Budget 2024: Viksit Bharat’s ‘aid’ diplomacy

This essay is part of the series "Budget 2024-25"

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Entering the third term of its 10-year stint in power, the National Democratic Alliance (NDA) led by PM Modi yet again highlighted its diplomatic priorities in the immediate neighbourhood. Budget 2024-2025, presented by Finance Minister (FM) Nirmala Sitharaman, her seventh straight in a series, distinctly prioritised development as its core agenda. In her 83-minute-long speech, FM Sitharaman emphasised on nine developmental priorities for the country, ranging from productivity and resilience in agriculture; employment and skilling; inclusive human resource development and social justice; manufacturing and services; urban development; energy security; innovation, research and development; sustainable infrastructure; and next-generation reforms. Given the government’s intentions to unlock ‘inclusive development’ accompanied by a long-term vision of prosperity and sustainability for all, especially the Global South, development cooperation is undoubtedly a pivotal medium to realise this end. It also comprises a major chunk of its development diplomacy that it has been vociferously pursuing for the last few years. As witnessed during its G20 presidency last year, India attempted to gather all the unheard voices and concerns from countries of the Global South and placed them at the forefront. Moreover, Sitharaman’s announcement of allocating INR 11 lakh, 11 thousand and 111 crores i.e., roughly US$133 billion towards capital expenditure in the infrastructure sector reiterates development as its policy priorities. This is nearly 3.4 percent of India’s GDP intended to accelerate and mobilise resources for the implementation of major roads, railways, and the power sector.  

Entering the third term of its 10-year stint in power, the National Democratic Alliance (NDA) led by PM Modi yet again highlighted its diplomatic priorities in the immediate neighbourhood.

In this sense, New Delhi’s commitment towards extending ‘aid’ to other countries in the neighbourhood revolves around enhancing connectivity and bolstering regional cooperation in the long run. Combining its political objectives with a broad-based economic agenda, ranging from signing free trade agreements (FTAs), building development partnerships with the Pacific Island Countries (PICs) and inking deals on connectivity with other geographies, India’s portfolio of economic diplomacy is gaining traction on the global front. So, what does the Budget 2024 have in store for development partnerships?  

In this sense, New Delhi’s commitment towards extending ‘aid’ to other countries in the neighbourhood revolves around enhancing connectivity and bolstering regional cooperation in the long run.

In fact, on the economic diplomatic front, the Indian government’s budgetary allocation remains somewhat static compared to the previous fiscal year, except for a few highs and lows. According to Demand No 29 Ministry of External Affairs (MEA) Budget Statement, the total outlay to the MEA has increased from INR 18,050 crore to INR 22,154 crore. Despite this increase, the total aid outlay has been slashed from last year’s INR 5,408.58 crore to INR 4,883.56 crore. Despite India’s continued stance on sharing its developmental practices with the rest of the countries in the Global South to reinvigorate partnerships, this may be startling. 

Table 1: India’s ‘Aid to Countries’ under Budget 2024

Source: India Budget 2024

With a major chunk of the aid allocation i.e., INR 2,068 crore being given to Bhutan, India has boosted its aid support for Nepal, Sri Lanka, Mauritius, and Seychelles. For the Himalayan nation Nepal, the aid distribution has been pegged at INR 700 crore compared to last year’s INR 550 crore. On the other hand, conflict-ridden Afghanistan’s aid has remained constant at INR 200 crore. Following the breakout of civil unrest in Bangladesh accompanied by a spurt in natural disasters, Dhaka’s aid has been cut down from INR 200 crore to INR 120 crore. However, India’s neighbour in the Indian Ocean, Sri Lanka, has been allocated about INR 245 crore compared to INR 150 crore in 2023. As a fallout of the diplomatic brouhaha between India and Maldives, it does not come as a surprise that Malé has received INR 400 crore which is a far cry from last year’s revised aid budget of INR 700 crore. This certainly casts a shadow on the increasing presence of the dragon, gradually making inroads in the Indian and Pacific Oceans which is a big concern for India. In this sense, both Mauritius and Seychelles have received INR 370 crore and INR 40 crore respectively highlighting India’s strategic intent of fostering robust ties in the Indian Ocean. Meanwhile, India’s connectivity ambition in the form of a 10-year contract for port operations signed with Iran for the Chabahar Port has been allocated INR 100 crore, along with INR 200 crore to Africa and another INR 30 crore to Latin America and INR 20 crore to Eurasia. 

With a major chunk of the aid allocation i.e., INR 2,068 crore being given to Bhutan, India has boosted its aid support for Nepal, Sri Lanka, Mauritius, and Seychelles.

Considering the increasing interdependence and interlinkages between economic factors and political goals and the unprecedented threat posed to global governance, it is but natural for countries to strive for cooperation based on an agreed set of rules. In this context, India’s role as a pertinent development provider will become ever increasingly crucial in the days to come. The international community is certainly keeping a close watch on Viksit Bharat’s ‘aid’ diplomacy as geopolitical, geoeconomics, and geostrategic gameplays keep unfolding.

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Swati Prabhu is an Associate Fellow at the Observer Research Foundation

• Indian Economy
• India
• Foreign Aid
• India Budget 2024-2025
• Narendra Modi
• Nirmala Sitharaman
• Union Budget 2024-2025
• Viksit Bharat

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