Budget 2018 Opinion

Don’t Ignore External Affairs

This budget continues the trend of not giving enough importance to foreign policy.

Diplomacy, akin to the use of force, is a tool of statecraft. Indeed, there is a case to be made about how a surgical use of the former can, to some extent, avoid the need for deploying the latter. This was precisely the sentiment with which US Secretary of Defense James Mattis, as Commander of US Central Command, remarked to the US Congress in 2013: “If you don’t fund the State Department fully, then I need to buy more ammunition ultimately.”

The Indian case is slightly different. India is currently at a stage where it needs to accumulate power in all dimensions. However, come the budget season every year and India’s claim to a global influencer status gets closely tagged with expenditure projections on its defence forces. In contrast, the budgetary allocations required for enhancing diplomatic relations don’t even find a mention in the Budget Speech.

Part of the reason is that the budget allotted to the Ministry of External Affairs (MEA) is relatively small. In the 2018 budget, for example, it constituted just 0.6 percent of the total government expenditure. Because it finds no mention in the Budget Speech, this is also a blind spot for budget analysts. However, as India seeks to maintain and expand its current set of international engagements, it is important that some light be thrown on the fiscal landscape of India’s foreign policy. Here is a quick look at some key aspects based on the 2018-19 budget.

1. The relative share of MEA in the budget is declining

Figure 1 plots MEA budget as a percentage of India’s GDP over the last seven years. From being close to 0.1% in 2012-13, it has now reached a low of 0.08% in 2018-19. This is happening even as PM Modi has shown active interest in India’s engagement with the world. Moreover, the Ministry of Overseas Indian Affairs (MOIA) was merged with MEA in 2016. So, while the MEA now has an enhanced mandate, its budgetary allotment has shown a declining trend.

Figure 2 shows the MEA budget size at constant 2011-12 prices. It shows that in real terms, MEA budget for the last three years in a row has been less than what it was in 2015-16.

One could argue that because the current PMO has taken greater active interest in foreign policy, the budgetary allocation for MEA has been reduced. However, this argument does not stand up to scrutiny because the follow-up work for projects and engagements resulting from prime ministerial visits will necessarily involve intervention by the external affairs ministry.

Keeping this declining trend in mind, the Parliamentary Standing Committee on External Affairs has been extremely critical of the government’s attitude towards matters related to foreign policy. A report released by the Committee in February 2017 observed:

The Committee remain deeply concerned that inadequate, delayed, withheld and reduced funding have constituted severe obstacles to the execution of Indian foreign policy in recent years.

The 2018-19 budget still makes no changes of significance on this issue.

Figure 1: MEA’s share as a % of GDP over the last seven budgets

Figure 2: MEA budget at constant 2011-12 prices

2. Bhutan remains the biggest beneficiary of India’s foreign aid programme

About one-third of the MEA budget is foreign aid given by India to other countries. Figure 3 shows the distribution.

Figure 3: Foreign Aid given by India over the last three budgets

In the 2018-19 budget, the aid to Bangladesh, Seychelles, and Nepal has seen a significant increase. Bhutan remains by far the largest aid policy recipient, accounting for nearly 17 percent of the total MEA budget.

Again, the Standing Committee had highlighted that.

Due to the overall budgetary cuts, there had been a budgetary cut for aid/assistance to countries under various heads. The Committee was distressed to note that due to the overall budgetary cuts, high level international commitments had to be kept in abeyance. The Committee had taken serious note of the cavalier approach of the Ministry of Finance over such a significant matter that undermines India’s credibility abroad.

3. Underspending on emigration protection and Indian Council of Cultural Relations

With the MOIA merged in 2016, the responsibility of protecting migrants lies with the MEA. Under the regressive Emigration Act of 1983, India’s overall approach for emigration protection has been to increase the costs of emigration for people who face the risk of exploitation abroad. A draft Emigration Bill to end the discriminatory regime has been pending with the Ministry since 2011. Besides a new law, MEA needs to invest in setting up a voluntary register for emigrants and setting up systems for diaspora evacuation in case of emergencies. From the budget estimates of 2018-19, there seems to be no provision to put such reforms into motion.

Similarly, there has been a marginal nominal increase in the allotment for Indian Council of Cultural Relations (ICCR). Under ICCR, the aim is to create India Experience Centres across the world. The Parliamentary Standing Committee had recommended that ICCR needs to open more centres across the world to enhance India’s global footprint. However, this again seems unlikely based on the nominal increase in projections for this line item.

What can be done differently?

Without a substantial increase in diplomatic capacity, expanding India’s engagements is nearly impossible. The MEA needs higher budgetary allotments, specifically for investing in capacity building in two areas. One, for increasing the number of Missions and Post abroad by enlarging the size of India’s diplomatic corps. Two, for investing in creating specialists who can present India’s case on global issues such as nuclear no-first use, climate change, data protection etc.  After all, an investment in diplomacy has the potential to deliver disproportionate benefits for the Indian national interest.

About the author

Pranay Kotasthane

Pranay Kotasthane heads the geostrategy programme at the Takshashila Institution. His research interests focus on geostrategy, geopolitics of the Indian subcontinent, public policy, economic reasoning and urban issues.