Neighbourhood has always been the core of India’s foreign policy, but over the years a fresh life has been added to it through development diplomacy

Over the years, India has shifted from hard power to soft power with a focus on development aid under the government’s "Neighbourhood First" policy which is based on the philosophy of Vasudhaiva Kutumbakam (the world as one family). This explains India’s development aid and grants to its neighbours mainly Afghanistan, Bangladesh, Bhutan, Nepal, and Sri Lanka.

Development diplomacy is seen as the new frontier of India’s foreign policy, involving sustained and long-term cooperation in the form of humanitarian assistance; infrastructural projects; community-based development projects and capacity-building programmes.

Development-oriented investments are utilised as diplomatic leverage for foreign policy manoeuvres aimed at increasing India's influence in its dynamic neighbourhood and opposing Chinese economic strength, in addition to assuring socioeconomic upliftment of the receiving country. As Indian foreign policy analyst C Raja Mohan aptly puts it, “Without enduring primacy in one’s own neighbourhood, no nation can become a credible power at the global stage.”

In the 2022-23 Union budget, the Indian government allocated Rs 6,292 Crore (Rs 6.9 billion) as development assistance to countries in India’s neighbourhood and Africa. Approximately Rs 2,266 crore (Rs 2.2 billion) were earmarked for Bhutan while development assistance for Nepal and Myanmar was Rs 750 crore (Rs 75 million) and Rs 600 crore (Rs 60 million) respectively.

The budget allocated Rs 300 Crore (Rs 30 million) developmental aid for Bangladesh and the outlay for Sri Lanka was Rs 200 crore (Rs 20 million). It is worth examining how India has expanded its development footprint in the South Asian sub-continent.

India has been one of the biggest contributors towards reconstruction of Afghanistan and since 2001, New Delhi has contributed nearly US$3 billion for the war-torn country’s infrastructure and institutional development. India was the largest regional donor to Afghanistan pre-2021 and has continued its assistance for the people of Afghanistan even after the Taliban came to power in August 2021.

India has supplied wheat and other essential food items and Covid-19 vaccines as humanitarian aid to Afghanistan. In its budget for 2022-23, India has allocated an amount of Rs 200 Crore (Rs 2 billion) as development assistance to Afghanistan. Afghanistan has traditionally been important to New Delhi as it helps counter Islamabad’s influence in the region.

India’s aid diplomacy with Sri Lanka has also been significant. Leading Indian businesses have made investments and established bases of operations in Sri Lanka. Since 2005, the Indian government has committed a total of USD 2.6 billion to Sri Lanka, out of which USD 436 million was in the form of grant assistance and USD 2.17 billion as credit.

Moreover, in 2022 India gave US$ 3.8 billion assistance for ameliorating the serious economic situation in Sri Lanka, which was induced by internal economic disequilibrium and high fiscal debt. In attempting to build its image as a major development and economic partner in the region, China began engaging with various South Asian countries through its Belt and Road Initiative (BRI).

Chinese investors put billions of dollars into Sri Lanka. Large financing from Beijing allowed Chinese businesses to work on a number of important infrastructure projects in Sri Lanka, ranging from the construction of roads and ports to the provision of railroad equipment.

However, Sri Lanka's debt to China became apparent as the economic crisis developed this year. Essentially, India’s approach to Sri Lanka has been people-centric, unlike China’s debt diplomacy. Moreover, Delhi has continued with the assistance regardless of the political and economic changes.

Likewise, India’s investments in Nepal, Bangladesh and Bhutan have been noteworthy. Nepal is one of the earliest recipients of India’s development cooperation initiatives and today, India is among its top bilateral partners.

With assistance from India since 1951(till 2019), over 559 large, intermediate, and small-scale projects worth NPR 76 billion have been implemented across the Himalayan country. In 2021, India committed US$72 million as development aid to Nepal and in February 2021, 13 terai road projects were completed with Indian funding of INR 400 crores and handed over to the Nepal government.

India is also Bhutan’s largest development partner and the highest recipient of India’s overseas aid. Bhutan received from India a total of INR 253 billion from 1998-99 to 2017-18 in the form of grants (INR 171 billion) and loans (INR 8.2 billion). India is also assisting in the upgradation of Bhutan’s Trade infrastructure by investing an amount of Nu./Rs. 800 million in projects such as construction of Pasakha Dry Port, Nganglam and Gelephu Dry Ports and implementation of Bhutan Integrated Taxation System.

India and Bangladesh share a special relationship. The deepening strategic relationship between the two countries and their increasing connectivity act as drivers for each other. Bangladesh is the biggest development partner of India. India has extended three Lines of Credits to Bangladesh in the last 8 years amounting to US$8 billion for development of infrastructure in various sectors including roads, railways, shipping and ports, while providing assistance through grants for other infrastructure projects.

This is the largest concessional credit given by India to any single country. Additionally, India is also developing two Indian Economic Zones at Mirsarai and Mongla in Bangladesh. Besides, its immediate neighbours, India has extended its development aid to South East Asian states by initiating projects such as India-Myanmar Kaladan Multi-Modal Transit Transport Project and India-Myanmar-Thailand trilateral highway.

Inland waterways, railroads, pipelines, energy transmission lines, and optical fibre links are all ways that Delhi is enhancing physical connectivity. Bilateral cooperation and sub-regional integration have regained momentum under the Modi administration, with various finished projects (e.g., South Asia’s first cross-border oil pipeline between India and Nepal in 2019) and new ones announced (e.g., the Greater Malé Connectivity Project).

In 2021, EAM Jaishankar said, “Much of India’s interests and relationships now lie to its East, a testimony of its ties with Asean”. This also explains why East Asia and SouthEast Asia are receiving increased development assistance from India.

Evidently, development cooperation is an important part of New Delhi’s regional posturing aimed at enhancing its influence in its dynamic neighbourhood and countering China’s growing footprint in the Asian subcontinent. However, sustained stability has been a cause of concern for a long time.

In South Asia, persistent turmoil at the political, economic, and social levels has continuously disturbed the peace and stability in India’s neighbouring countries and the region as a whole. Practical considerations also play their part. For example, challenging work conditions, and an uncertain security situation have adversely affected progress of these projects. Success in India’s immediate neighbourhood is the litmus test for its infrastructure diplomacy.

At the time when Beijing has earned notoriety for creating debt traps in the guise of development aid, Delhi has the opportunity to fill the gap by projecting itself as a reliable, long-term development partner. In fact, the time is right for India to walk the talk.

***Author is a PhD scholar from JNU’s School of International Studies; views expressed are her own