Acknowledging the country's rising wealth and status, International Development Secretary Justine Greening said Britain would change its entire relationship with Indiaseeking to boost trade as it ends its aid programme.
Britain offered India about 280 million pounds ($447 million) in assistance in 2011, focused heavily on education and health programmes for impoverished children.
However, many legislators in the UK had targeted the development spending for scorn, arguing that Britain, struggling to cut its own national debt, could no longer afford to help a booming nation that has its own space programme.
Now is the time to move to a relationship focusing on skills-sharing rather than aid, Greening said in a statement. Our own bilateral relationship has to keep up with 21st Century India. Its time to recognise Indias changing place in the world.
India currently has its lowest economic growth in almost a decade. Last month, the World Bank and the International Monetary Fund cut their predictions for Asia's third-largest economy.
The World Bank expects Indias economy to grow 6% for the year, and the International Monetary Fund forecasts growth of just 4.9%, down from its earlier projection of 6.1%.
Britain is struggling with spending cuts worth about 103 billion pounds ($162 billion) through 2017 aimed at slashing the budget deficit. The cuts will mean the loss of tens of thousands of public sector jobs and harsh welfare cuts.
Greenings department said the change in aid policy would save Britain about 200 million pounds ($319 million) by 2015.
British foreign secretary William Hague discussed the plan Thursday on a visit to New Delhi ahead of the public announcement. Aid is the past and trade is the future, Indian foreign minister Salman Khurshid said following the talks with Hague.
President Pranab Mukherjee, in a previous role as finance minister, had described the British aid programme as a peanut in India's overall spending on programmes for the country's poor.
Britain's development ministry said that, despite the cuts in India, it would meet its pledge to spend 0.7% of gross domestic product on overseas aid by 2013 an international aid target set for the G-8 nations at a meeting in Scotland in 2005.