India Reduces Aid to Bangladesh and Iran Amid Strained Relations
India has significantly reduced its aid to Bangladesh and Iran as relations with both nations have become strained. This decision was highlighted during the announcement of the Union Budget for the fiscal year 2026-27 by Union Finance Minister Nirmala Sitharaman.
Reduction in Aid to Bangladesh
In the new budget, India’s financial assistance to Bangladesh was slashed from ₹120 crore to ₹60 crore. This decision reflects a notable shift in diplomatic relations, especially following the political unrest in Bangladesh and the exile of former Prime Minister Sheikh Hasina.
The Indian government has expressed concerns regarding the safety of the Hindu minority in Bangladesh. Following Hasina’s exile, the interim government in Bangladesh has demanded her return for legal proceedings, further complicating bilateral ties.
Impact on Aid to Iran
India has also ceased allocating funding for the development of Chabahar port in Iran. This decision comes despite a ten-year agreement signed by India to operate the Shahid Beheshti terminal at the port.
Ongoing unrest in Iran and rising tensions between Tehran and Washington have likely influenced India’s decision to withhold support.
Increased Aid to Other Neighboring Countries
While aid to Bangladesh and Iran has decreased, other neighboring countries have received increased financial support in the new budget:
- Bhutan: ₹2,289 crore (up by 6%)
- Nepal: ₹800 crore
- Sri Lanka: ₹40 crore
- Myanmar: ₹300 crore
- Maldives: ₹550 crore
- Mauritius: ₹550 crore
- Afghanistan: ₹150 crore
- Mongolia: ₹25 crore
- African countries: ₹225 crore
- Seychelles: ₹19 crore
Overall Budget Allocation
The total budget allocation for “Aid to countries” has seen a slight increase to ₹5,686 crore, which is a 4% rise compared to the previous year’s budget estimates of ₹5,483 crore. However, this marks a reduction of ₹100 crore compared to the revised estimates for 2025-26.
India’s decision to adjust its foreign aid reflects its evolving diplomatic priorities amidst changing geopolitical landscapes.
