said in a statement.

The decision is estimated to save GBP 200 million by 2015 to England, Reuters has reported.

The one-time colonial power and its former colony will focus on skill-sharing and trade in the future.

The Indian government has also welcomed the decision to halt the financial aid. Speaking to media after a discussion with British Foreign Secretary William Hague, Indian Foreign Minister Salman Khurshid said: "Aid is the past and trade is the future."  

The aid to India raked up a controversy in both countries. In the U.K., it was labeled as a payoff to push for a defense deal with India while the Indians considered it “peanuts,” as described by former finance minister Pranab Mukherjee (now the President of the country) in 2011.

The handouts to India have not been much hailed in England as several experts believe that India don’t deserve the aid as it spends billions on defense and space programs while economic recession is looming large over England.

On the other hand, India, one of the fast emerging markets, is embarrassed to accept the aid, as the country can do without it. India, which got its freedom from the British rule in 1947, is an important trade partner of Britain and several of its companies have strong business interests in the country.

Moreover, realizing its changed position and leading role in the global economy, India has started aiding other backward countries. Prime Minister Manmohan Singh recently announced a $5-billion aid to Africa.

Although India’s wealth and status is rising fast, one third of its population still live in abject poverty and some of the advocacy groups feel that India need the aid despite its growing economy.

"India still has major challenges. Millions of Indian people live in extreme poverty and a shocking number of children under five die each year," said Adrian Lovett, executive director of the poverty campaign group ONE, according to APP.