A Better but Still Insufficient MEA Budget for Indian Diplomacy

For India to realise its 2047 Viksit Bharat ambition and pursue its strategies for an increasingly competitive and complex world, the Ministry of External Affairs (MEA) plays a critical role. Yet as we cautioned in last year’s detailed budget analysis, the MEA’s capacity constraints have been posing significant obstacles.

The Indian Foreign Service (IFS) remains understaffed, with approximately one thousand officers, which makes it one of the smallest diplomatic services relative to India’s economy and population globally. This is proving to be manifestly insufficient to oversee around two hundred diplomatic missions abroad, as well as the headquarters and many other nodal positions across the central government to facilitate foreign policy coordination.

Beyond human resources, there are also other significant capacity gaps that pose a risk of affecting India’s reputation and squander the potential of many new initiatives and commitments. Several African countries have shown interest to engage Delhi following its G20 presidency ambition to ‘lead’ the Global South—yet the hard reality is that the MEA’s financial firepower in terms of grants and loans is still far less than that of competitor China or several European countries.

To cope with rising ambition and expectations for India to move from domestic vision to international action, the MEA will need more than just a meagre budget. This is urgent given that new areas are emerging—from defence diplomacy to digital and technology partnerships—that require India to be represented in new international forums.

To cope with rising ambition and expectations for India to move from domestic vision to international action, the MEA will need more than just a meagre budget. This is urgent given that new areas are emerging—from defence diplomacy to digital and technology partnerships—that require India to be represented in new international forums with experts that can contribute to specialised, technical negotiations.

For instance, the MEA will have to empower its climate diplomacy, to complement and encourage the effort of other ministries. There is also increasing demand for India to play a more prominent role in global health governance, beyond the WHO. And with over twenty million citizens abroad, India’s diaspora diplomacy will also face new consular challenges, including more frequent and complex expatriate evacuation operations.

Overall, this year’s budget (2024–25) is a good indication that the MEA is on the way to receive more, albeit still insufficient resources to enhance its capacity to define and defend Indian interests abroad.  Two important dimensions stand out in the budget.

The MEA saw a budgetary increase of approximately 23%, compared to the previous year. This marks a notable change from the limited—and even negative—growth in the MEA’s budget estimates over the past five years.

First, the MEA saw a significant budgetary increase of approximately 23%, compared to the previous year, increasing from INR 18,050 crores (USD 2.1 billion) to INR 22,155 crores (approx. USD 2.6 billion). This marks a notable change from the limited—and even negative—growth in the MEA’s budget estimates over the past five years, including during the G20 presidency year (see Figure 1). The increased allocation partially delivers on the recommendations of the 21st report of the Parliamentary Committee on External Affairs for the MEA (2022–23) to strengthen the ministry’s capacity and resources to better serve India’s foreign policy objectives. However, stuck at a share of 0.4% of the total Union budget, the MEA budget still falls short of reaching the Committee’s recommended figure of 1%.

Source: MEA Budget Documents between 2020–2025

Second, there has been an 8% reduction in the budget allocated for ‘Technical and Economic Cooperation with other countries.’ This category encompasses various instruments of economic assistance to India’s neighbouring countries and other nations in the Global South, as well as contributions to regional and multilateral forums such as SAARC and BIMSTEC, and disaster relief assistance. Bhutan, the largest recipient of India’s assistance, saw a 14% decrease in budgetary estimates, dropping from INR 2,400 crore (approx. USD 290 million) last year to INR 2,068 crore (approx. USD 247 million) this year. Yet one should refrain from interpreting this as New Delhi being less interested in, or committed to Bhutan—a common mistake if one does a mere numerical analysis of yearly trends in economic assistance by country (see Figure 2).

For example, if one looks at other line items in the budget, this year saw a converse 29% increase for Bhutan under ‘Advances to Foreign Governments,’ which mainly includes highly preferential loans to develop various hydroelectric projects. After many decades of delays, these advances align with India’s regional connectivity strategy to develop an integrated energy grid and market with Bhutan, Bangladesh and Nepal (BBIN).

Source: MEA Budget 2024–25, P. 113–114
Note: The figures have been rounded.

India’s vision of a Viksit Bharat in 2047 will require a stronger, smarter and more capable state that can promote and protect Indian interests abroad. This year’s budget marks a positive step in the direction for the Ministry of External Affairs but far more is required to endow and prepare Indian diplomacy.

Additionally, the allocation in assistance for Bangladesh also decreased by 40% from last year. This reduction can be attributed to two main factors. First, several of India’s projects in Bangladesh, including the Akhaura–Agartala railway line, have been completed, reducing the need for further funding. Second, Bangladesh has become the largest recipient of India’s Lines of Credit (LoCs), with India extending USD 7.4 billion in LoCs to date for projects in sectors such as railways, roads, shipping, ports, and defence. This shift in the funding strategy for both Bhutan and Bangladesh reflects a broader trend in India’s development cooperation, moving from grants to low-interest loans. This also marks growing diplomatic alignments with the private sector, whether to build transportation and energy infrastructure with neighbour countries or to take India’s digital public infrastructure abroad.

India’s vision of a Viksit Bharat in 2047 will require a stronger, smarter and more capable state that can promote and protect Indian interests abroad. This year’s budget marks a positive step in the direction for the Ministry of External Affairs but far more is required to endow and prepare Indian diplomacy for both the known and unknown challenges of the next decades.