Bhutan Secures Largest Development Aid Share in India's Budget 2026
In a significant move highlighting India's diplomatic priorities, the Union Budget for the fiscal year 2026-27 has allocated the largest share of development assistance to Bhutan among neighboring countries. The Himalayan kingdom is set to receive a substantial Rs 2,288 crore as part of India's overseas development partnership portfolio.
Comparative Allocations to Other Neighbors
Following Bhutan, Nepal has been earmarked Rs 800 crore, while both the Maldives and Mauritius will receive Rs 550 crore each. This distribution underscores India's strategic focus on strengthening ties with key partners in the region through financial support for developmental projects.
Reduced Funding for Bangladesh Amid Diplomatic Strains
Notably, the allocation for Bangladesh has been pegged at Rs 60 crore for the upcoming fiscal year. This marks a significant reduction from the previous year's budget estimate of Rs 120 crore for 2025-26, which was later revised down to Rs 34.48 crore. Officials attribute this decrease to strained bilateral relations over the past year and a half, reflecting the dynamic nature of diplomatic engagements influencing budget decisions.
Overall MEA Budget and Development Portfolio
The Ministry of External Affairs (MEA) has been allocated a total of Rs 22,118 crore in the latest Budget, compared to the current fiscal's Budget Estimate of Rs 20,516 crore and a revised estimate of Rs 21,742 crore. Within this, the total overseas development partnership portfolio for 2025-26 stands at Rs 6,997 crore, accounting for a little over 31 per cent of the MEA's allocation.
Focus on Immediate Neighbors and Project Diversity
Out of the total development partnership portfolio, Rs 4,548 crore has been specifically earmarked for immediate neighbors. This funding is expected to support a wide range of initiatives, from large-scale infrastructure projects such as:
- Hydroelectric plants
- Power transmission lines
- Housing developments
- Roads and bridges
To smaller, grassroots-level community development projects aimed at fostering sustainable growth and people-to-people connections.
Other Key Allocations and Omissions
In continuation of India's special relationship with Afghanistan, an allocation of Rs 150 crore has been made for the country, up from Rs 100 crore in 2025-26. Sri Lanka receives Rs 400 crore, while Myanmar is allocated Rs 300 crore. Interestingly, in a departure from recent years, no allocation has been made for the Chabahar Port project, amid ongoing US-Iran tensions. Last year's Budget had set aside Rs 100 crore for this project, later revised to Rs 400 crore.
Historical Context and Future Implications
As per revised estimates for 2025-26, Bhutan was previously allocated Rs 1,950 crore, indicating a steady increase in support. This Budget reinforces India's commitment to its neighborhood first policy, with Bhutan at the forefront due to longstanding bilateral ties and strategic importance. The allocations are poised to enhance regional stability and economic cooperation, while adjustments reflect current diplomatic realities.
