Author : Swati Prabhu

Expert Speak India Matters
Published on Feb 03, 2023
With G20 ruling 2023, New Delhi is bound to utilise its development cooperation allocations for forging new alliances and establishing sustainable partnerships
Budget 2023: Amrit Kaal for development diplomacy? This piece is part of the essay series, Amrit Kaal 1.0: Budget 2023
By revealing the first budget of Amrit Kaal for fiscal year 2023-2024, Finance Minister (FM) Nirmala Sitharaman prioritised the government’s intentions of unlocking ‘inclusive development’ and setting an ambitious agenda for prosperity and sustainability. Given the changing guidelines of geopolitics in a post-pandemic world, development partnerships have emerged as a critical tool for diplomacy, leveraging the foreign policy manoeuvres and influencing the global strategic ambience. Reiterated by India’s External Affairs Minister S Jaishankar in his opening remarks at the 77th UNGA, New Delhi correctly recognises the importance of diplomacy and dialogue as essential tools for achieving development. With India’s G20 Presidency in action, the Union Budget 2023 invariably gains traction as the conversation around crafting new avenues of cooperation and resilience gathers storm. Moreover, India’s new economic diplomacy has also been making paradigmatic waves deployed through its unique development partnership model. Establishing a ‘demand-driven’ and ‘no-strings attached conditionalities’ development cooperation network in the immediate neighborhood and also in Africa, Central Asia, Latin America, and other developing countries in the Pacific, India, along with China and Brazil are strongly steering the Southern-driven partnerships. So, what does this year’s budget look like for development cooperation?
With India’s G20 Presidency in action, the Union Budget 2023 invariably gains traction as the conversation around crafting new avenues of cooperation and resilience gathers storm.
As compared to last fiscal year, Budget 2023 remains static for development assistance. In fact, ‘aid’ to several countries has been slashed down. According to Demand No 29 Ministry of External Affairs Budget Statement, the total aid outlay has shrunk marginally from INR 5476.10 crore to INR 5408.37 crore. For instance, development assistance to the Himalayan nation of Nepal has been cut from INR 750 crore to INR 550 crore; for conflict-ridden Afghanistan it remains unchanged at INR 200 crore; for Myanmar it has been reduced from INR 600 crore to INR 400 crore; for the economically-crippled Sri Lanka it has dwindled from INR 200 crore to INR 150 crore. Maldives is one of the only few countries whose budget aid has increased from INR 360 crore to INR 400 crore owing to New Delhi’s involvement in the Great Male Connectivity Project (GMCP) and other high impact community development projects (HICDP). In fact, India’s allocation for the Chabahar Port also remains fixed at INR 100 crore (See Figure 1). This reflects how regional connectivity and physical infrastructure remain at the heart of India’s aid allocations, giving an impetus to international trade and economic growth. This can also be understood in terms of countering the Chinese engagements in the region, particularly through the Belt and Road Initiative (BRI), recently given a verbal push by the Global Development Initiative (GDI) and the Global Security Initiative. Figure 1: Budget Allocation for 2022-2023 & 2023-2024
Aid to Countries Budget 2022-2023 (in ₹ crore) Revised 2022-2023 (in ₹ crore) Budget 2023-2024 (in ₹ crore)
Bhutan 2266.24 2500.15 2400.58
Afghanistan 200 350 200
Bangladesh 300 170 200
Nepal 750 425 550
Sri Lanka 200 75 150
Maldives 360 400 400
Myanmar 600 500 400
Mongolia 12 2.5 7
Africa 250 160 250
Eurasia 140 65 75
Latin America 40 7 50
Other Developing Countries 150 135 150
Disaster Relief 10 5 5
Chabahar Port 100 100 100
Mauritius 900 575 460
Seychelles 14.06 6.45 10
Source: India Budget 2023 Despite India’s partnerships faring well on the development charts, Union Budget 2023 remains the same for diplomacy.  In fact, a total outlay of INR 18,050 crore has been allocated to the MEA, which is a jump from INR 17,250 compared to last year’s budget. But, then, the revised budget slumped at INR 16,972 crore. As observed by the Parliamentary Standing Committee on External Affairs in one of its reports released in December 2022, one of the key limiting factors impacting its diplomatic performance is budgetary constraints. Drawing comparisons with Chinese aid allocation, say towards its soft power institutions and agencies, the report highlighted a gap between the on-ground demand and the actual budget earmarked. One of the other contentious recommendations of the report also stems from the concern that India’s diplomatic aid allocations does not match its rising aspirations and stature. In this case, Budget 2023 has set aside about INR 990 crore to fulfill its G20 Presidency exigencies. A look at India’s receipts from multilaterals and bilaterals reflects an increase of INR 69,908 crore from INR 60,481 crore, including external loans and cash grants (See Figure 2).  Figure 2: India’s Receipts of External Assistance
Agency Budget Estimate 2022-2023 (in ₹ crore) Budget Estimate 2023-2024 (in ₹ crore)
1)      External Loans 80242.03 84942.12
2)      Less-External Loans for State Projects 20380.58 17168.60
3)      Net External Loan (1-2) 59861.45 67773.52
4)      Cash Grants 620 936.89
5)      Commodity Grant Assistance N/A 1198.42
6)      Total (3+4+5) 60481.45 69908.83
7)      Repayment of Loans 40610.30 45656.00
8)      External Loans Net of Repayments (6-7) 19871.15 24252.83
9)      Interest Payment on External Loans 7925.90 12254.70
10)  External Assistance (Net of Repayments & Interest Payments) (8-9) 11945.25 11998.13
Source: India Budget 2023 Here lies the opportunity for India to up the ante by increasing the budget allocated for development diplomacy, impacting its strategic standing and international relations. Given the uniqueness of India’s ’demand-driven’ model, much in contrast to China and other nations, development partnership can definitely emerge as a potent instrument of economic diplomacy scoring over all other donors, if budgetary allocation can be beefed up. Additionally, it also offers a plausible outline for other countries to shape their development partnerships on Agenda 2030. It is imperative to highlight that the finance ministry finds itself in a zero-sum situation where a two-level game is being played out—matching the budget demand at both the domestic level and the international stage. Bringing down the fiscal deficit at home, consolidating the Indian economy in a post-pandemic world, addressing the growing inequalities in the social sector—these are the challenges immediately concerning the Indian Budget. Prioritising development assistance in budget allocations, hence, becomes difficult in such a scenario. However, with G20 ruling 2023, it would be interesting to track New Delhi’s trajectory on utilising its development cooperation allocations for forging new alliances and establishing sustainable partnerships.
Although India has been attempting to use the word ‘cooperation’, ‘assistance’ or ‘partnership’, in official documents the word ‘aid’ has been utilised.
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Swati Prabhu

Swati Prabhu

Dr Swati Prabhu is Associate Fellow with the Centre for New Economic Diplomacy at the Observer Research Foundation. Her research explores the interlinkages between development ...

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