India's 2015-16 foreign aid budget: Where the money is going

In stark contrast with most of its peers in the emerging donor club, India has directed the vast majority of its rapidly growing foreign aid budget close to home over the past decade. By most accounts, Indian foreign aid’s sharp focus on South Asia has been designed to bolster New Delhi’s standing as a regional power. Indian Prime Minister Narendra Modi’s first full-year budget, which was unveiled late last month, augurs little change in the direction of Indian foreign aid. Devex analysis reveals that the budget sets aside 84 percent of the $1.6 billion Indian foreign aid envelope in 2015-16 to South Asia, down slightly from 86 percent the year before. The top recipient of Indian aid, Bhutan will claim 63 percent of Indian aid in 2015-16, which is unchanged from the previous year. Buoyed by a 26 percent increase in India’s total foreign aid spending, every major recipient of Indian aid, with the exception of Afghanistan, is slated for an aid hike in the budget. While Africa sees a 38 percent increase in Indian foreign aid, the continent will continue to garner just a small portion of New Delhi’s aid spending — only 3 percent. It’s worth noting that African countries still have access to lines of credit extended by the previous Indian government. As part of our continuing coverage of emerging donors, below, Devex takes a closer look at the programs and priorities of Indian foreign aid in its five biggest recipient countries for 2015-16. Among the five countries, only Myanmar is located outside South Asia. Bhutan ($981 million) Already the largest recipient of Indian foreign aid, Bhutan sees a 26 percent increase in Modi’s 2015-16 budget — bringing Indian aid levels in the country to $981 million. New Delhi directs much of its assistance to Bhutan toward developing the water-abundant country’s hydropower sector. India intends to purchase at least 10,000 megawatts of power from Bhutan by 2020. Last year, during his visit to Bhutan, Modi kicked off the 600-megawatt Kholongchu Hydroelectric Project, one of 10 Indian hydropower projects in the country. In addition to its massive investment in Bhutan’s hydropower sector, India has smaller-scale development projects targeting social sectors. India has historically been the largest donor to Bhutan. Afghanistan ($108 million) Keen to fill the vacuum left by the Western aid drawdown, India has been positioning itself for a more prominent development role in Afghanistan. Somewhat surprisingly then, Modi’s 2015-16 budget slashes Indian aid to Afghanistan by a modest 5 percent to $108 million. The Indian government has pledged more than $2 billion in bilateral assistance to Afghanistan, including for a string of large-scale infrastructure projects across the country. Two of those projects — Afghanistan’s new parliament building in Kabul and the Salma Dam in Herat province — are expected to be completed sometime this year. A recent Devex analysis revealed that India was the 10th-biggest donor to Afghanistan last year. Sri Lanka ($80 million) Amid a revitalization in Indian-Sri Lankan ties following the recent election of Maithripala Sirisena as Sri Lanka’s president, New Delhi maintains its aid budget for the country at under $80 million in Modi’s 2015-16 budget. At the same time, Modi is expected to extend an additional line of credit to Sri Lanka for infrastructure and development projects during his historic visit to Sri Lanka this week. In 2010, the previous Indian government committed $270 million to build 50,000 housing units for internally displaced Tamils in Sri Lanka — an ongoing effort that has been described as the largest Indian development aid project abroad. India is the second-largest donor to Sri Lanka based on the latest available figures. Nepal ($67 million) A long-standing development partner of New Delhi, Nepal sees an Indian aid hike of 40 percent in Modi’s 2015-16 budget — bringing Indian aid levels to nearly $67 million. The aid hike comes on top of a $1 billion line of credit Modi announced during his visit to Nepal in August. India is the sixth-largest donor to Nepal based on the latest available figures. While in Nepal, Modi revealed that India’s development engagement with Kathmandu would focus on three sectors: transport infrastructure, information and communications technology, and energy. Late last year, Modi also inaugurated the $16 million Nepal-Bharat Maitri Emergency and Trauma Center in the capital city, one of India’s marquee development aid projects in Nepal. Myanmar ($43 million) Modi’s 2015-16 budget sets aside $43 million in aid to Myanmar, more than double last year’s amount. Indian aid to Myanmar spans a range of sectors, including infrastructure, human resource development, institutional capacity building and border area development. Under a memorandum of understanding with the Myanmar government, India has agreed to provide $5 million in annual grants through 2019 to build schools, health centers and bridges in Chin state, Myanmar’s poorest province bordering India. In addition to development aid for Myanmar, India has recently extended a $500 million line of credit to Yangon. Check out more insights and analysis for global development leaders like you, and sign up as an Executive Member to receive the information you need for your organization to thrive.