Budget 2026–27 Cuts Bangladesh Aid, Drops Chabahar Allocation

India has cut its budgetary allocation for developing Iran’s Chabahar port to zero in the 2026–27 Union Budget, reflecting concerns over US sanctions. At the same time, funding for development projects in Bangladesh has been halved to ₹60 crore, underscoring the strain in bilateral ties.

The allocation for Chabahar, which had been revised from ₹100 crore to ₹400 crore in 2025–26, was reduced to nil for the coming fiscal year. A six-month exemption from US sanctions granted by the Trump administration in 2025 remains valid only until April.

Funding for Bangladesh’s development partnership fell from ₹120 crore in 2025–26 to ₹60 crore in 2026–27. Relations between New Delhi and Dhaka have deteriorated under Bangladesh’s interim government, though India is seeking to reset ties following the general election scheduled for February 12.

Bhutan, India’s closest development partner, once again received the largest share of external assistance, with an allocation of ₹2,288 crore—slightly higher than the ₹2,150 crore provided in 2025–26.

Overall, the Ministry of External Affairs was allotted ₹22,119 crore for 2026–27, up from ₹20,517 crore in the previous fiscal year. Of this, ₹6,998 crore was earmarked for overseas development projects, accounting for nearly one-third of the ministry’s budget and representing 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.