India's Foreign Aid Strategy in Budget 2026-27: Key Allocations and Strategic Shifts
In the Union Budget for the fiscal year 2026-27, India has earmarked a substantial sum of Rs 5,685.56 crore as grants-in-aid to foreign countries, reflecting its ongoing commitment to international development partnerships. This allocation forms part of the broader budgetary outlay of Rs 22,118.97 crore for the Ministry of External Affairs, underscoring the government's focus on diplomatic and economic outreach.
Top Recipients and Notable Changes in Aid Distribution
Bhutan and Nepal have emerged as the primary beneficiaries of India's foreign aid in the latest budget. Bhutan received the highest allocation at Rs 2,288.56 crore, reinforcing India's strategic and developmental ties with its closest neighbour. This consistent support highlights the deep-rooted partnership between the two nations.
Nepal followed with an allocation of Rs 800 crore, maintaining India's role as a key development partner in the region. However, in a significant development, aid to Bangladesh has been sharply reduced by 50%, dropping to Rs 60 crore from Rs 120 crore in the previous budget. This cut comes amid growing political and diplomatic tensions, including recent unrest in Bangladesh and attacks on minorities, which have strained bilateral relations.
Detailed Breakdown of Aid Allocations
The budget documents provide a comprehensive overview of aid distributions across various countries and regions:
- Bhutan: Rs 2,288.56 crore (highest allocation)
- Nepal: Rs 800 crore
- Sri Lanka: Increased to Rs 400 crore from Rs 300 crore
- Myanmar: Rs 300 crore
- Maldives: Rs 550 crore (marginally lower than previous Rs 600 crore)
- Afghanistan: Raised to Rs 150 crore from Rs 100 crore
- Mauritius: Rs 550 crore
- African Countries: Steady at Rs 225 crore
- Latin American Countries: Doubled to Rs 120 crore
- Disaster Relief: Remained at Rs 80 crore
Strategic Withdrawal from Chabahar Port Funding
In a notable policy shift, India has not allocated any funds for the Chabahar Port project in Iran in the 2026-27 Budget. This marks a departure from recent years, where New Delhi consistently set aside around Rs 100 crore annually for this strategic connectivity initiative. The decision is influenced by renewed US sanctions on Iran and uncertainty over the continuation of Washington's waiver for India's involvement, which is set to expire on April 26.
The Chabahar Port, jointly developed by India and Iran, serves as a critical gateway for trade and connectivity to Afghanistan, Central Asia, and Russia. It is a key component of the International North-South Transport Corridor (INSTC), a 7,200-km multimodal trade route linking India with Eurasia and Europe. Indian officials are currently evaluating options in light of geopolitical and economic pressures, engaging with the US on the issue.
Implications and Future Outlook
The allocation patterns in Budget 2026-27 reveal India's nuanced approach to foreign aid, balancing regional priorities with global strategic interests. The increased aid to Afghanistan and steady support for African nations indicate a continued focus on stability and development in key regions. Meanwhile, the reduction in aid to Bangladesh and the withdrawal from Chabahar Port funding reflect responsive adjustments to evolving diplomatic and geopolitical landscapes.
As India navigates complex international relations, its foreign aid budget serves as a tool for fostering partnerships, promoting regional stability, and advancing economic interests. The coming fiscal year will likely see further developments as these allocations are implemented amidst ongoing global challenges.
