India’s Allocation and Disbursement of Funds: Key Insights with Focus on India’s Immediate Neighbouring Countries

India's Allocation and Disbursement of Funds: Key Insights with Focus on India's Immediate Neighbouring Countries

ABSTRACT

As an emerging global power, India has been actively engaging in development partnerships with various countries, especially in Asia and Africa. These partnerships often involve providing grants and loans to foster economic development, infrastructure improvement, and capacity building. India’s foreign policy significantly emphasizes strengthening bilateral relations, promoting regional stability, enhancing soft power, and advancing economic interests through development assistance. Funds allocated refers to the amount of money that has been earmarked or set aside for a specific project or purpose. Funds disbursed is the actual amount of money that has been released and spent on the project. Collectively, the research objectives for this study is designed to provide a holistic and nuanced understanding of the financial landscape among India’s immediate neighbouring countries, offering valuable insights into regional economic interactions, developmental strategies, and the complex dynamics of fund allocation and disbursement. This exploratory analysis examines the allocation and disbursement of funds by India over the fiscal years 2008-09 to 2022-23, with a specific focus on India’s immediate neighbours Over the last 15 financial years (2008-09 to 2022-23), India allocated approximately 85.3K crores for its development partnership initiatives. Out of this, around 74.1K crores were disbursed. During this period, among all the IIN countries, India allocated and disbursed the highest amount of funds to Bhutan (46.2K crores allocated and 40.6K crores disbursed). The significant amount of allocated funds that remained undisbursed could be due to various factors, such as project delays, changing priorities, or inefficient disbursement mechanisms. The disproportionately high allocation and disbursement of funds to Bhutan compared to other IIN countries may raise questions about the equity and fairness of India’s development partnership initiatives. India should consider diversifying its development partnerships beyond the IIN countries to ensure a more balanced and equitable distribution of funds. This could involve exploring partnerships with other countries and regions that align with India’s strategic interests and development priorities.

1. Introduction

As an emerging global power, India has been actively engaging with various countries through development partnerships, especially in Asia and Africa. These partnerships often involve providing grants and loans to foster economic development, infrastructure improvement, and capacity building. India’s development partnership is rooted in the principle of South-South cooperation, which emphasizes mutual benefit and solidarity among developing countries. Through grants and loans, India seeks to support socio-economic development, enhance regional stability, and build long-lasting diplomatic relations. Grants are non-repayable funds India provides to recipient countries for specific development projects. These projects often focus on areas such as education, healthcare, infrastructure, and capacity building. Loans provided by India, often through its Export-Import Bank (Exim Bank), are typically concessional, meaning these are usually offered at lower interest rates and with longer repayment periods compared to commercial loans. These loans are aimed at large-scale infrastructure projects, such as roads, railways, and power plants, which are crucial for economic growth and development.

India’s foreign policy significantly emphasizes strengthening bilateral relations, promoting regional stability, enhancing soft power, and advancing economic interests through development assistance. By supporting development projects with partner countries, India fosters goodwill and fortifies bilateral ties to create the foundation for long-term cooperation. Additionally, contributing to the economic development of neighbouring and partner countries promotes regional stability, which aligns with India’s strategic interests. This approach also bolsters India’s soft power, portraying it as a responsible and benevolent global player on the international stage. Furthermore, offering loans and grants provides opportunities for Indian companies to engage in overseas projects, thereby promoting India’s economic interests abroad. This multifaceted strategy not only benefits the recipient nations but also enhances India’s diplomatic and economic influence globally.

Funds allocated refers to the amount of money that has been earmarked or set aside for a specific project or purpose. Allocation is an initial step where the financial resources are identified and reserved but not necessarily transferred or utilized. For example, India may allocate $100 million for a healthcare project in Africa. Funds disbursed is the actual amount of money that has been released and spent on the project. Disbursement occurs after the allocation and is contingent upon the progress of the project, compliance with conditions, and completion of necessary administrative procedures. In the same example, out of the $100 million allocated, only $60 million may have been disbursed if that is the amount required for the project’s current phase. The distinction between funds allocated and funds disbursed is significant because it highlights the gap between commitment and execution. Allocated funds indicate the level of commitment from the donor, while disbursed funds reflect the actual implementation and impact of the assistance.

