Explained: Why India slashed Bangladesh’s share of neighbourhood aid in Budget 2026

Budget 2026: India has halved the development assistance for Bangladesh to ₹60 crore in the Union Budget 2026 amid frosty bilateral ties between the two neighbouring nations.

Bhutan remains the largest recipient of India's aid with the largest share - ₹2,288 crore - as development aid, followed by ₹800 crore to Nepal and ₹550 crore each to the Maldives and Mauritius, in the Budget 2026-27 presented by the Finance Minister Nirmala Sitharaman in the Parliament on Sunday.

In the Budget, the Ministry of External Affairs (MEA) has been allocated a total of ₹22,118 crore, against the current fiscal year's budget estimate of ₹20,516 crore and the revised estimate of ₹21,742 crore.

Since the political change in Dhaka, India has restricted tourist visas for Bangladeshis and recently withdrew families of Indian diplomats from Bangladesh, citing security concerns ahead of the 12 February elections.

The present Bangladesh dispensation led by chief advisor Muhammad Yunus has been actively pursuing closer ties with Pakistan, a significant departure despite the tumultuous history during the 1971 liberation struggle.

On 19 December 2024, Yunus met Pakistan's Prime Minister Shehbaz Sharif at the D-8 Summit in Cairo, Egypt and urged the resolution of the outstanding 1971 issues from Islamabad. Sharif had responded, saying he had a "warm and cordial exchange" with Yunus.

The long-running political row over cricket ties was triggered by Kolkata Knight Riders’ decision to remove Bangladeshi bowler Mustafizur Rahman from their Indian Premier League squad.

The Government of Pakistan has reportedly given the country's national cricket team the green light to participate in the upcoming T20I World Cup 2026, but instructed them on Sunday not to play India, the tournament hosts. Pakistan’s participation in the tournament was thrown into uncertainty after Bangladesh's withdrawal.

The much-anticipated India vs Pakistan clash was scheduled for 15 February in Colombo. India and Sri Lanka are co-hosting the T20 World Cup this month.

"India has consistently raised the matter of safety and security of the minorities with the authorities in Bangladesh, at both political and diplomatic levels on several occasions," Minister of State for External Affairs Kirti Vardhan Singh said.

The main goals of the policy include strengthening regional connectivity through roads, railways, ports, and energy links, boosting trade and economic cooperation, promoting people-to-people ties through cultural exchanges and easier travel, supporting development projects in neighbouring countries, enhancing security cooperation, especially against terrorism and cross-border crime and countering the strategic influence of other powers, particularly China, in the region.

Some initiatives under this policy include infrastructure and aid projects in Nepal, Bhutan, Sri Lanka, and Bangladesh, vaccine and medical assistance during the COVID-19 pandemic and disaster relief and humanitarian support to neighbours, to name a few.

In continuation with India's special and improving relationship with Afghanistan, an allocation of ₹150 crore has been made to that country.

In October 2025, India upgraded ties with Afghanistan's Taliban administration, giving a boost to the diplomatically isolated group, by announcing it would reopen its embassy in Kabul that was shut after the Taliban seized power in 2021.

The Afghan Taliban administration will also send diplomats to New Delhi, the two nations decided during talks in New Delhi between Foreign Minister S Jaishankar and his counterpart in the Taliban administration, Amir Khan Muttaqi, who was on a six-day visit after getting a temporary exemption on his travel ban.

While Sri Lanka has been allocated ₹400 crore, an amount of ₹300 crore has been set aside for Myanmar.

The total assistance to Latin American countries in the 2026-27 budget has been pegged at ₹120 crore.

(With agency inputs)