India’s Budget Cuts Development Aid to Bangladesh by Half

Representational image. Photo: Collected

India has cut its development assistance to Bangladesh by 50% in the national budget for the 2026–27 fiscal year, reflecting a sharp deterioration in bilateral relations following the ouster of Sheikh Hasina from power.

The allocation for Bangladesh has been set at Rs60 crore for the fiscal year beginning in April, down from Rs120 crore in FY26. The revised estimate for FY26 was further lowered to Rs34.48 crore as relations between the two countries remained strained.

The reduction represents the steepest cut in India’s regional aid programme and comes amid a diplomatic freeze, allegations of attacks on minorities, and Dhaka’s perceived tilt towards Pakistan.

Among neighbouring countries, Bhutan received the largest allocation of Rs2,288 crore, an increase of Rs138 crore from the previous budget. Nepal was allocated Rs800 crore, while the Maldives and Mauritius received Rs550 crore each. Aid to the Maldives was reduced by Rs50 crore, while Mauritius saw a 10% increase. Myanmar’s allocation fell by 14% to Rs300 crore.

Sri Lanka was allocated Rs400 crore, while Nepal, Afghanistan and Sri Lanka saw marginal increases. Afghanistan’s allocation rose to Rs150 crore from Rs100 crore in the previous fiscal, reflecting warming ties between New Delhi and Kabul.

In a departure from recent years, no allocation was made for the Chabahar port project in Iran, which had received Rs100 crore in the previous budget and Rs400 crore in the revised estimate.

Overall, the budget allocated Rs22,118 crore to the Ministry of External Affairs, up from a revised estimate of Rs21,742 crore in the current fiscal. The overseas development partnership portfolio was set at Rs6,997 crore, with Rs4,548 crore earmarked for immediate neighbours, covering projects ranging from major infrastructure to community-level development initiatives.