Jayanta Roy Chowdhury
New Delhi, Feb 1 (.) India’s budget has cut the aid it had last year allocated to Bangladesh by half, after having spent less than a quarter of the Rs 120 crore it had allocated in the current 2025026 financial year, a sign of how low the relationships between New Delhi and Dhaka have touched.
At the same time after threat of US sanctions and tariff hikes on countries “doing business” with Iran, India for the first time has allocated no money for the strategic port at the mouth of the Persian Gulf which India was developing for trade not only with Iran but also with central Asia, Afghanistan, and even mainland Russia.
Though the figures are shown as central sector projects and schemes, they represent the foreign aid given by India. The total monies allocated under this head has been pegged at 6,997 crore.
India is currently operating the port which bypasses Pakistan, under a six-month conditional sanctions waiver granted by the US Treasury in October 2025, which is set to expire on April 26, 2026.
India has invested more than USD 370 million in the port whose Shahid Beheshti Terminal is operated by India Ports Global Limited (IPGL) operates the under a 10-year contract.
India which has been involved in multiple connectivity and energy projects in Bangladesh, such as the Akhuara-Agartala rail link, Khulna-Mongla port rail line, a 1320 MW thermal power station being jointly builtat rampal, had actually increased its foreign aid allocation for Bangladesh to Rs 120 crore in the budget for 2025-26.
This was done despite the fall of the Sheikh Hasina regime, possibly as India’s policy-makers had in the initial phase expected continued good relations with the interim government which came in in August 2024.
However, a tirade of anti-India pronouncements by the Yunus administration’s ministers including the chief advisor Prof Yunus, and a tit for tat trade measures by the two countries saw actual expenditure fall to just Rs 34.48 crore. As a result, India has kept a far more modest aid budget of just Rs 60 crore.
“All our projects in Bangladesh are in limbo. We will probably wait for a new government to emerge and then allocate funds through an ad hoc budget if relationship progresses as they should,” said Pinka R Chakravarty, former Secretary in the Ministry of External Affairs.
India’s closest neighbor Bhutan will continue to have the lion’s share of the foreign aid budget with a grant of Rs 2283 crore, an increase over this year’s rs 1950 crore. Other notable foreign aid budgets include for Nepal which has been kept at Rs 800 crore, Sri Lanka which stands at Rs 400 crore, an increase by a third over last year.
Maldives, with whom there were some hiccups in India’s relationship in 2024, has a strong budgetary allocation of Rs 550 crore, Mauritius will be given an identical Rs 550 crore, while Afghanistan, whose Taliban government has recently restarted full diplomatic relations with India will get a foreign aid of Rs 150 crore, a 50 per cent increase over last year. . JRC