The research objectives of this study are strategically designed to provide a comprehensive analysis of financial allocation and disbursement dynamics with a focus on India’s Immediate Neighbouring (IIN) countries. The primary aim is to systematically examine the intricate patterns of funds allocation and disbursement across these nations over the last 15 years. The first research objective focuses on investigating the variability of funds allocation and disbursement patterns across IIN countries through a temporal lens. The second research objective analysed the year-on-year percentage distribution of funds allocated and disbursed among IIN countries to uncover comparative trends, highlighting each nation’s relative financial performance and allocation strategies. The third research objective delves into a critical comparative analysis of the proportion of funds disbursed relative to funds allocated across India’s immediate neighbouring countries to shed light on each nation’s efficiency, absorption capacity, and implementation mechanisms of financial resources. Collectively, these research objectives are designed to provide a holistic and nuanced understanding of the financial landscape among India’s immediate neighbouring countries, offering valuable insights into regional economic interactions, developmental strategies, and the complex dynamics of fund allocation and disbursement.

2. Data & Methodology

This descriptive research examines the allocation and disbursement of funds by India over the fiscal years 2008-09 to 2022-23, with a specific focus on India’s immediate neighbours: Afghanistan, Bangladesh, Bhutan, China, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka. However, since India never provided any funds to China and Pakistan during this period, these countries are excluded from the analysis. The dataset is web-scraped from the Ministry of External Affairs.  To derive deeper and more nuanced insights, the research methodology extended beyond basic reporting to encompass a multi-dimensional statistical approach. This included computing aggregate statistics such as the total funds allocated and disbursed across all IIN countries, which provided a macroscopic view of the financial landscape. The study implemented year-on-year (YoY) percentage distributions of funds allocated and disbursed across IIN countries to enhance the analytical depth. This approach allowed for a comparative assessment of financial trajectories, enabling stakeholders to understand not just the absolute numbers but also the proportional changes and relative financial health of each participating nation. Additionally, a key metric representing the YoY percentage of funds disbursed out of total allocated funds across IIN countries was computed to provide a critical measure of financial efficiency and utilization rate.

3. Results

Over the last 15 financial years (2008-09 to 2022-23), India has allocated approximately 85,258 crores for its development partnership initiatives, of which 73,152.1 Cr. funds were allocated for IIN countries only, representing 85.8% of the total allocation. The disbursement pattern also closely reflects the allocation strategy. In total, India has disbursed 74,064.9 crores of funds during the same period, in which IIN countries received 63,505.8 Cr. (85.7% of total disbursed funds) and non-IIN countries received only 10,559.13 Cr. (14.3% of disbursed funds). The remarkable consistency between allocation and disbursement percentages—differing by mere fractions of a per cent—speaks to an exact and efficient financial management process. This alignment demonstrates India’s capability to execute financial strategies with minimal deviation, suggesting robust planning, sophisticated fund management mechanisms, and a disciplined approach to international economic interactions (fig: 1).

Fig: 1

Among all the IIN countries, Bhutan has emerged as one of the most significant fund recipients, showing India’s regional financial commitments. Indian govt. has allocated a staggering 46,195.8 crore rupees for Bhutan over the last 15 years, of which 40,647.9 crore rupees were disbursed, representing an impressive 64% of the total IIN country funds and 54.9% of the overall funds. This extraordinary focus on Bhutan suggests a deep-rooted strategic partnership, potentially underpinned by geographical proximity, geopolitical considerations, and shared economic interests.

