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What is the story about?
India’s Union Budget 2026-27 has earmarked ₹5,685.56 crore for international aid, which is 3.68% higher compared to the previous budget. With India’s neighbours receiving nearly 80% of the total aid, the influence of 'Neighbourhood First' policy cannot be missed.
Meanwhile, the Ministry of External Affairs, which administers this aid through its Development Partnership Administration, has received ₹22,118.97 crore, marking a 7.81% increase in allocation from FY26.
Commenting on the FY27 allocation, Amb Rajiv Bhatia, Distinguished Fellow at Gateway House, tells CNBC-TV18 that India needs to allocate more money to the Ministry as well as for external assistance. “It is only a marginal increase this year. I am an advocate of proactive foreign policy. For that, more resources are required. Or else, the results will not be optimal,” he says.
Bhutan continues to be the biggest beneficiary of India's aid, seeing a 6.44% jump in allocation to ₹2,288.56 crore. The Himalayan kingdom accounts for over 40% of the total international aid provided by India. This comes as no surprise since New Delhi has been the biggest economic benefactor of Thimphu.
Also Read: Budget 2026 offers policy continuity, reform push, says FM Sitharaman at USISPF meet
Nepal is a distant second, securing ₹800 crore in aid for FY27. The aid to Kathmandu has risen 14% year-on-year, coinciding with the political upheaval in the country. Moreover, Afghanistan and Sri Lanka have seen a relative increase in aid for FY27.
The aid to Bangladesh has been slashed by half compared to 2025 – from ₹120 crore to just ₹60 crore. The decline in funds comes at a time when India’s ties with Bangladesh have been under pressure following the overthrow of former PM Sheikh Hasina in August 2024.
Meanwhile, Maldives and Myanmar, too, have recorded a fall in total allocation for FY27.
Swati Prabhu, Fellow at ORF, says that India focusing on its neighbourhood is par for the course.
“That is how every country will look at aid. Even Europe through its ‘Global Gateway’ programme wants to first safeguard its backyard and then think about other countries,” says Prabhu, who specialises in economic diplomacy.
Amb Bhatia says that policymakers have made it clear that India wants to help its neighbours. New Delhi, he says, is also using aid & grants as a tool to promote its national interest.
“These countries are also expected to show their consideration towards India. If some of them are unable to do so, then we are under no obligation to keep being generous to them,” the former Indian envoy to Myanmar notes.
Allocation for other regions
Just one-fifth of the total aid has been earmarked for countries outside India’s neighbourhood. The allocation for African countries and Seychelles has remained the same, while Mauritius has received only a marginal YoY hike in aid.
“India has ambitions to lead the Global South. However, the allocation for the African continent, which has over 50 countries, is not adequate,” says Amb Bhatia.
The meagre allocation for Africa contrasts with India’s growing development partnership with the continent, especially in capacity building, since 2005.
Prabhu says that the budget figures do not tell the full story because India also works with Africa through other institutions and programs beyond direct aid.
“India wants to remain part of Africa’s development journey, but fiscal constraints and a ‘neighbourhood-first’ priority affect how much aid it can allocate,” she adds.
Latin America, on the other hand, has seen its share of allocation increase to ₹120 crore from ₹60 crore last financial year.
But Hari Seshasayee, co-founder, Consilium Group, a Latin America-based advisory firm, says that there is nothing to infer from the doubling of aid.
“India’s allocation for Latin America represents only about 2% of its total aid budget. India's contribution to Latin America's total aid is only 0.1% – the region's total aid amounts to roughly $12 billion,” says Seshasayee while arguing that aid has not played a significant role in shaping India-Latin America relations so far.
Nevertheless, Latin America is emerging as a major focus area in India’s foreign policy calculations. Seshasayee believes that New Delhi is courting the region for three things – energy security, food security and critical minerals.
Also Read: Budget 2026-27 | A calibrated approach aimed at strengthening growth
According to the IEA, Latin America supplies about 35% of global lithium and 40% of copper, both essential for EV batteries and clean-energy technologies. For India, the region accounts for 15-20% of India’s petroleum imports and is a significant source of vegetable oils and other agricultural products.
The Chabahar Conundrum
The biggest exclusion in this year's aid Budget has been Chabahar. The Iranian port, where India began operating the Shahid Baheshti Terminal in 2018, has been allocated zero funds in the FY27 Budget.
In the last few budgets, the Chabahar Port had consistently received ₹100 crore.
This development follows reports of India winding down its operations at the strategically-important port, amid tensions between the US and Iran.
In September 2025, the US imposed crippling economic sanctions on Iran but had granted India a six-month exemption from the punitive measures on the project. The waiver will come to an end on April 26.
The Chabahar port aims to boost connectivity and trade ties. India and Iran are also strongly pitching for making the port an integral part of the International North-South Transport Corridor.
“At present, the allocation reveals its own story. Our interest in Chabahar has been consistent but our engagement keeps changing depending on the geopolitical situation,” says Amb Bhatia.
However, the veteran diplomat is not giving up on the project yet. He believes that the project may be back on track in the future. But that would completely depend, he argues, on how the India-US equation develops in the next few months or years.
On February 6, while replying to a question in Lok Sabha on India's engagement in Chabahar Port, the Minister of State in the Ministry of External Affairs, Kirti Vardhan Singh, said that India has fulfilled its commitment of contributing USD 120 million for the procurement of port equipment, as per the provisions of the contract.
Meanwhile, the Ministry of External Affairs, which administers this aid through its Development Partnership Administration, has received ₹22,118.97 crore, marking a 7.81% increase in allocation from FY26.
