Jul 29, 2024 09:08 PM IST
Structural issues like partial utilisation of allocated funds, slow implementation of projects, and short-staffing pose a major challenge to the successful implementation of the budget
The full budget for the current financial year that was presented last week — it is also the first budget in the third term of the government led by Prime Minister Narendra Modi — underlines some key trends in the trajectory of Indian foreign policy. It is no secret that despite India’s growing global clout and ambitions, the budget allocated to the ministry of external affairs (MEA) has consistently remained below 1% of the overall budget. However, with a 23% growth in the budget estimate when compared to that of last year, this budget has seen the highest-ever allocation for the MEA worth ₹22,155 crore. With a significant focus on special diplomatic expenditure, guarantee redemption funds, embassies and missions, and assistance to neighbours, the budget places India’s foreign policy on the right track. That said, several structural issues persist.
A significant chunk of the MEA budget is allocated to other central sector expenditures. This division has seen a significant increase in budget estimates of ₹5,256 crore from last year to ₹10,046 crore. Special diplomatic expenditure or discretionary expenditure accounts ( ₹4,659 crore) and guarantee redemption funds accounts ( ₹4,383 crore) entail most of the allocation. This higher allocation for discretionary spending will help India expand its influence, public perception, and bilateral relations, especially when China is emerging as a major challenge, and the world order is evolving in unpredictable ways.
Similarly, the guarantee redemption funds refer to guarantees provided to EXIM Bank by the Centre for loans that are doubtful debts. Such guarantees are required for India to enhance its image as a significant player in the Global South and the developing world, with many in these groupings struggling from recent multi-crises. To further its interests, the MEA has also made allocations to multilateral institutions like the United Nations, the South Asian Association for Regional Cooperation, and the Commonwealth Secretariat. It has also continued to strengthen its capacities and networks by funding the South Asian University and Nalanda International University, as well as other autonomous and non-autonomous research institutions and think tanks.
The second major component of the budget is the establishment expenditure of the Centre, which has seen a reduction from ₹6,945 crore to ₹6,441 crore. The allocation is for the secretariat, embassies/missions, passport and emigration, welfare schemes for women, and others like public diplomacy, evacuation projects, international conferences, entertainment of dignitaries and high-level visits. More than half of the estimate ( ₹3,868 crore) is being allocated to expenditures for embassies and missions, an increase from last year’s ₹3,529 crore. This allocation underscores India’s willingness to strengthen its missions abroad and further its global presence and diplomatic activities.
The third and final component of the budget is schemes and projects with an allocation of ₹5,668 crore, which includes assistance to countries, international training programmes, and cultural aid. A significant part of assistance has been reserved for India’s neighbourhood, reflecting the government’s Neighbourhood First policy and Security and Growth for All in the Region (SAGAR) vision. This is vital to expanding its influence, building leverage, and emerging as a credible alternative to China in the region.
Bhutan is the largest recipient with ₹2,069 crore, despite a reduction from last year’s ₹2,400 crore. Nepal ( ₹700 crore), Sri Lanka ( ₹245 crore), and Seychelles ( ₹40 crore) have seen an increase from previous BEs, underscoring India’s focus on faster implementation of its projects. In the Maldives and Afghanistan, the assistance has remained similar to last year’s BE. Finally, Mauritius ( ₹370 crore), Myanmar ( ₹250 crore), and Bangladesh ( ₹120 crore) have seen a reduction in assistance compared to last year. This highlights the complexities inherent in dealing with the regimes in Kabul and Naypyidaw, preference for commercial assistance to Dhaka, slow implementation of projects in the Maldives, and fewer new commitments with Mauritius.
Beyond the neighbourhood, India has increased its assistance to African and other developing countries. Its commitment to Chahbahar ( ₹100 crore) and Eurasia has remained the same, reinforcing New Delhi’s stakes in these regions. However, there is a decline in assistance to Latin America, and disaster relief, potentially impacting India’s role as a first responder.
Structural issues like partial utilisation of allocated funds, slow implementation of projects, and short-staffing pose a major challenge to the successful implementation of the budget. In fact, with a size of 4,500 personnel — of whom about only 1,000 are IFS officers — the MEA still needs significant reforms to cope with India’s rising global profile.
Harsh V Pant is vice-president, Observer Research Foundation, and professor at King’s College London. Aditya Gowdara Shivamurthy is fellow, ORF. The views expressed are personal
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