In contrast, other countries demonstrate more modest allocations and disbursement patterns. Afghanistan has ranked second in the list of largest fund-recipient IIN countries. In the last 15 years, India has allocated 6,719.3 crore rupees to Afghanistan, of which 6,221.5 crore rupees were disbursed, accounting for 9.2% of total IIN country funds and 7.9% of overall funds. Nepal follows closely with an allocation of 7,116.0 crore rupees, of which 6,374.4 crore rupees were disbursed, representing 9.7% of IIN country funds and 8.3% of total funds. These allocations hint at a clear approach to regional economic diplomacy, where India strategically channels resources based on complex geopolitical and developmental considerations.

Fig: 2

The disbursement rates across different countries offer fascinating insights into India’s financial engagement’s efficiency and strategic prioritization. While Bhutan has maintained an exceptional disbursement rate of nearly 88%, other countries have shown varying levels of fund utilization. However, Myanmar has presented a notable contrast, with only 3,029.8 crore rupees disbursed out of 4,338.2 crore rupees allocated, representing a lower disbursement rate of approximately 69.8%. Similarly, Sri Lanka has shown a disbursement rate of about 74%, receiving 2,702.3 crore rupees against an allocation of 3,649.0 crore rupees.

The percentage breakdown of funds across different dimensions such as—IIN country funds, total funds, and individual country allocations—provides a multi-layered perspective on India’s regional economic strategy. Comparatively, smaller nations like Maldives and Bangladesh have received relatively modest allocations, around 3.5-3.6% of IIN country funds, yet their inclusion demonstrates India’s commitment to comprehensive regional engagement. This approach suggests a holistic view of economic cooperation that extends beyond pure monetary considerations, potentially encompassing diplomatic, cultural, and strategic dimensions (fig: 2).

Fig: 3

India’s trajectory of fund allocation reveals a compelling narrative of growth, volatility, and strategic recalibration. In the initial years (2008-09 to 2011-12), the total allocated funds showed a steady, moderate increase, rising from 1,822.47 crore rupees to 2,844 crore rupees. However, the fiscal years from 2012-13 to 2015-16 marked a period of significant expansion, with total allocated funds escalating dramatically from 4,857.21 crore rupees to a peak of 9,108.37 crore rupees. This surge suggests a period of heightened economic optimism, increased regional engagement, or specific strategic initiatives driving fund allocations.

The subsequent years witnessed a notable trend of contraction and fluctuation. From 2016-17 onwards, there’s a discernible downward trajectory in total allocated funds, with annual allocations oscillating between 5,375 crore rupees and 7,662.79 crore rupees. This period of financial moderation reflects multiple factors: potential economic constraints, strategic reprioritization, or a more measured approach to regional fund deployment. Interestingly, the allocated funds for IIN (International Investment Network) countries have consistently represented a significant proportion of the total funds, typically ranging between 80-90%, indicating a sustained commitment to regional economic partnerships.

The disbursement pattern presents an equally intriguing narrative. Notably, the disbursement figures sometimes directly mirror the allocation trends, revealing the complex realities of fund utilization. The peak disbursement occurred in 2015-16, with 7,719.65 crore rupees disbursed overall and 7,290.43 crore rupees directed to IIN countries. This peak diverges from the allocation peak, suggesting potential time lags or nuanced implementation strategies in fund deployment.

A particularly fascinating aspect emerged in the post-2016-17 period, where a consistent gap between allocated and disbursed funds was observed. This discrepancy indicates several underlying dynamics: challenges in fund absorption, strategic financial management, or external factors impacting fund utilization. For instance, in 2019-20, while 7,662.79 crore rupees were allocated, only 7,023.14 crore rupees were actually disbursed, representing a disbursement rate of approximately 91.7%.

The fiscal years 2020-21 and 2021-22 present a unique context influenced by the global COVID-19 pandemic. During this tragic period, a more pronounced divergence between allocation and disbursement was observed, with total allocated funds at 6,854.65 and 7,028.95 crore rupees, but disbursed funds dropping to 5,371.47 and 4,576.69 crore rupees, respectively. This reduction reflects the economic disruptions and challenges posed by the pandemic, demonstrating the vulnerability of financial ecosystems to unprecedented global events.

