External Aid for Bangladesh Halved, No Allocation for Chabahar Port in Budget 2026–27

Bhutan remains top recipient as India reshapes overseas development priorities amid diplomatic and sanctions pressures

New Delhi: India has sharply reduced its overseas development spending for Bangladesh and dropped funding for Iran’s Chabahar port entirely in the Union Budget for 2026–27, reflecting shifting geopolitical realities and strains in key bilateral relationships.

According to budget documents, the allocation for development projects in Bangladesh has been halved to ₹60 crore from ₹120 crore in 2025–26. The cut comes amid a downturn in India–Bangladesh relations under the interim government in Dhaka, even as New Delhi looks to reset ties following Bangladesh’s general election scheduled for February 12.

Funding for the strategically significant Chabahar port in Iran has been reduced to zero for 2026–27. The allocation for the project had been revised upward from ₹100 crore to ₹400 crore in 2025–26, but was withdrawn in the latest budget in view of continuing US sanctions. A six-month sanctions exemption granted by the Trump administration in 2025 is valid only until April.

Bhutan once again emerged as the largest recipient of India’s external aid, receiving an allocation of ₹2,288 crore—slightly higher than the ₹2,150 crore earmarked in the previous financial year—underscoring its status as New Delhi’s closest development partner.

The Ministry of External Affairs was allotted ₹22,119 crore for 2026–27, up from ₹20,517 crore in 2025–26. Of this, the overseas development assistance portfolio stands at ₹6,998 crore, accounting for nearly one-third of the ministry’s total budget and marking a modest increase from last year’s ₹6,750 crore.

Other major allocations include ₹800 crore for Nepal, ₹550 crore each for the Maldives and Mauritius, ₹400 crore for Sri Lanka, ₹225 crore for African nations, and ₹120 crore for Latin American countries.