Budget 2026: India Reworks Aid To Neighbours, Bangladesh Takes Hit After Cut

Budget 2026 recalibrates foreign aid, boosting Bhutan, Afghanistan, Nepal, Sri Lanka while cutting Bangladesh allocation. The Budget reflects notable changes in India’s financial assistance to partner countries.

Finance Minister Nirmala Sitharaman on Sunday presented the Union Budget 2026–27, becoming the first finance minister to deliver nine consecutive budgets. Under the government’s Neighbourhood First policy, the Ministry of External Affairs (MEA) has been allocated ₹22,118.97 crore for foreign aid, marking a modest increase from ₹20,516.61 crore in the previous financial year. The Budget reflects notable changes in India’s financial assistance to neighbouring and strategic partner countries, with allocations rising for several nations while being reduced for others. India has significantly increased financial assistance to Bhutan, its closest strategic partner, allocating ₹2,288.55 crore.

Neighbourhood Aid Boost: Afghanistan, Nepal, Sri Lanka, Mongolia Allocations Rise

The enhanced support underlines the strong bilateral relationship, particularly in sectors such as hydropower and infrastructure development. Aid to Afghanistan has been increased threefold, from ₹500 million to ₹150 crore, reaffirming India’s continued commitment to humanitarian assistance and development support in the country. Nepal has received ₹8 billion, an increase of ₹1 billion from last year, while Sri Lanka has been allocated ₹4 billion, also up ₹1 billion. The enhanced allocation to Sri Lanka follows India’s recent financial assistance to help the island nation cope with Cyclone Ditwah. Mongolia has seen a fivefold increase in assistance, with its allocation rising from ₹5 crore to ₹25 crore.

India Recalibrates Regional Foreign Aid

Financial support for Mauritius has also been substantially increased to ₹5.5 billion. The Seychelles’ allocation remains unchanged at ₹19 crore. India has announced financial assistance of ₹5.5 billion for the Maldives and ₹3 billion for Myanmar. In contrast, India has reduced its aid allocation to Bangladesh, announcing assistance of ₹600 million. The cut comes after only a portion of previously allocated funds was utilised. Overall, the Budget signals a recalibration of India’s foreign aid priorities, aligning financial support with strategic interests, regional developments and humanitarian needs.