The final year in the dataset, 2022-23, shows signs of stabilization and potential recovery. With total allocated funds at 6,182.3 crore rupees and disbursed funds at 4,703.49 crore rupees, the trend suggests a gradual return to pre-pandemic financial deployment strategies. The continued high proportion of funds allocated to IIN countries (approximately 75.6%) underscores India’s unwavering commitment to regional economic cooperation (fig: 3).

Fig: 4

The percentage breakdown of allocated funds and disbursed funds reveals a remarkably consistent pattern of fund allocation towards IIN countries, which have consistently represented a substantial majority of the total funds. In the early years (2008-09 to 2011-12), IIN countries received approximately 91% of the total allocated funds, demonstrating a clear strategic prioritization of regional economic engagement. This period reflects a focused approach to nearby geopolitical and financial partnerships, with India channelling resources predominantly towards its immediate neighbourhood.

As the fiscal years progressed, the percentage allocation maintained a high but slightly more variable pattern. From 2012-13 to 2015-16, IIN countries consistently received between 88% and 94% of total allocated funds, reaching a peak allocation of 93.9% in 2014-15. This period signifies an era of intense regional economic diplomacy, where India substantially concentrated its financial resources within its immediate geographical sphere of influence. The consistency of these percentages suggests a deliberate and strategic approach to regional economic integration.

The subsequent years (2016-17 to 2022-23) witnessed a subtle but noticeable shift in allocation patterns. During this period, The percentage of funds allocated to IIN countries has fluctuated more noticeably, ranging from approximately 80% to 90%. In fiscal years 2017-18 and 2018-19, the allocation to IIN countries dropped to around 82-85%, which indicates a slight recalibration of India’s regional economic strategy or response to changing geopolitical dynamics. Despite these fluctuations, the overwhelming majority of funds continued to be directed towards IIN countries, underlining the persistent importance of regional economic partnerships.

The disbursement percentages mirror the allocation trends with remarkable precision, further validating the strategic consistency of India’s approach. Throughout the entire period, the rate of funds disbursed to IIN countries remained closely aligned with the allocation percentages, typically varying by less than 2-3 percentage points. This alignment suggests an efficient and well-planned financial management system capable of translating allocation strategies into actual fund deployment with high fidelity.

A particularly intriguing aspect emerges in the later years, especially during the 2019-20 to 2022-23 period, which coincides with the global COVID-19 pandemic. During these years, while the absolute allocation and disbursement amounts have fluctuated significantly, the percentage of funds directed to IIN countries remained relatively stable, hovering around 82-85%. This consistency demonstrates India’s unwavering commitment to regional economic support, even during a period of global economic uncertainty (fig: 4).

Fig: 5

India’s fund allocation for Bhutan escalated dramatically from a modest allocation of 953 crore rupees in 2008-09 to a peak of 6,160.02 crore rupees in 2015-16, representing a stunning six-fold increase. The disbursement pattern mirrors this growth, with funds disbursed rising from 1,182.23 crore rupees to a peak of 5,368.46 crore rupees. This sustained and substantial financial commitment underscores India’s strategic partnership with Bhutan, likely reflecting deep-rooted geopolitical, economic, and developmental ties that extend far beyond mere monetary transactions.

On the other hand, Afghanistan has presented a complex and fluctuating financial engagement pattern. Initially, the fund allocation for Afghanistan was around 445 crore rupees in 2008-09, and within five years, this amount peaked at 707 crore rupees in 2012-13 before gradually declining to 200 crore rupees by 2022-23. Interestingly, the disbursement pattern often diverged from allocation, with some years seeing higher disbursements than allocations, potentially indicating carry-forward funds or complex geopolitical considerations. The most notable disbursement occurred in 2015-16, reaching 880.44 crore rupees despite an allocation of 676 crore rupees, suggesting a responsive and flexible approach to regional economic support.

