- One of the Key features of this budget is the provision of a record INR 4,883 crore for aid to neighbouring countries, which points to India’s proactive policies toward the development of friendly relations with neighbouring states.
- Changes in the budget signify shifts in the direction of the external policy of New Delhi concerning India’s neighbours.
- The rise in grants to Sri Lanka, Nepal and Mauritius shows that there are attempts to consolidate relations with states that are important for India’s strategic considerations.
For the neighbouring countries of India, the Union Budget 2024-25 has huge bearings on policy and diplomacy, especially considering India’s ‘Neighbourhood First’ policy. This budget represents a calculated change in priorities of India’s foreign aid disbursements, which entail fewer grants for Myanmar and Maldives while stepping up for Sri Lanka, Nepal, and Mauritius. This response breaks down these changes and how they might precipitate shifts in the balance of the region. [1]
A brief on Union Budget: 2024-25
Presented by Finance Minister Nirmala Sitharaman, the Union Budget for 2024-25 emphasizes several key areas: facilitating infrastructure growth, social causes, people’s employment, and economic development. As a result of the abovementioned programs and projects, a total expenditure has been estimated to be INR 48. 2 trillion (approximately USD 575 billion); out of its capital expenditure would be INR 11.1 trillion revenues of USD 1 trillion (or the equivalent of 1 trillion in US dollars, 132 billion dollars) which in turn means that the revenue is increased by 16.9 from the previous year. [2]
One of the Key features of this budget is the provision of a record INR 4,883 crore for aid to neighbouring countries, which points to India’s proactive policies toward the development of friendly relations with neighbouring states. However, the distribution of such funds has elicited controversies, especially concerning the relative decrease of Myanmar and Maldives.
Changes in Aid Allocations
Reduction in Grants
Myanmar: New Delhi has reduced its grant to Myanmar by 32% since February 2021 due to a military coup that has resulted in changing the strategy. The reduction shows India’s distaste for the current regime and its violations of human rights. The situation might culminate in enhanced volatility in Myanmar’s economy which depends on India in terms of investment, trade, and finance. [3]
Maldives: Thus, the Maldives will be facing a cut of 48% in the grant amount that it is set to receive. This cut may cause problems for Maldives’ economic recovery, especially in attempting to recover from the aftermath of the pandemic. The reduction of the aid could make the Maldives turn to other countries for help and change the state of powers in the Indian Ocean region due lack of support from India.
Increase in Grants
Sri Lanka: On the other hand, Sri Lanka’s grant allocation graph has shown a rise. This decision may have been coordinated to check the rise of China’s influence in the region especially after Sri Lanka’s economic emergency. In supporting Sri Lanka, India looks at the prospects of expanding relations and maintaining the friendly environment that Sri Lanka has provided India.
Nepal: Nepal has also received a grant which has also been increased perhaps due to the intention of cementing bilateral relations as China’s influence continues to rise. Nepal can be of great use to India in fixing the northern borders for its safety and a strong position in South Asia.
Mauritius: The rise in aid to Mauritius can be seen in the light of India’s general engagement to consolidate its position in the Indian Ocean where Mauritius is useful in security and connectivity domains. [4]
Implications for Regional Dynamics
Geopolitical Shifts
These are changes to the budget that signify shifts in the direction of the external policy of New Delhi concerning India’s neighbours. India has cut down the aid to Myanmar and the Maldives; this might imply dissatisfaction with the political status of the two countries and the changing of alliance in South Asia.
In the case of Myanmar, this would possibly make the Myanmar situation even worse where the EU aid cut could lead to more instability and isolation from the global society. This could leave a power void that could be filled by China thus raising China’s dominance in the region.
These are outlined to expose the fact that the massive reduction in aid to Maldives could bring the island nation closer to China if it must look for other sources of funding. This change might have changed the relations in the region, particularly in the Indian Ocean region which is of strategic importance to the Indian Ocean
Building up relations with good neighbours
The rise in grants to Sri Lanka, Nepal and Mauritius shows that there are attempts to consolidate relations with states that are important for India’s strategic considerations.
More support from international sources can assist Sri Lanka’s economy to be a better hub, thus being immune to the draconian conditions usually likely to Chinese investors. This could help in the creation of a more favourable atmosphere for investments and Indian influence.
By raising aid for Nepal, the Indian side seeks to offset the strengthening of China’s position in Nepal, which has become one of the most significant sites of geopolitical struggle in recent years. It also observed that closer relations can help in upgrading bilateral business investments, trade, BT and border control and security.
The increase in the aid provided to Mauritius conforms with the strategic plan of India in terms of bolstering the security of the Indian Ocean region. In the matter of piracy, Mauritius is a strategic friend because piracy threatens safe and secure sea routes, which are important to India’s trade. [5]
Conclusion
India’s Union Budget 2024-25 trends define a new direction in Indian foreign aid policy, especially concerning the neighbours. The cuts in grants to Myanmar and the Maldives are in response to New Delhi’s displeasure with their respective domestic political environments, and these hikes to Sri Lanka, Nepal, and Mauritius form part of a pre-emptive measure to foster the diplomatic relations with countries that India considers to be strategically important partners.
Considering all the above changes, the prospects for regional order and India’s dominance in the South Asian region depend on how efficiently it can utilize its assistance to consolidate allied partners and strengthen opposition to China. This strategy is going to have that much of an impact on creating the geopolitics of the region for the coming years.
(Parag Gilada is pursuing a Master’s in Global Affairs from the OP Jindal Global University. His areas of interest include Sports Diplomacy, Para Diplomacy and Indian Politics.)
[1] India’s Union Budget 2024-25: Key Highlights- https://www.investindia.gov.in/team-india-blogs/indias-union-budget-2024-25-key-highlights
[2] UPSC Key | Union Budget, Agriculture, Neighbourhood First Policy and more- https://indianexpress.com/article/upsc-current-affairs/upsc-key-union-budget-agriculture-neighbourhood-first-policy-and-more-9473322/
[3] India’s Union Budget 2024-25: Key Announcements- https://www.india-briefing.com/news/indias-union-budget-2024-25-key-announcements-33723.html/
[4] Budget 2024 is growth oriented, addresses right sectors: Vikas Khemani- https://www.business-standard.com/budget/news/budget-2024-is-growth-oriented-addresses-right-sectors-vikas-khemani-124072400392_1.html
[5]A Budget with many authors but no plot- https://frontline.thehindu.com/columns/india-budget-2024-tax-hikes-regional-allocations-job-schemes/article68441954.ece
Parag is pursuing his master’s at the Jindal School of International Affairs. Views expressed are the author’s own.
Aayush Pal 
Piyush Anand 
Shobhil Shrivastava