Commenting on the FY27 allocation, Amb Rajiv Bhatia, Distinguished Fellow at Gateway House, tells CNBC-TV18 that India needs to allocate more money to the Ministry as well as for external assistance. “It is only a marginal increase this year. I am an advocate of proactive foreign policy. For that, more resources are required. Or else, the results will not be optimal,” he says.
Bhutan continues to be the biggest beneficiary of India's aid, seeing a 6.44% jump in allocation to ₹2,288.56 crore. The Himalayan kingdom accounts for over 40% of the total international aid provided by India. This comes as no surprise since New Delhi has been the biggest economic benefactor of Thimphu.
Also Read: Budget 2026 offers policy continuity, reform push, says FM Sitharaman at USISPF meet
Nepal is a distant second, securing ₹800 crore in aid for FY27. The aid to Kathmandu has risen 14% year-on-year, coinciding with the political upheaval in the country. Moreover, Afghanistan and Sri Lanka have seen a relative increase in aid for FY27.
The aid to Bangladesh has been slashed by half compared to 2025 – from ₹120 crore to just ₹60 crore. The decline in funds comes at a time when India’s ties with Bangladesh have been under pressure following the overthrow of former PM Sheikh Hasina in August 2024.
Meanwhile, Maldives and Myanmar, too, have recorded a fall in total allocation for FY27.
Swati Prabhu, Fellow at ORF, says that India focusing on its neighbourhood is par for the course.
“That is how every country will look at aid. Even Europe through its ‘Global Gateway’ programme wants to first safeguard its backyard and then think about other countries,” says Prabhu, who specialises in economic diplomacy.
| Country | FY26 (in ₹Cr) | FY27 (in ₹Cr) |
| Afghanistan | 100 | 150 |
| Bhutan | 2150 | 2288.56 |
| Bangladesh | 120 | 60 |
| Myanmar | 350 | 300 |
| Maldives | 600 | 550 |
| Nepal | 700 | 800 |
| Sri Lanka | 300 | 400 |
Amb Bhatia says that policymakers have made it clear that India wants to help its neighbours. New Delhi, he says, is also using aid & grants as a tool to promote its national interest.
“These countries are also expected to show their consideration towards India. If some of them are unable to do so, then we are under no obligation to keep being generous to them,” the former Indian envoy to Myanmar notes.
Allocation for other regions
Just one-fifth of the total aid has been earmarked for countries outside India’s neighbourhood. The allocation for African countries and Seychelles has remained the same, while Mauritius has received only a marginal YoY hike in aid.
“India has ambitions to lead the Global South. However, the allocation for the African continent, which has over 50 countries, is not adequate,” says Amb Bhatia.
The meagre allocation for Africa contrasts with India’s growing development partnership with the continent, especially in capacity building, since 2005.
Prabhu says that the budget figures do not tell the full story because India also works with Africa through other institutions and programs beyond direct aid.
“India wants to remain part of Africa’s development journey, but fiscal constraints and a ‘neighbourhood-first’ priority affect how much aid it can allocate,” she adds.
| Country/Region | FY26 (in ₹Cr) | FY27 (in ₹Cr) |
| Mauritius | 500 | 550 |
| Seychelles | 19 | 19 |
| African countries | 225 | 225 |
| Latin America | 60 | 120 |
| Chabahar Port | 100 | No allocation |
Latin America, on the other hand, has seen its share of allocation increase to ₹120 crore from ₹60 crore last financial year.
But Hari Seshasayee, co-founder, Consilium Group, a Latin America-based advisory firm, says that there is nothing to infer from the doubling of aid.
“India’s allocation for Latin America represents only about 2% of its total aid budget. India's contribution to Latin America's total aid is only 0.1% – the region's total aid amounts to roughly $12 billion,” says Seshasayee while arguing that aid has not played a significant role in shaping India-Latin America relations so far.
Nevertheless, Latin America is emerging as a major focus area in India’s foreign policy calculations. Seshasayee believes that New Delhi is courting the region for three things – energy security, food security and critical minerals.
Also Read: Budget 2026-27 | A calibrated approach aimed at strengthening growth
According to the IEA, Latin America supplies about 35% of global lithium and 40% of copper, both essential for EV batteries and clean-energy technologies. For India, the region accounts for 15-20% of India’s petroleum imports and is a significant source of vegetable oils and other agricultural products.
The Chabahar Conundrum
The biggest exclusion in this year's aid Budget has been Chabahar. The Iranian port, where India began operating the Shahid Baheshti Terminal in 2018, has been allocated zero funds in the FY27 Budget.
In the last few budgets, the Chabahar Port had consistently received ₹100 crore.
This development follows reports of India winding down its operations at the strategically-important port, amid tensions between the US and Iran.
In September 2025, the US imposed crippling economic sanctions on Iran but had granted India a six-month exemption from the punitive measures on the project. The waiver will come to an end on April 26.
The Chabahar port aims to boost connectivity and trade ties. India and Iran are also strongly pitching for making the port an integral part of the International North-South Transport Corridor.
“At present, the allocation reveals its own story. Our interest in Chabahar has been consistent but our engagement keeps changing depending on the geopolitical situation,” says Amb Bhatia.
However, the veteran diplomat is not giving up on the project yet. He believes that the project may be back on track in the future. But that would completely depend, he argues, on how the India-US equation develops in the next few months or years.
On February 6, while replying to a question in Lok Sabha on India's engagement in Chabahar Port, the Minister of State in the Ministry of External Affairs, Kirti Vardhan Singh, said that India has fulfilled its commitment of contributing USD 120 million for the procurement of port equipment, as per the provisions of the contract.
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