Union Budget 2025 | US freezes foreign aid, but India to spend 20% more on development projects in other countries

New Delhi: India on Saturday proposed to spend 20 per cent more on its overseas development partnership projects in 2025-26 even as President Donald Trump’s administration froze all foreign assistance of the United States.

The Union Budget 2025-26 presented by Finance Minister Nirmala Sitharaman proposed to earmark Rs 6750 crore – 20 per cent more than the 2024-25 allocations of Rs 5667.56 crore – for funding development projects in other countries, mostly in the neighbourhood of India.

Sitharaman allocated Rs 20,516.61 crore for the Ministry of External Affairs in her budget for 2025-26 – Rs 1638.06 crore and Rs 4760.59 crore less than the 2024-25 Budget Estimate and Revised Estimate respectively.

Nearly 33 per cent of the overall allocation for the MEA in 2025-26 was earmarked for the development projects funded by New Delhi in other countries.

The US leaves all other countries behind it when it comes to providing foreign aid. Washington DC budgeted about $60 billion for providing support to other countries in 2023, or about 1 per cent of the overall budget of the US.

But Trump Administration of late ordered to suspend many of the billions of dollars in US-funded projects globally to support health, education, development, job training, anti-corruption, security assistance and other efforts.

No allocation has been made towards EXIM bank provisioning in MEA’s budget. The provisioning regarding EXIM Bank is a dynamic process and may be done at a later phase if the need arises. The allocation of Rs. 20,516.61 crore for 2025-26 is an increase of 15.45 per cent in comparison to last year’s budget without the allocation towards EXIM bank provisioning.

With Prime Minister Narendra Modi’s government pursuing a ‘Neighbourhood First’ policy, 64 per cent of the MEA’s schemes – worth Rs. 4320 crore – is earmarked for India’s immediate neighbours towards implementation of a variety of demand-driven initiatives ranging from large infrastructure projects such as hydroelectric plants, power transmission lines, housing, roads, bridges, integrated check-posts, to small-scale grass-roots level community development projects as well as training and capacity building programmes.

The MEA have operationalized 10 new Missions and Posts abroad during 2024-25. So the ministry’s relevant budget head for BE 2025-26 has increased by around 9 per cent to cater for the same. This marks an increase from Rs 3867.64 crore in the 2024-25 Budget Estimate to Rs. 4206 crore in the 2025-2026 Budget Estimates.

Track Budget reactions LIVE

Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.