Nepal has demonstrated a progressive and strategic financial engagement, with allocated funds growing from 140 crore rupees in 2008-09 to a peak of 1,050 crore rupees in 2019-20. The disbursement trend closely followed allocation, with funds disbursed increasing from 136.37 crore rupees to a peak of 1,198.25 crore rupees. This consistent and growing financial support reflects India’s commitment to Nepal’s economic development and the intricate bilateral relationship characterized by open borders, cultural similarities, and deep-rooted economic interconnectedness.

Myanmar and Bangladesh have showcased more nuanced engagement patterns. Myanmar’s allocated funds fluctuated significantly, ranging from as low as 45 crore rupees to a peak of 600 crore rupees in 2022-23, with disbursements often varying considerably from allocations. Bangladesh, in contrast, demonstrated a more gradual growth, starting with minimal allocations of 16 crore rupees in 2008-09 and gradually increasing to 300 crore rupees by 2022-23, with disbursements showing a similarly measured progression.

Maldives and Sri Lanka have represented more minor but strategically significant recipients of Indian funds. The Maldives experienced dramatic fluctuations, with allocated funds ranging from 7 crore rupees to 576 crore rupees, reflecting the complex and dynamic nature of India’s engagement with smaller neighbouring nations. Sri Lanka’s allocation remained relatively stable in later years, hovering around 200 crore rupees annually, suggesting a consistent but measured approach to economic support (fig: 5).

Fig: 6

The changing financial dynamics across IIN countries show that Bhutan consistently emerges as the most significant recipient of allocated and disbursed funds, dominating the percentages throughout the period. In most of the years, Bhutan received between 48% to 78% of the total funds, with a particularly notable peak of 77.82% in funds disbursed during 2016-17 and 72.82% in funds allocated in the same year. Interestingly, the distribution patterns demonstrate significant variability for other countries. Nepal shows a notable trend of increasing fund allocation and disbursement over time. From modest percentages around 5-7% in the early years, Nepal’s share gradually rose, reaching impressive peaks of 23.58% in disbursed funds and 18.57% in allocated funds during the fiscal year 2019-20.

Myanmar and Afghanistan present more volatile funding profiles. Myanmar’s funds fluctuated considerably, ranging from as low as 1.61% to as high as 17.74% in disbursed funds, with a similar pattern in funds allocation. While consistently receiving funds, Afghanistan showed a gradual decline in its percentage share over the years, potentially reflecting changing geopolitical or economic circumstances. Bangladesh and Maldives maintained relatively more minor but consistent fund allocations. Bangladesh, in particular, showed an intriguing progression, with its fund percentages gradually increasing from less than 1% in early years to around 6-7% by the later fiscal years. Maldives experienced more fluctuation, with percentages ranging from 0.15% to 9.10% in disbursed funds. Sri Lanka’s funding profile was the most inconsistent, with percentages oscillating between 0.97% and 8.00% in disbursed funds and similar variability in allocated funds. This volatility might reflect the country’s complex economic and political landscape during this period (fig: 6).

Fig: 7

The pattern of fund utilization across different countries shows that Maldives is the most extreme example of variability, with disbursement percentages showing extraordinary peaks and troughs. In 2008-09, Maldives saw an astounding 2,924.5% disbursement rate, which suggests a massive overutilization of allocated funds. Bangladesh demonstrates a similarly unpredictable disbursement pattern. The country experienced significant variability, with fund disbursement ranging from as low as 17.1 in 2009-10 to a substantial 937.3 in 2012-13. Such dramatic fluctuations indicate rapidly changing economic conditions, project scaling, or potentially complex bureaucratic processes affecting fund utilization.

Nepal and Afghanistan show more moderate but still notable variations. Nepal’s disbursement percentages typically hover between 45.0 and 127.4, suggesting a relatively consistent approach to fund allocation and use, though only partially stable. Afghanistan’s numbers range from 47.5 to 144.6, indicating similar challenges in predictable fund utilization. Bhutan presents an interesting case of relatively stable fund disbursement. While not as extreme as Maldives or Bangladesh, Bhutan’s percentages generally range between 54.8 and 147.5, showing flexibility in fund usage that doesn’t veer into extreme territories. Myanmar and Sri Lanka round out the picture with their unique disbursement narratives. Myanmar’s percentages fluctuate between 30.9 and 149.6, with a notable increase in variability in later years. Sri Lanka shows an exciting trend, with a dramatic drop in disbursement percentage to 22.4 in 2020-21 and 24.3 in 2021-22, potentially reflecting economic challenges or significant changes in investment strategies (fig: 7).

