Washington: The US is set to cut aid to India by 35 percent in 2008 after the South Asian nation was categorised as a "transforming" country with one of the best-performing economies in the world in a sweeping overhaul of US foreign assistance programme.

India's aid was slashed to $81 million after it was categorised as a "transforming" country instead of a "developing" one under a plan developed by Randall L. Tobias, a corporate veteran chosen by Secretary of State Condoleezza Rice to manage foreign assistance, the Washington Post said.

"India is now taking a different place on the global stage, in terms of diplomacy, politics and economy," US State Department spokesperson Sean McCormack was quoted as saying by The Post. "Aid programs had not caught up with these evolving realities" he added.

The Washington Post has pointed out that the bulk of the $23 billion in annual US foreign aid goes to a handful of key countries, leaving about 120 nations to battle over $3 billion of the pie.

India is one of the big losers in Rice's foreign aid revolution. All US aid to assist India in education, women's rights, democracy and sanitation will be terminated under the new overhaul of US foreign assistance programme.

One promising US-funded programme in India is QUEST, a partnership with technology firms such as Microsoft and Lucent aimed at teaching critical skills in Indian classrooms. With Washington promising about $2 million a year, QUEST expanded from 200 to 2,000 schools in just one year. But without a continued US contribution, the initiative probably will not survive, Aakash Sethi, the programme's executive director told The Post in a telephone interview from Bangalore.