India reduces development assistance to neighbors in budget 2022

Afghanistan, Bhutan, Nepal, see cuts in their allocations in the financial year 2022-23, while Bangladesh, Maldives, and Myanmar receive higher funds in comparison to the last year.  

Feb 01, 2022
Representational Photo

India’s grant and loan assistance to its neighbors saw a reduction of around 14 percent as the government allocated INR 4676 crore (roughly $625 million) in the financial year 2022-23—down from INR 5396 crore (roughly $721 million) a year before. 

Bhutan, the closest partner in the region, received the highest share, around INR 2264 crore ($302 million).    

Afghanistan, now under the Taliban’s control, receives $26.74 million—down from around $47 million in FY22— in the Union Budget 2022, which was presented on Tuesday by Finance Minister Nirmala Sitharaman in Parliament. 

Significantly, Afghanistan, Bhutan, Nepal, see cuts in their allocations of development assistance in the financial year 2022-23 in comparison to the previous financial year. On the other hand, Bangladesh, Maldives, and Myanmar see higher allocation this year. 

From $401 million in the last financial year, Bhutan this year is allocated around $302 million. Bangladesh $40.11 million, up from $26.74 million last year; the Maldives $48 million, up from $33.4 million last year; Myanmar $80.22 million, up from $53 million last fiscal year. 

$100 million has been set aside for Nepal which had received $120 million in the last year's budget. Sri Lanka receives $26.74 million this year, unchanged from the previous year. 

This year, the share of neighboring countries’ allocation is around 57.5 percent—an increase from 55 percent in the last year's budget—of the total allocations for foreign countries, though overall allocations came down this year. 

Constantino Xavier, a research fellow at the Centre for Social and Economic Progress (CSEP), suggested that a shift from grants and loans to lines of credit as a preferred tool for developmental partnership could be one of the reasons behind the reduced allocations. 

India’s disengagement from Afghanistan following the Taliban’s takeover and the completion of major legacy projects eg. Terai Road in Nepal might be possible reasons for reduced aid and loan allocations, he suggested in a tweet.

The allocation for Myanmar saw a significant increase this year despite no progress on peace efforts there. The move, however, shows New Delhi’s balanced and realistic approach, keeping its own internal security challenges, in the sensitive northeastern region, in mind. 


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