Millennium Post

Budgeting India's foreign relations

With its aid budget gradually rising, India is fast-emerging as a donor country

On July 5, Finance Minister Nirmala Sitharaman presented the first budget of the just re-elected NDA government. In the budget, the finance minister presented detailed estimates of earnings and expenditures of the government, including the ministry of external affairs (MEA). INR 17,884.78 crores (US$2.60 billion approximately) has been earmarked for MEA, which is 0.64 per cent of the government's total budget. MEA allocation seemed meagre considering the vast gamut of commitment that India, an aspiring power, has in the world scenario. However, experiences across the world suggest that India is not alone; whose spending on foreign relations is limited. There are various global powers whose budget on foreign relations is much lower than the size of their economy.

The budget for MEA covers the expenditure of a plethora of activities of the ministry. For example, supporting activities of the secretariat of the ministry, public diplomacy in the headquarters and expenditures of Indian missions abroad. The budget also covers the cost of various international conferences, repatriation of the destitute, evacuation of Indians due to civil wars. In addition, it has allocations for programmes like Know Your India programme, Scholarships to the Indian Diaspora, promotion of the cultural ties, and Distinguished Visitors programmes with countries like the UK and United States. Besides, the budget has the allocation for India's contribution to various international organisations like Common Wealth, United Nation Organisations, SAARC Secretariat and South Asian University. The MEA covers expenses like maintenance of aircraft for VVIP travel and many more.

A substantial portion of MEA's budget goes for aid in various countries. In this budget, INR 9,069.34 crores (US$ 1.32 billion roughly) has been allocated for India's foreign aid. India is providing aid for various projects in countries in South Asia, Central Asia, Africa, Latin America and other developing countries. South Asian neighbours took a major chunk of India's spending abroad that valued at INR 5,252.75 crores i.e., 58 per cent of India's total aid budget.

It is worthy to note that with INR 2,801.79 crores allocated for Bhutan, the country continued to be the highest recipient of India's aid abroad. Nepal with INR 1,050 crore of an estimate is the second-highest recipient of India aid in the neighbourhood.

Barring Afghanistan, there has been a slight increase in allocation of India's aid to other South Asian neighbours. Aid to Afghanistan is estimated at INR 400 crores which is a decrease of INR 70 crores. In 2018-19, the allocation for Afghanistan was INR 470 crores. Afghanistan was one of the largest recipients of India's aid. Earlier, India had given US$1 billion as aid to the country. Political volatility in the country assumed to a reason for the reduction. Allocation for Bangladesh marked a slight increase. This year, the aid for the country is estimated at INR 175 crores in contrast to INR 120 crores in 2018-19. Similarly, the allocation for Sri Lanka estimated INR 250crores in place of INR165 crores in 2018-19. This year aid allocation for the Maldives is INR 576 crores in place of INR 440 crores in 2018-2019. The major gainer, however, was Mauritius, the Indian Ocean country with the presence of a large diaspora. This year INR 1,100 crores have been allocated to the country, which was around INR 400 crore more than last year; INR 660 crores in 2018-19.

India is fast emerging as a donor country. India's aid budget has grown steadily for a decade with slight fluctuation in 2016-17 and 2017-2018. Back in 2009-10, India's budget for aid was INR 2,699.93 crores and in the present budget, aid estimated to be INR 9,096.34 crores. The rise in India's aid budget is encouraging. The step helps to strengthen India's ties with countries and its image in the global arena. Given the instability in the global geopolitical scenario largely due to the rivalry between China and the United States, it is important for countries like India to develop its own niche.

Today, India stands as an example because many of the global powers having a superior level of prosperity are cutting its aid budget like in the case of the United States. The US has a $19 trillion economy but budget foreign affairs stand around US$ 31 billion. China, having an economy of around US$ 13 trillion, spends approximately US$8 billion for its foreign relations.

In spite of the positive spin to India's foreign policy funding, the glass is half-full. Considering the wide range of issues to cover, a need was felt for additional resources. Nevertheless, in an era of spending cut, it is unlikely for the government to top up the additional expenditure.

This year's budget, however, showed an alternative. Finance minister declared the government's intention to raise funding from private sector equity, multilateral financing, contributions from corporates, non-residents, etc., for enhancing its developmental diplomacy. This step is encouraging. To involve the private sector, the government needs to have a detail policy formulation.

One of the positive starts could be in way of encouraging private sectors to fund research in foreign policy, primarily to the Indian think tanks. Research, an important part of framing policy, is lagging because of funding constraints. MEA with its small budget could not fulfil the demand for research. A special incentive like tax advantage could be rolled in to make research funding lucrative to the corporate. Strengthening foreign policy research in the Indian think tanks could go a long way in promoting India's interest.

(The author is Senior Fellow with the Observer Research Foundation. The views expressed are strictly personal)

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