Budget support to Bangladesh halved due to strained ties

India has sharply revised its overseas development assistance in the Union Budget 2026-2027, cutting aid to Bangladesh by half, a move that reflects growing tensions in bilateral ties amid reports of rising anti-Hindu incidents and killings in the neighboring country.

Bangladesh is facing one of India’s sharpest cuts in foreign aid, with its allocation reduced from Rs 120 crore to Rs 60 crore, even as aid to most other neighboring countries has been maintained or increased.

The document also revealed that while India had allocated Rs 120 crore to Bangladesh, of which only Rs 34.48 crore was actually spent due to the strained relations.

Meanwhile, Bhutan continues to top the list of countries receiving Indian aid, followed by Nepal, Maldives and Sri Lanka. The allocation under “Aid to Countries” has been increased to Rs 5,686 crore, about 4% higher than last year’s budget estimates of Rs 5,483 crore.

A major shift in the budget is the complete absence of funding for the Chabahar port project. India had spent Rs 400 crore on the project in 2024-25 and had initially allocated Rs 100 crore in the 2025-26 budget estimates, later increasing it to Rs 400 crore in the revised estimates.

For 2026-2027, the allocation has been reduced to zero.

This is despite India signing a 10-year deal in 2024 to operate the Shahid Beheshti terminal in Chabahar, a project considered crucial for India’s access to Afghanistan and Central Asia while bypassing Pakistan.

The pause in funding coincides with increased external pressure on India’s involvement with Iran, following US President Donald Trump’s announcement of a 25% tariff on countries trading with Tehran, effectively limiting previous sanctions waivers. The development adds uncertainty to India’s role in the Chabahar project and its broader regional connectivity plans.

Meanwhile, Bhutan remains the largest recipient of Indian aid, with its allocation rising by about 6% to Rs 2,289 crore, due to continued support for hydropower and infrastructure projects.

Nepal sees a 14% increase to Rs 800 crore, while Sri Lanka’s aid rises by about a third to Rs 400 crore, underscoring India’s role in supporting the island’s post-crisis recovery.

In the Indian Ocean region, allocations are mixed with the Maldives seeing a reduction of around 8% to Rs 550 crore, while Mauritius will receive a 10% increase to the same amount.

Aid to Afghanistan remains unchanged at Rs 150 crore, mainly for humanitarian support, while Myanmar’s allocation is reduced by around 14% to Rs 300 crore due to political instability and implementation issues.

Aid to African countries remains steady at Rs 225 crore, funding for Latin America doubles to Rs 120 crore from a low base and aid to Eurasian countries drops slightly to Rs 38 crore.

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