India’s diplomatic 'great game' on a shoestring budget

Lower budgetary allocation to the MEA has remained a trend for the past three years and is surprising, considering India’s foreign policy objectives today are driven on carving a leadership role for itself in world affairs, writes Shreya Upadhyay for South Asia Monitor

Feb 8, 2018
By Shreya Upadhyay
The Great Indian Budget is over. Experts are done lauding and lamenting the good, the bad and the ugly aspects in detail. Domestic compulsions ruled this budget, as always. The missing element was the review of the fiscal neglect meted out to the Ministry of External Affairs (MEA).
This budget allocates 0.6 percent of the total expenditure to the MEA, which did not find any mention in Finance Minister Arun Jaitley’s speech. This has remained a trend for the past three years and is surprising, considering India’s foreign policy objectives today are driven on carving a leadership role for itself in world affairs. A more crucial aspect is the concern regarding China’s increasingly aggressive economic and military pitch in Asia, especially the subcontinent.
The last few years have seen a flurry of activities as part of India’s engagement with the world. Movies like ‘Slumdog Millionaire’, ‘Lion’ and ‘Dangal’ have put India on the world map. ‘Dangal’ became one of the 20 highest-grossing films of all time in China. The present government has been vocal about making India a “global cultural power”. The country has been brandishing its spiritual image by promoting itself as the birthplace of Buddhism and Yoga.
China on its part has been exercising its soft power ambitions and using development agenda for the same. The One Belt, One Road is its most ambitious soft power manoeuvre till now. Chinese official media mouthpieces like Xinhua and CGTN have ramped up their operations overseas to report global news from the Chinese perspective.
On paper, India that used to be the highest recipient of multilateral development aid has made the transition to the role of a provider. In the financial year, 2015-16, India gave Rs. 7719.65 crore as aid whereas it received Rs. 2,144.77 crore in aid from foreign countries and global banks. In 2016, the Ministry of Overseas Indian Affairs (MOIA) was merged with the MEA to enhance diplomatic back-up and coordination and increase efficiency.
What grabbed this budget’s headlines was MEA receiving an increase of Rs 213-crore from the year gone by. It has been allocated Rs 15,011 crore. However, a closer view from the GDP standpoint reveals a steady decline in MEA budget allocation since 2015-2016. The Parliamentary committee in a report in 2017 had noted the “problem of budgetary constraints which has resulted in the lack of coherence in foreign policy implementation". 
There has been a decline in the share of India’s external loans and assistance. The government had allocated a total of Rs 7,659.62 crore in the budget estimates for foreign aid. However, the revised estimates for this year have  been further cut down to Rs 5,820.01 crore – a drop of 22%.
There has been an exception to this, with Nepal’s share being increased by over 43% to Rs 650 crore in the next financial year. The announcement coincided with External Affairs Minister Sushma Swaraj’s Kathmandu visit in an attempt to reach out to Nepal’s left alliance headed by K.P. Sharma Oli. This is being viewed as part of the ‘repair diplomacy’ post the border ‘blockade’ of 2015 and the Indian government’s support to Nepali Congress.
Bhutan has received the lion share of the budget with Rs 2,650-crore. While this is an increase from last year’s Rs 2579-crore, this has steeply gone down from Rs 5,900 crores allocated by the previous government.
Instructively, then Foreign Secretary S. Jaishankar had noted in 2017 that MEA’s “big challenge” was utilizing its budget in Bhutan. Two big dams, Punatsangchhu-I and Punatsangchhu-II, have seen their completion schedules going awry due technical troubles and geographic vagaries. However, Bhutan is of strategic importance to India, especially after the Doklam episode. Other than that, it is also an important source of electricity, base minerals, cement, chemicals and wood products and a reliable and cheap source of India’s energy supplies.
The aid to Afghanistan was also slashed from Rs 125 crore to Rs 65 crore this year. But it is slated to go up by Rs 175 crore next year. Afghanistan is also strategic for India’s interests. US President Donald Trump administration wants India to ramp up its economic development assistance to that country. In the past decade plus, India has invested in several infrastructure projects, including construction of the Salma dam hydropower and irrigation project, Zaranj-Delaram highway project (linking Delaram road in Afghanistan to Iranian border Zaranj) and the Afghan Parliament. Currently, it is concentrating on education and development activities in the war-torn nation.
The region becomes further tactical for New Delhi as Beijing invests funds of nearly US$ 46 billion in the China-Pakistan Economic Corridor project that would link western China to Gwadar port in Pakistan through a network of roads and railways. Realistically speaking, India does not have the economic wherewithal to check China’s growing footprints in South Asia. But, it has been working on establishing links with Chabahar port in Iran. Last year’s budgeted Rs 150 crore, which remained unused, has been extended this year as well.
Other nations to have been sanctioned aid are in Africa (Rs 200 crore), Bangladesh (Rs 175 crore), and Sri Lanka (Rs 150 crore). The budget also provides for Rs 280 crore towards schemes/projects in Myanmar. Some of the amount is likely to be used in the “restoration of normalcy and development of the Rakhine State”.
This budget scored high on India’s maritime strategic diplomacy. Island nations like Seychelles, Maldives, and Mauritius have also been granted allocations. Seychelles allocation has also been increased from Rs 200 crore to Rs 300 crore. Part of that amount will be used to develop facilities on Assomption Island, including developing an airstrip and jetty there. In Mauritius, the Government has signed a Memorandum of Understanding for the improvement of sea and transport facilities at the Agalega island.
India’s doles in the region become crucial as these are aimed at outgunning Chinese presence in the area. But, it will be prudent to accept that the Indian rupee cannot fight the Chinese yuan. Our economy is one-fifth of China’s in size. We suffer from key institutional constraints.
The Indian Council for Cultural Relations (ICCR) is slated with the responsibility of undertaking cultural missions worldwide to enhance India’s global footprint. However, it is reported to be struggling for lack of funds.
China, however, has infused a whopping total of $20 billion to boost cultural diplomacy. China has been expanding its cultural arm claiming Buddhism and establishing as many as 250 Confucius (ancient Chinese teacher and philosopher) Centres across the world.
It makes sense for the country to currently invest in projects related to science and technology and creation of a job market that would strengthen India’s economic presence. Yet, it needs to be realized that for a country like India, that is aspirational, to engage with the world, availability of funds for foreign affairs is a must. Diplomacy remains a crucial aspect of India’s growth story and should be utilized with greater finesse.
(The author is a policy analyst with the Takshashila Institution, Bangalore. She can be contacted at

Leave a Reply

Your email address will not be published. Required fields are marked *

In northeast India, water-management practices to deal with climate change

In a small village on the north bank of the Brahmaputra in Assam in northeast India, farmer Horen Nath stood gazing at his partially submerged paddy field. The floods had kept their annual date but mercifully, the farmer said, the waters have started receding. "The weather has become very strange of late. We always had ample rain,


UAE, Saudi Arabia can help India meet any oil deficit, says UAE envoy

Even as the US-imposed sanctions on Iran has put India’s energy security in jeopardy, United Arab Emirates Ambassador to India Ahmed Albanna has allayed fears of an oil shortage, saying hi...

Tweets about SAMonitor
SAM Facebook