Union Budget 2026: Massive Blow to Bangladesh as Aid Cut by 50%, Chabahar Port Allocation Halted

New Delhi: Finance Minister Nirmala Sitharaman presented the historic Union Budget 2026–27 in the Lok Sabha on Sunday, February 1, marking the first time India’s annual budget was tabled on a Sunday. The 1-hour and 25-minute speech was her ninth consecutive budget presentation and the third shortest on record.

The budget reveals India's diplomatic priorities, with some countries receiving a substantial increase in aid while others face a decline.

Bhutan continues to dominate India’s external aid allocations; Bangladesh has emerged as the biggest casualty, recording the steepest cut in assistance amid ongoing tensions.

Bangladesh sees steepest reduction in aid

Among all countries listed under the Ministry of External Affairs grants, Bangladesh has witnessed the sharpest decline in allocation.

In Budget 2025, Bangladesh was allocated ₹120 crore, and this has been reduced to ₹60 crore in Budget 2026, marking a nearly 50 per cent cut. The revised estimates for FY26 present an even starker picture, with allocations falling by over 70 per cent to just ₹34.48 crore.

In the Revised Estimates for 2025–26, Bangladesh had received around ₹100 crore, which has now been halved to ₹50 crore for 2026–27. 

The sharp reduction comes amidst the ongoing tension between two neighbouring countries. 

Bhutan remains India’s top aid recipient

Bhutan continues to be the largest beneficiary of India’s foreign assistance.

For 2026–27, Bhutan has been allocated ₹2288, the highest among all countries covered under MEA grants. The allocation underscores India’s long-standing development partnership with the Himalayan nation, particularly in hydropower, infrastructure, and economic cooperation.

In comparison, Bhutan had received an even higher allocation of ₹2,150 crore in Budget 2025, reaffirming its position as one of India’s top strategic priorities.

Allocates no money for Chabahar Port amidst tension 

No allocation has been made for the Chabahar port project amid the ongoing tension with the US, and in the budget last year, an amount of Rs 100 crore was set aside for the Chabahar port project, and the amount increased to Rs 400 crore in the revised estimate. 

Nepal and Maldives receive steady support

Nepal has been allocated ₹800 crore in Budget 2026, maintaining a broadly stable level of assistance compared to previous years. The funding reflects continued cooperation in connectivity, infrastructure development, and post-disaster reconstruction.

The Maldives has received ₹550 crore in the current budget. While lower than last year’s ₹600 crore allocation, the assistance signals sustained engagement despite recent political shifts in the island nation. India’s support remains focused on capacity building and development projects.

Notably, in Budget 2025, Maldives had seen a 27 per cent increase in aid to ₹600 crore, despite strained relations at the time, highlighting India’s broader neighbourhood-first approach.

Sri Lanka at lower end of allocation spectrum

Sri Lanka has been allocated ₹400 crore in Budget 2026–27. While support continues, the allocation remains significantly lower than those for Bhutan and Nepal.

The cautious funding approach comes as Sri Lanka continues to navigate economic recovery following its financial crisis. 

Afghanistan sees increase

Afghanistan has been allocated ₹150 crores in this year's budget, an increase from the previous year's allocation of ₹100 crores.

Africa and Eurasia receive minimal assistance

African countries collectively received ₹225 crore, while Eurasian countries were allocated ₹38 crore. These regions remain among the lowest recipients of Indian external assistance, reinforcing India’s primary focus on its immediate neighbourhood.

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