India reduces development aid to Bangladesh by Rs 60 crore in Union Budget 2026–27, while increasing financial support for Bhutan, Nepal, Afghanistan, Sri Lanka and Mongolia, highlighting a strategic shift in India’s regional development and foreign policy priorities.
India has significantly reduced its development assistance allocation to Bangladesh in the Union Budget 2026–27, even as it expanded financial support for several other neighbouring and strategic partner countries. The move has drawn attention amid evolving regional priorities and India’s broader foreign policy and development diplomacy goals.
According to budget documents tabled in Parliament, India slashed development aid to Bangladesh by Rs 60 crore, bringing the total allocation down from Rs 120 crore in the previous fiscal year to Rs 60 crore in 2026–27. The cut comes at a time when New Delhi has increased allocations for countries such as Afghanistan, Nepal, Bhutan, Sri Lanka, and Mongolia, signalling a recalibration of regional aid priorities.
Bhutan continues to receive the largest share of Indian development assistance among neighbouring countries. The allocation for Bhutan has been raised to Rs 2,288.56 crore, underlining India’s long-standing partnership and ongoing infrastructure, hydropower, and capacity-building projects in the Himalayan kingdom.
Afghanistan has also seen a notable rise in financial support, with allocations increasing from Rs 100 crore to Rs 150 crore. Officials indicate that the enhanced funding reflects India’s intention to expand development projects focused on humanitarian assistance, health, and basic infrastructure, despite the complex political situation in the country.
Nepal’s allocation has been increased by Rs 100 crore to Rs 800 crore, reinforcing India’s commitment to cross-border connectivity, energy cooperation, and development initiatives. Sri Lanka has similarly benefited, with its allocation rising from Rs 300 crore to Rs 400 crore, as India continues to support economic recovery efforts and infrastructure development on the island nation.
One of the sharpest proportional increases has been recorded for Mongolia. India raised its financial support from Rs 5 crore to Rs 25 crore, indicating renewed interest in strengthening ties with the strategically important East Asian nation through development cooperation and capacity-building programmes.
In contrast to these increases, Bangladesh was not the only country to see a reduction. India also trimmed development assistance to the Maldives from Rs 600 crore to Rs 550 crore, and to Myanmar from Rs 350 crore to Rs 300 crore. Additionally, allocations for Eurasian countries were reduced to Rs 38 crore, while financial support for Latin American nations was increased substantially to Rs 120 crore.
Despite selective cuts, the Ministry of External Affairs (MEA) has received a higher overall budget allocation. The MEA’s total budget rose from Rs 20,516.62 crore in the previous fiscal year to Rs 22,118.97 crore in the Union Budget 2026–27, reflecting India’s expanding diplomatic footprint and global engagement.
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Policy analysts suggest that the redistribution of development aid reflects India’s strategic assessment of project readiness, geopolitical considerations, and regional stability priorities, rather than a single-country-focused shift. However, the reduction in aid to Bangladesh is likely to be closely watched, given the depth of bilateral ties between the two neighbours.
