But allocations have been reduced slightly for all except Nepal

By P.K.Balachandran- Colombo

February 3:

The Interim Indian budget for 2024-2025 presented on February 1, has enhanced the allocation for the Ministry of External Affairs, but the allocations for the neighbouring countries barring Nepal and Sri Lanka have been reduced slightly.

The External Affairs Ministry has been allocated a total of INR 22,154 crore (US$ 2.6 billion) for the fiscal 2024-25 as against last year’s outlay of INR 18,050 crore (US$ 2.1 billion).But the allocation for South Asian countries (other than Pakistan and Myanmar) is INR 3763 (US$ 453 million) in 2024-25 as opposed to INR 4228 crore (US$ 509 million).BhutanBhutan gets the lion’s share this year with INR 2068 crore (US$ 249 million) though less than last year which was US$ 288 million.

Bhutan is strategically placed, sharing borders with both India and China. China is said to be nibbling away at Bhutanese territory which alarms India because the defence of Bhutan is virtually India’s responsibility.Bhutan has very close economic relations with India. Between 2014 and 2021-22, bilateral trade tripled from US$ 484 million to US$ 1422 million. India exports to Bhutan US$ 877 million worth of goods and imports (mainly power) to the tune of US$ 545 million.

India has also invested in large and medium scale projects especially in the hydro-electric sector.AfghanistanIndia has allocated INR 200 million (US$ 24 million), marginally less than last year. India has geopolitical stakes in Afghanistan despite its reluctance to recognize the Taliban regime on human rights and political grounds.India is eager to participate in Afghanistan’s development for the sake of the Afghans. India’s infrastructure projects in Afghanistan are worth US$ 2 billion. It has built 218 km of roads and laid 202 km of 200 KV DC transmission lines, had fed 2 million children in 34 provinces and given 675 graduate university scholarships.

India is keen on doing more work in Afghanistan. But under the Taliban regime opportunities are limited. But the slight cut in the budgetary allocation this year is reflective of that constraint.BangladeshBangladesh also had to take a slight budgetary cut. The amount allocated this year INR 120 crore (US$ 14 million). However, Bangladesh has very close ties with India. It is India’s largest trading partner in South Asia with bilateral trade in 2021-2022 having been worth US$ 18 billion, a US$ 8 billion jump from the previous year.India is the biggest trading partner for Bangladesh which exports US$ 2 billion worth of goods to India.

Bangladesh has given India access to the Mongla and Chittagong ports. India is a collaborator in the construction of the Rooppur nuclear power plant along with Russia.India wants to sign a Comprehensive Economic Partnership with Bangladesh. But Bangladesh’s bid to join the China-led Regional Comprehensive Economic Partnership Agreement (RECP) irks India. The sharing of the waters of the Teesta river remains an irritant in the relationship. NepalNepal has got a US$ 84 million, a US$ 6 million hike from last year. Perhaps this is to keep it away from Chinese influence which was at its height when the communists led by K.P.Sharma Oli were in power.Bilateral trade is considerable.

India’s exports to Nepal is to the tune of US$ 8 billion and imports are to the tune of US$ 840 million. India has invested in power projects in Nepal. About 32,000 Nepalese serve in the Indian army.Sri Lanka Like Nepal, Sri Lanka has got a hike in the allocation. It has gone up from INR 60 crores (US$ 7 million) to INR 75 crore (US$ 9 million).India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership, which has witnessed considerable expansion over the years thanks to the India-Sri Lanka Free Trade Agreement (ISFTA) signed in 2000.India’s extending US$ 4 billion during the 2022 economic crisis, helped Sri Lanka come out of the woods. No other country or institution has matched this.

In 2020, trade between India and Sri Lanka had stood at US$ 3.6 billion. In 2021, India was Sri Lanka’s largest trading partner with an overall bilateral trade of US$ 5.45 billion.Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force. More than 60% of Sri Lanka’s total exports to India over the past few years have used the ISFTA provisions. Interestingly, only about 5% of India’s total exports to Sri Lanka in the past few years have used the ISFTA provisions. This is because of Indians goods are competitive in the Sri Lankan market.

India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to the Central bank of Sri Lanka, the total FDI from India exceeds US$ 2.2 billion. The investments are in the areas of petroleum retail, tourism & hotels, manufacturing, real estate, telecommunications, and banking & financial services.Sri Lanka is one of India’s major development partners. The overall commitment by India to development cooperation is to the tune of more than US$ 3.5 billion with grants alone amounting to around US$ 570 million. Grant projects cut across sectors such as education, health, livelihood, housing and industrial development.The Indian Housing Project, with an initial commitment to build 50,000 houses in the war-affected areas and in the tea estates, is India’s flagship grant project in Sri Lanka. The overall commitment of INR 1372 crore (US$ 165 million) makes it also one of the largest projects undertaken by India abroad.As on date, close to 49,300 houses spread across Northern, Eastern, and Central provinces have been completed. During the visit of Prime Minister Narendra Modi to Sri Lanka in May 2017, he announced that an additional 10,000 houses would be constructed in plantation areas at a total cost of INR 453 crore (US$ 54 million).

The country-wide 1990 Emergency Ambulance Service is another flagship project. The Service, launched in July 2016 in the Western and Southern Provinces, was expanded to all Provinces. Some of the other notable grant projects completed are the 150-bed Dickoya hospital, livelihood assistance to nearly 70,000 people from the fishing and farming communities in Hambantota, supply of medical equipment to the Vavuniya Hospital and 150 Boats and Fishing gear given to Mullaithivu fishermen.Eleven Lines of Credit have been extended to Sri Lanka by the Export Import Bank of India in the last 15 years.

Sectors in which the projects have been executed/ are under execution with the LOC include: Railways, transport, connectivity, and defence. A US$ 100 million LoC for undertaking solar power projects was signed in 2021. Buddhist temples with solar panels will get free electricity.Some important projects that have been completed are: supply of defence equipment; upgrading of the railway line from Colombo to Matara; track laying in the Omanthai-Palai sector, the Madhu Church-Tallaimannar, Madawachchiya-Madhu railway line; reconstruction of the Pallai-Kankesanthurai railway line; setting up signalling and telecommunication systems; supply of engine kits for buses, diesel locomotives for the railways, DMUs, carrier and fuel tank wagons.

Under the LOC of US$ 318 million, various projects for procurement of rolling stock for the Sri Lanka Railways, upgrading of railway tracks, setting up of railway workshops are at different stages of implementation. A project for the rehabilitation of the Kanakesanthurai harbour is being executed under an LOC of US$ 45.27 millionMaldivesDespite the strained relations between the Maldives and India, New Delhi has allocated US$ 72 million to the Maldives in the current budget.Among the noteworthy Indian projects in the Maldives are the Greater Male’ Connectivity Project and the construction of 4000 Social Housing Units in Hulhumale.

There are MoUs for cooperation in cyber-security, disaster management, in fishing zone forecasting capacity, marine research, an agreement for credit financing of police infrastructure, buyer’s credit for an additional 2,000 social housing units, facilitation of duty free tuna exports to India, gifting of a replacement ship for CGS Huravee, supply of a second Landing Craft Assault (LCA), gifting of 24 utility vehicles to the Maldives National Defence Force.Over the last five years, more than 500 medical evacuations have been carried out by Indian personnel operating two helicopters and a Dornier aircraft donated by India. 523 lives have been saved by this team.


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