India has recalibrated its neighbourhood development assistance in the Union Budget 2026–27, increasing allocations for countries such as Nepal, Afghanistan, Bhutan and Sri Lanka, while sharply reducing aid to Bangladesh, signalling a selective realignment of regional priorities.
According to Budget documents, India’s development assistance to Bhutan has been raised to Rs 2,288.56 crore, reaffirming Thimphu’s position as the largest recipient of Indian aid. Allocation for Afghanistan has been increased from Rs 100 crore to Rs 150 crore, indicating that New Delhi expects to scale up development projects in the country despite continuing political uncertainty.
Aid to Nepal has been enhanced by Rs 100 crore to Rs 800 crore, while Sri Lanka will receive Rs 400 crore, up from Rs 300 crore in the previous Budget. India has also significantly increased assistance to Mongolia, raising the allocation from Rs 5 crore to Rs 25 crore.
Bangladesh Aid Halved
In contrast, financial support for Bangladesh has been halved, with the allocation reduced from Rs 120 crore to Rs 60 crore. Assistance to the Maldives has been marginally cut from Rs 600 crore to Rs 550 crore, while funding for Myanmar has been lowered from Rs 350 crore to Rs 300 crore.
Beyond the immediate neighbourhood, allocations for Eurasian countries have been reduced to Rs 38 crore, while development assistance to Latin American nations has been increased to Rs 120 crore, reflecting a broader diversification of India’s external engagement.
3 Kartavyas
Overall, the Ministry of External Affairs’ budget has been increased to Rs 22,118.97 crore, up from Rs 20,516.62 crore in the previous financial year, providing additional headroom for diplomatic, development and strategic initiatives.
Presenting the Budget in Parliament, Finance Minister Nirmala Sitharaman said the government’s spending priorities were guided by three kartavyas—accelerating economic growth, empowering citizens, and ensuring inclusive development—an approach that now appears to extend to India’s external development partnerships as well.
The revised aid allocations are expected to be closely watched in the region, particularly in the context of evolving diplomatic ties and India’s broader neighbourhood-first and global outreach strategies.
