Union Budget and India’s Foreign Policy Priorities

When the Union Budget is announced, focus is usually on taxation, infrastructure and defence. The Ministry of External Affairs (MEA) often gets overlooked. Last year, its budget saw a rare 23% increase, after growing just 4% annually between 2017 and 2023. Despite efficient utilisation (96% of revised estimates) MEA remains one of the least-funded ministries. It receives only 0.4% of India’s total budget. This allocation reflects foreign policy priorities and India’s ability to deliver on global commitments.

How Does the MEA Budget Align with India’s Global Ambitions?

India’s vision of ‘Viksit Bharat’ by 2047 depends on strong global partnerships. The MEA plays a crucial role in:

• Leading the Global South
• Strengthening ties with ASEAN
• Enhancing regional connectivity
• Engaging with the Quad (India, Australia, Japan and the U.S.)
• Building institutions like the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure

The MEA’s Crucial Role in Achieving ‘Viksit Bharat 2047’

For India to achieve its 2047 Viksit Bharat vision, the MEA plays a critical role. However, as highlighted in budget analysis, capacity constraints continue to pose major challenges.

The Indian Foreign Service (IFS) is severely understaffed, with only 1,000 officers managing nearly 200 diplomatic missions abroad and key nodal positions across the central government. This is one of the smallest diplomatic corps globally compared to India’s economy and population.

Beyond human resources, capacity gaps threaten India’s diplomatic reputation and ability to follow through on global commitments. Many African nations have sought closer ties with India after its G20 presidency and leadership of the Global South. However, India’s grants and loans remain far below those of China or European nations.

India’s Expanding Diplomatic Responsibilities and MEA Budget

India’s global ambitions require more than a marginal budget increase. New areas demand expert representation in international forums, including:

• Defence diplomacy
• Digital and technology partnerships
• Climate diplomacy
• Global health governance
• Diaspora diplomacy

With over 20 million Indian citizens abroad, consular challenges and expatriate evacuations are becoming more frequent and complex. The MEA must be equipped to handle these rising demands.

MEA Budget Trends and Strategic Gaps in 2024-25

2024–25 budget shows positive movement. But it remains insufficient for India’s expanding global role.

Budget Increase:

• MEA’s budget grew by 23% from ₹18,050 crore ($2.1 billion) to ₹22,155 crore ($2.6 billion).
• And this aligns with the 21st report of the Parliamentary Committee on External Affairs (2022–23), which recommended more funds to support India’s foreign policy.
• However, at 4% of the total budget, the Budget still falls short of the 1% target suggested by the committee.

Decline in Economic Assistance:

• The budget for ‘Technical and Economic Cooperation with Other Countries’ dropped by 8%.
• Bhutan’s aid fell by 14%, from ₹2,400 crore ($290 million) to ₹2,068 crore ($247 million).
• Bangladesh’s allocation was cut by 40%, reflecting the completion of key projects like the Akhaura–Agartala railway.
• However, these declines are offset by a 29% rise in concessional loans (‘Advances to Foreign Governments’), especially for Bhutan’s hydropower projects.

India’s Shift from Grants to Loans in Foreign Aid

India is moving from grants to Lines of Credit (LoCs). It is offering low-interest loans to neighbouring countries. 45% of LoCs now go to India’s neighbours, with Bangladesh alone receiving $7.86 billion. This shift aligns with India’s regional connectivity strategy, particularly in the BBIN framework (Bangladesh, Bhutan, India, Nepal).

While LoCs ensure long-term financial returns, they also demand better oversight and stronger implementation mechanisms.

 India’s foreign aid priorities have shifted in 2024-25:

• Aid to foreign nations fell by 10%, but loans to foreign governments increased by 29%
• Bhutan remains the largest aid recipient, reflecting energy ties and hydropower projects
• Bangladesh’s aid dropped from ₹200 crore to ₹120 crore, while Sri Lanka’s allocation rose by 63%
• Grants are decreasing, while Lines of Credit (LoCs) are rising—45% of LoCs go to neighbouring countries, with Bangladesh receiving $7.86 billion
• LoCs offer sustainable financing, but need stronger oversight mechanisms

Impact of Budget Constraints on India’s Foreign Policy Plans

Partner countries expect timely project execution, financial support and diplomatic follow-through. However, the current MEA budget (0.4% of total expenditure) is insufficient. In 2022, the Parliamentary Standing Committee on External Affairs suggested increasing it to 1%. A sudden jump of 63% is unlikely, but raising it to 0.6%-0.8% would show stronger intent.

Enhancing India’s Diplomatic Clout with a Better MEA Budget

Two areas need greater funding:

1. Economic Tools for Regional Integration: India’s connectivity efforts face hurdles. In 2024, challenges arose due to political shifts in Bangladesh, instability in Myanmar, strained Nepal ties and the Maldives’ ‘India Out’ stance. Meanwhile, visits by Sri Lanka’s President and Bhutan’s Prime Minister strengthened regional commitments. More financial support is needed to sustain the ‘Neighbourhood First’ policy and counter China’s influence.
2. Institutional Capacity Expansion: India must strengthen the Indian Foreign Service (IFS), research institutions and diplomatic missions. A stronger MEA can meet rising foreign policy demands.

The Need for Institutional Capacity Expansion in India’s Foreign Policy

Despite a 30% increase in the MEA’s training budget, institutional strengthening remains slow:

• The IFS is understaffed, affecting global engagement
• Foreign missions, training and cultural diplomacy grew by just 7%
• Nalanda University and South Asian University saw budget cuts of 20% and 22%
• India has invested in global dialogues, but lacks funding for policy-relevant research at universities and think tanks

Declassification and Digitisation’s Role in India’s Diplomatic Strategy

External Affairs Minister S. Jaishankar noted that Track 1 diplomacy (government-led) is ahead of Track 2 (academic and research-driven). MEA must declassify and digitise historical records if it wants to close this gap. If the public can access these archives it can:

• Help scholars map India’s diplomatic history.
• Correct misconceptions about foreign policy.
• Enable policymakers to learn from past successes and failures.

Conclusion: Strengthening India’s Foreign Policy with a Better-Funded MEA

To meet India’s global aspirations, it needs a better-funded MEA. A gradual budget increase and targeted investments in diplomacy, connectivity and research will strengthen India’s foreign policy to a great extent. A focus on institutional capacity and historical records will further improve diplomatic decision-making.

Source:
The Hindu