India debates whether to continue receiving British aid
The Indian government is debating whether it should still accept any development aid from Britain.
India is currently the biggest recipient of UK development aid, receiving more than £800m (about $1.25bn) over the three years to 2011.
Foreign Secretary Nirupama Rao told the BBC no final decision had been made.
Britain's Department for International Development (DfID) says it is reviewing its spending, and close dialogue with the Indian government will continue.
The BBC's Chris Morris in Delhi says there are those who argue that a country like India, which has an economy growing at nearly 10% a year and a massive defence budget, simply does not need British development assistance.
On the other hand, nearly half a billion people in India are still desperately poor and efforts to reduce global poverty will make no significant progress if those figures do not improve, our correspondent says.
An internal memo - written by Mrs Rao and leaked to a local newspaper - appeared to suggest that India had already decided it did not want any more development aid from Britain after April next year.
But Mrs Rao says the quotes used have been taken out of context.
She admits that there is a debate within government about whether any development aid is still needed. But no decision has been taken, and there will be full consultation with London.
British officials say the tone of the leaked memo does not reflect what they are hearing from the rest of the Indian government.
When Prime Minister David Cameron met his Indian counterpart Manmohan Singh in Delhi recently, it was agreed that no-one would make a decision about giving or receiving development aid without a proper consultation process.
Britain is already reviewing its development budget, and re-examining its priorities.
"All DfID's country programmes are currently under review to ensure our aid helps the poorest people in the poorest countries," a spokesperson in London said.
India's Finance Minister, Pranab Mukherjee, told parliament recently that India would prefer to voluntarily surrender money if Britain made a decision to cut aid.
So as well as financial considerations in both countries, there is an element of national pride at stake, our correspondent says - if Britain decides to cut aid to India, Delhi may say it does not want the money anyway.