Under the Obama — and perhaps the Trump — administration, the United States has looked to India to play a larger role as a security provider in the Indian Ocean region. India shares similar ambitions, seeing itself as a rising global power with an increasing capability to affect events outside its immediate neighborhood. But these aspirations for India’s presence on a wider stage have frequently come into conflict with its relative poverty and its own internal development needs. The many demands on Indian resources are clear from an examination of its Union Budget, which attempts to balance the demands of debt repayment, security, and development.
Despite the many differences between the United States and India, their roughly congruent federal structures — and the similar distribution of responsibilities between states and the federal government — make meaningful budget comparisons relatively straightforward. Beyond the vast size disparity between the U.S. federal and Indian union budgets, a breakdown of spending shows some important dissimilarities. Perhaps most importantly, India devotes a far larger portion of its budget to debt repayment, limiting its room for maneuver. While India is pursuing a fiscal roadmap that should see the debt eventually repaid, in the medium term growth in defense spending will depend on India’s ability to significantly increase its receipts. The Wadhwani Chair in U.S.-India Policy Studies compared these figures, with the Indian figure listed first, by the numbers.
1380 percent: The relative size of the U.S. federal budget in fiscal year 2015 (ended September 30, 2015) to the Indian budget in Fiscal Year 2016 (ended March 30, 2016).
40.15 percent compared to 12.5 percent: The percentage of federal spending on the top 20 agencies in India and the United States, respectively, that goes to the countries’ finances ministries. The huge portion of India’s federal budget dedicated to the finance ministry reflects the heavy burden of debt servicing. India paid nearly $66 billion in interest alone in Fiscal Year 2016, nearly 25 percent of all federal spending. The equivalent figure for the United States was 6.1 percent.
17.3 percent compared to 20.2 percent: The percentage of federal spending on the top 20 agencies in India and the United States, respectively, that goes towards defense spending, including veterans’ pensions and care. India is often criticized by defense experts for its relatively low spending on defense, but these figures are a reminder that the problem is not so much relative budget share as it is low government spending overall and the division of funds between revenue and capital expenditure.
17.2 percent compared to 50.6 percent: The percentage of Indian and United States spending on the top 20 agencies that goes to bureaus whose primary purpose is entitlement spending. In the case of the United States, this is the Department of Health and Human Services, which funds Medicare and Medicaid, and the Social Security Administration. In India, these are the Ministry of Food and Public Distribution (purchases, distributes, and sells subsidized staples); the Ministry of Fertilizers (the vast majority of its budget goes towards fertilizer subsidies); and the Ministry of Rural Development (roughly half of its budget goes towards India’s national rural employment guarantee program). While other agencies run their own programs, and states chip in as well, the relatively small percentage of the budget that goes directly towards entitlements highlights the difficulties of introducing a Universal Basic Income system in India.
4.7 percent compared to 1.8 percent: The percentage of allocation to the top 20 agencies that goes to India’s Ministry of Home Affairs (MHA) and the U.S. Departments of Homeland Security and Justice, combined. The disparity reflects the wide-ranging law-and-order responsibilities of the MHA, most of which are assumed by the states in the U.S. system.
Want to learn more? See how the U.S. and Indian budgets compare by percentage expenditure (clicking on the graphic will take you to the source for the data):
Sarah Watson is an associate fellow with the Wadhwani Chair in U.S.-India Policy Studies at CSIS.