India’s foreign policy finds itself at a critical juncture. While much of the country’s external engagements remain deeply intertwined with its economic policy, looming challenges continue to demand vital strategic attention to its security calculus. The recently concluded India-European Union (EU) free trade agreement (FTA), the seeming consensus over a trade deal with Washington, and an overall focus on economic diplomacy to fuel its regional and global prowess underscore that a resilient economic backbone is an essential element of India’s foreign policy.

Similarly, the challenges to India’s national security and the emergence of a serious, systematic reset in New Delhi’s security preparedness, as evidenced during and in the aftermath of Operation Sindoor in 2025, highlight the need for a robust budgetary allocation. The Union Budget 2026-27, and the budgetary allocations to the ministry of external affairs (MEA), and the ministry of defence (MoD), serve as a guiding framework that outlines New Delhi’s priorities at this moment of flux.

India’s budgetary allocation towards the MEA has seen a marginal increase since 2025-26. For the upcoming financial year, Rs 22,118 crore has been earmarked for the ministry, against that of the current year which was pegged at Rs 20,516 crore. An overview of the fine print in the allocation reveals a host of realignments that are likely to guide India’s external engagements. The largest allocation within the budget for the ministry has been directed towards the Overseas Development Partnership (ODP) vertical—at Rs 6,997 crore,........

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