The Budget pipeline and India’s foreign policy ambitions

The Ministry of External Affairs (MEA) budget has seen a significant increase in 2024, but still remains one of the least-funded Ministries, with only 0.4% of India’s total expenditure allocated. As India seeks to position itself as a global leader with growing regional and international commitments, a larger MEA budget is crucial to effectively pursue these goals, particularly in foreign aid, regional integration, and strengthening diplomatic capacities.

Budget Allocation and Global Ambitions

• MEA’s Budgetary Shortfall: The MEA budget, accounting for just 0.4% of total national expenditure, is insufficient to meet India’s growing global ambitions. The Parliamentary Standing Committee recommended raising it to 1%, signaling the need for greater investment in foreign policy execution.
• Global Leadership and Diplomacy: India’s vision of becoming a global leader requires enhanced diplomatic and financial resources to sustain partnerships, lead initiatives like the International Solar Alliance, and strengthen ties with regional partners like the ASEAN and Quad.
• Partner Expectations: Countries expect India to deliver on projects and provide diplomatic follow-through. The MEA’s limited resources are strained when fulfilling these expectations, particularly amidst challenges like China’s growing influence and regional instability.

Foreign Aid, Loans, and Shifts in Policy

• Foreign Aid Trends: India’s foreign aid has seen a decline of 10%, while loans to foreign countries have increased by 29%. India is shifting from grants to Lines of Credit (LoCs), particularly in South Asia, including significant funding to Bhutan and Bangladesh.
• Neighbourhood Focus: The majority of India’s foreign aid is directed to its neighbours, with Bhutan continuing to be the largest recipient due to historical ties and energy cooperation. Aid to Bangladesh has decreased, while Sri Lanka has seen a significant increase in its allocation.
• Implications of LoCs: LoCs provide sustainable infrastructure financing but require strong oversight, placing additional pressure on the MEA’s diplomatic machinery and coordination capabilities.

Institutional Capacity and Resource Allocation

• Training and Human Resources: The MEA’s training budget grew by 30%, but overall resource allocation for building institutional capacity remains insufficient. The Indian Foreign Service (IFS) remains understaffed, and coordination challenges impede progress.
• Cultural Diplomacy and Missions: The MEA’s budget for foreign missions, cultural diplomacy, and training programs saw a modest 7% increase. However, key academic institutions like Nalanda University and South Asian University faced cuts of 20% and 22%, respectively.
• Need for Research and Digitisation: The MEA’s push for declassification and digitisation of its records is critical for enhancing research capabilities. Such efforts could provide valuable insights into India’s diplomatic history, improving both academic research and current policy-making.

Practice Question

Q. Critically examine the current budget allocation for India’s Ministry of External Affairs (MEA) and its implications on the country's foreign policy, regional engagement, and global leadership ambitions.