(File Photo) Nepal’s Prime Minister Khadga Prasad Sharma Oli (R) and his Indian counterpart Narendra Modi. (Source: REUTERS) (File Photo) Nepal’s Prime Minister Khadga Prasad Sharma Oli (R) and his Indian counterpart Narendra Modi. (Source: REUTERS)

India reduced its financial aid to Nepal by 40 per cent Monday. The cut that came days after Nepal PM K P Sharma Oli’s visit to mend ties and “clear misunderstandings” was expected to raise eyebrows in Kathmandu.

In the Union Budget presented Monday, the Centre allocated Rs 300 crore for aid to Nepal for 2016-17, a massive decline from last year’s allocation of Rs 420 crore. However, government sources told The Indian Express that the cut was not an indicator of New Delhi’s confidence in the Oli government. “The issue in Nepal is that of absorption capacity, and they have been quite poor in utilising the aid being given to them…Look at the earthquake reconstruction programme…they have just set up the reconstruction authority in Nepal. The aid last year could not be utilised, which led to revision of budget estimates,” an official said.

Overall, the Ministry of External Affairs was allocated Rs 14,662 crore, a cut of Rs 378 crore compared to last year, even as the focus of the outlay remained on development projects implemented by India in neighbouring countries including Bhutan and Afghanistan.

While financial aid to majority of countries — Bangladesh (down from Rs 250 cr to Rs 150 cr), Bhutan (down from Rs 6,160.20 cr to Rs 5,490 cr), Sri Lanka ( cut from Rs 500 cr to Rs 230 cr) — was reduced, two countries witnessed a hike in assistance: Myanmar (up from Rs 250 cr to 400 cr) and Maldives (up from Rs 25 cr to Rs 40 cr).

Officials attributed the hike to new projects coming up in these two countries. Out of the total allocation to the MEA, Rs 4,720 crore was given to the ministry under plan outlay, while Rs 9,942.66 crore was set aside as non-plan expenditure.

While Rs 15,041.08 crore was given to the ministry in 2015-16 as per revised estimate, the total allocation made for next fiscal is 2.5 per cent less than last year. Out of total international assistance, Rs 4510 crore will be plan expenditure and Rs 3,060.62 crore non-plan expenditure.

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