4. Conclusion

The significant amount of allocated funds that remained undisbursed could be due to various factors, such as project delays, changing priorities, or inefficient disbursement mechanisms. This highlights the need for better project management and monitoring to ensure timely and efficient utilization of allocated resources. The disproportionately high allocation and disbursement of funds to Bhutan compared to other IIN countries may raise questions about the equity and fairness of India’s development partnership initiatives. It is essential to ensure that funds are distributed based on each country’s specific needs and priorities rather than favouring one country over others. While Bhutan’s high share of funds may be justified by its unique relationship with India, it is pivotal to ensure that the allocation of funds aligns with the national priorities and development plans of both India and the recipient countries. Engaging in meaningful consultations with partner countries can help identify areas of mutual interest and ensure the effective utilization of resources. Robust monitoring and evaluation mechanisms are necessary to assess the impact and effectiveness of development partnership initiatives. This includes setting clear objectives, defining measurable indicators, and conducting regular assessments to ensure the allocated funds are used efficiently and achieve the desired outcomes. 

India should consider diversifying its development partnerships beyond the IIN countries to ensure a more balanced and equitable distribution of funds. This could involve exploring partnerships with other countries and regions that align with India’s strategic interests and development priorities. Improving project management capabilities, including better planning, monitoring, and risk mitigation strategies, can help reduce the percentage of undisbursed funds and ensure the timely and effective utilization of allocated resources. Promoting transparency and accountability in allocating and disbursing funds can help build trust with partner countries and ensure that the funds are being used for their intended purposes. This includes regular reporting, independent audits, and public disclosure of information related to development partnership initiatives. India’s development partnership initiatives can serve as a platform for fostering regional cooperation and integration. By aligning its development cooperation efforts with regional development frameworks and initiatives, India can leverage its resources to promote shared prosperity and address common challenges. India should focus on strengthening its domestic resource mobilization efforts to sustain and expand its development partnership initiatives. This includes improving tax collection, reducing tax evasion, and exploring innovative financing mechanisms to generate additional resources for development cooperation.

5. References

  1. MEA Performance Dashboard. (n.d.). https://meadashboard.gov.in/
  2. Neighbourhood first in MEA’s aid allocation. (n.d.). Drishti IAS. https://www.drishtiias.com/daily-updates/daily-news-analysis/neighbourhood-first-in-meas-aid-allocation
  3. How India Funds the World: Financial assistance in the immediate neighbourhood. (2019, May 29). Economic and Political Weekly. https://www.epw.in/engage/article/how-india-funds-world-financial-assistance
  4. In numbers: 16 years of data, 8 charts to decode India’s foreign policy and aid rhetoric. (n.d.). The Wire. https://thewire.in/politics/in-numbers-eight-charts-on-indias-foreign-policy-and-aid
  5. Benu, B. P. (2024, May 16). India’s foreign grant and loan disbursements, flat, since the pandemic. BusinessLine. https://www.thehindubusinessline.com/data-stories/data-focus/indias-foreign-grant-and-loan-disbursements-flat-since-the-pandemic/article68182136.ece

 



About Author



 

Pankaj Chowdhury is a former Research Assistant at the International Economic Association. He holds a Master’s degree in Demography & Biostatistics from the International Institute for Population Sciences and a Bachelor’s degree in Statistics from Visva-Bharati University. His primary research interests focus on exploring new dimensions of in computational social science and digital demography.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of 360 Analytika.

Acknowledgement: The author extends his gratitude to the Ministry of External Affairs for providing data support.

This article is posted by Sahil Shekh, Editor at 360 Analytika.

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