As China looms, India redirects foreign aid to Indian Ocean countries - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Sunday 7 July 2019

As China looms, India redirects foreign aid to Indian Ocean countries

Indian Ocean countries get a larger share of Indian aid as New Delhi counters China (photo: Modi visits Maldives)

By Ajai Shukla
(Edited version in) Business Standard, 8th July 19

To backstop India’s influence in its extended neighbourhood, Friday’s budget has raised the allocation for providing financial aid to friendly regional countries by over 26 per cent. Last year’s revised allocation of Rs 6,667 crore has been upped to Rs 8,415 crore in 2019-20.

The aid budget has not just being raised, but redirected as well. While Bhutan retains its slot as India’s largest aid recipient, Indian Ocean island countries and littoral states feature high on the list of large aid recipients.

After Bhutan, which has been allocated Rs 2,802 crore this year, tiny Mauritius will be the second-largest recipient of Indian aid, with Rs 1,100 crore allocated. Another island nation, the Maldives, is in fourth place with Rs 576 crore allocated. Seychelles has been allocated Rs 100 crore, while Rs 450 crore has been budgeted for African countries.

Aid flows to Indian Ocean

Largest aid recipients in 2019-20
Largest aid recipients in 2018-19
Largest aid recipients in last decade

Bhutan (2,802 cr)
Bhutan (2,510 cr)
Bhutan (32,280 cr)
Mauritius (1100 cr)
Nepal (750 cr)
Afghanistan (4,855 cr)
Nepal (1,050 cr)
Mauritius (660 cr)
Nepal (4,156 cr)
Maldives (576 cr)
Afghanistan (470 cr)
Mauritius (2,520 cr)
Africa (450 cr)
Maldives (440 cr)
Africa (2,368 cr)
Myanmar (400 cr)
Myanmar (370 cr)
Sri Lanka (2,317 cr)
Afghanistan (400 cr)
Africa (330 cr)
Maldives (1,787 cr)

In all these Indian Ocean Region (IOR) countries, Beijing has expanded its presence using its financial heft and promises of infrastructure development. Now, New Delhi is equipping itself to compete, albeit with lesser resources.

A decade ago, New Delhi’s aid budget was just 30 per cent of what it is today. More than half of the Rs 2,428 crore budget in in 2009-10 went to Afghanistan and Bhutan, leaving little for the IOR countries. Seychelles and Mauritius did not feature on India’s aid list then and the Maldives got a token Rs 3 crore.

Not until 2016-17 was financial aid earmarked for these IOR island states. That year also saw the first specific allocation for developing Chabahar Port, in Iran: a meaty Rs 100 crore. However, US sanctions on Iraq ensured no allocations were made in 2017-18 and 2018-19. This year, Chabahar features again, with an allocation of Rs 45 crore.

India’s humanitarian aid commitment to Afghanistan, which is widely praised by the international community, has tended to dominate New Delhi’s aid discourse. In fact, budget documents show that Afghanistan is a distant second to Bhutan. Since 2001-02, India has disbursed Rs 5,931 crore to Afghanistan. During this period, Bhutan received Rs 40,850 crore. Even Nepal received almost as much as Afghanistan during this period: Rs 5,071 crore.

National Security Council Secretariat (NSCS)

Meanwhile, there is speculation over large expenditures by the NSCS, which have come to light in the budget documents. While the NSCS budget for 2018-19 allocated Rs 304 crore, the revised allocations anticipate an expenditure of Rs 842 crore – almost thrice the budgeted sum. This includes a capital allocation of Rs 715 crore, whereas the budget estimates did not allocate a capital budget to the NSCS.

Sources in the NSCS say there is curiosity within the secretariat about where this amount has been expended, and what assets have been created with the Rs 715 crore capital allocation. The NSCS recently occupied an additional floor in the government building it is headquartered in, but refurbishments could not have cost more than “a couple of crore”, say the sources.

There is speculation that at least some of the money could have gone into organising Prime Minister Narendra Modi’s large rallies in New York, London and Sydney.

The NSCS is an executive body that advises the prime minister’s office (PMO) on matters of national strategy and security. There are limitations on the audit scrutiny of expenditures made by the NSCS. 


  1. That's like $40 mil per country max. China can outspend India anytime after which all of India's investments goes up in smoke. Use the money to make India stronger.

  2. NSR says - That is like $150 millions per country... Not bad...


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