Diplomatic shifts visible as New Delhi reallocates regional development funds
India’s latest financial roadmap for the 2026-27 fiscal year reveals a massive shift in how the nation supports its neighbors. The India foreign aid budget 2026 shows a stark contrast between strengthening ties with some allies and distancing from others. Most notably, financial assistance to Bangladesh has been sliced in half, dropping from Rs 120 crore to just Rs 60 crore. This move follows a period of strained relations and reports of instability in the neighboring country.
While the total budget for "Aid to Countries" rose by 4% to reach Rs 5,686 crore, the distribution is far from uniform. Bhutan remains the biggest beneficiary, receiving Rs 2,289 crore to support its infrastructure and hydropower projects. Similarly, Nepal saw a significant 14% boost in its allocation, reaching Rs 800 crore. These increases signal India's intent to remain the primary development partner for its closest Himalayan neighbors.
One of the most surprising developments in the India foreign aid budget 2026 is the complete removal of funding for the Chabahar port project in Iran. After years of heavy investment, the allocation has dropped to zero. Experts suggest this pause may be a tactical response to changing global trade policies and external pressures regarding engagement with Tehran.
In the Indian Ocean region, the results are mixed. While Sri Lanka received a 33% increase to Rs 400 crore to assist in its ongoing economic recovery, the Maldives saw its share reduced by 8% to Rs 550 crore. Meanwhile, aid to Afghanistan remained stable at Rs 150 crore, focusing strictly on humanitarian efforts.
The budget also highlights a pivot toward Latin America, where funding has doubled to Rs 120 crore. Conversely, Myanmar faced a 14% cut due to ongoing political challenges. This budget serves as a clear indicator of India's current diplomatic priorities and its "Neighborhood First" strategy's evolving nature.
With Agency Inputs
