India's budget slashes aid to Bangladesh by 50%
Allocation for Bangladesh has been pegged at Rs60 crore as against Rs120 crore for FY26
India's budget for the fiscal year 2026-27 presented in parliament today (1 February) slashed developmental aid to Bangladesh by 50%, amid a sharp downturn in bilateral ties post-Sheikh Hasina's ouster from power.
This marks the steepest reduction in regional aid, triggered by a diplomatic freeze, allegations of attacks on minorities, and Dhaka's tilt toward Pakistan.
For the next fiscal beginning in April, the budget's allocation for Bangladesh has been pegged at Rs60 crore as against Rs120 crore for FY26. In fact, the revised estimate of the aid to Bangladesh in FY26 budget has been pegged at Rs34.48 crore as ties between the two sides remained frosty.
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Bhutan was allocated the largest share of Rs2,288 crore as development aid in the budget for FY27 followed by Rs800 crore to Nepal and Rs550 crore each to the Maldives and Mauritius.
Bhutan remains the largest recipient of Indian aid and sees its allocation rise by Rs138 crore to Rs2,288 crore from Rs2,150 crore in the previous budget of FY26.
The aid for the Maldives saw a drop of Rs50 crore to Rs500 crore while the same to Mauritius saw a 10% rise. Myanmar's allocation falls 14% to Rs300 crore.
In continuation with India's warming up of relationship with Afghanistan, an allocation of Rs150 crore has been made in the new budget to that country. The allocation to Afghanistan for FY26 was Rs100 crore.
Sri Lanka has been allocated Rs400 crore and Rs300 crore was set aside for Myanmar in the budget for FY27. The aid for Afghanistan, Sri Lanka and Nepal saw a marginal increase in allocation.
In a break from the last few years, no allocation has been made in the new budget for the Chabahar port project in Iran. In the budget last year, an amount of Rs100 crore was set aside for the project and the amount increased to Rs400 crore in the revised estimate.
The budget allocated a total of Rs22,118 crore to the Ministry of External Affairs (MEA) as against the current fiscal's budget estimate of Rs20,516 crore and revised estimate of Rs21,742 crore.
The total overseas development partnership portfolio for FY26 was pegged at Rs6,997 crore, which is little over 31% of the allocation made to the MEA.
Out of the total allocation under the overseas development partnership portfolio, Rs4,548 crore has been earmarked for immediate neighbours.
The amount is expected to be spent towards implementation of a variety of initiatives ranging from large infrastructure projects such as hydroelectric plants, power transmission lines, housing, roads, bridges to small-scale grass-roots level community development projects, according to officials.
India's total foreign grants hit Rs5,685 crore in FY26, according to budget papers.
