Context: This year the budget speech also made a reference to geo-political affairs at the global level becoming more complex and challenging with wars and conflicts. Globalisation is being redefined with reshoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies.
The budget speech also made a reference to the India-Middle East-Europe Economic Corridor which will be a strategic and economic game changer for India and others.
A reference was also made to India’s successful completion of the G20 summit as the country showed the way forward and built consensus on solutions for those global problems.
Grants under the Budget
- The Indian government has allocated an estimated amount of Rs 5,667.56 crore as grants and loans to foreign governments for the fiscal year 2024-25. These investments are made primarily in India’s neighbourhood, Indian ocean region and strategic extended neighbourhood.
- Bhutan has emerged as the primary recipient of Indian government grants and loans. In the fiscal year 2023-24, the government provided a loan of Rs 1,614.36 crore, surpassing the budget estimates for grants and loans in 2024-25.
- Top 10 receiver of grants from India
1. Bhutan: Rs 2398.97 crore
2. Maldives: Rs 770.90 crore
3. Nepal: Rs 650 crore
4. Myanmar: Rs 370 crore
5. Mauritius: Rs 330 crore
6. Afghanistan: Rs 220 crore
7. Bangladesh: Rs 130 crore
8. Sri Lanka: Rs 60 crore
9. Seychelles: Rs 9.91 crore
10. Mongolia: Rs 5 crore
Friend-Shoring, Reshoring and Offshoring?
Today western countries are increasingly adopting industrial policies that promote “friend-shoring” of strategic industries. This, and related terms like “nearshoring”, “de-risking’ and “decoupling” (mainly from China), are in vogue among economic policymakers
Friend-shoring
- When a government pushes businesses to restructure supply chains, shifting production away from geopolitical rivals to friendly powers. Friend-shoring is similar to nearshoring, which moves production closer to home. Both policies aim to strengthen trade security.
- The Biden administration ban on American investment in Chinese technology is one example of the same
Reshoring: Reshoring which is also known as in-shoring or onshoring, reshoring is when a business transfers operations back to its home country. This is seen as an attractive solution for companies whose businesses are impacted by changes in geo-political.
Offshoring: Moving business operations to another country is commonly known as offshoring. This can reduce labour costs and ensure the ready provision of certain skills. It may also mean greater proximity to certain raw materials.