India Cuts Bangladesh Funding in Union Budget 2026–27 to Half, Reducing to ₹60 Crore From ₹120 Crore, Signaling Diplomatic Reset Over Minority Violence

Key Points:

India's Union Budget 2026-27 has reduced the financial assistance provided to Bangladesh by half, decreasing the previous ₹120 crore to ₹60 crore. The step has been taken amid growing diplomatic strain between the two neighbors, with concerns escalating over violence against minorities in Bangladesh, particularly the Hindu community.

Bangladesh has been showing a significant shift in its approach towards Pakistan, with efforts to strengthen ties that contradict the historical context of the 1971 liberation war. Bangladesh’s interim administration Chief Adviser Yunus met Pakistan Prime Minister Shehbaz Sharif during a conference in Egypt. They reportedly addressed long-standing grievances from Bangladesh’s separation from Pakistan, with Sharif later describing the meeting as “warm and cordial.”

See Also: Minority Attacks and Political Unrest Strain India-Bangladesh Relations Ahead of 2026 Polls

Islamabad and Dhaka have been taking initiatives to normalize bilateral engagement through visa-free access for holders of diplomatic and official passports, revival of the Joint Economic Commission after nearly two decades, and an agreement to establish a Trade and Investment Commission. This comes amid India-Bangladesh relations straining significantly since 2024, following political unrest in Bangladesh that also targeted Indian diplomatic interests.

Meanwhile, India has earmarked Rs 5,685.56 crore as grants-in-aid to foreign countries in the 2026–27 Budget, marking the broader foreign assistance framework. As per the allocation, Bhutan remains at the top of the chart, receiving ₹2,288 crore, followed by Nepal with Rs 800 crore. The funds for the Maldives and Mauritius amount to ₹550 crore each. As far as Bangladesh is concerned, an initial estimate of ₹34.48 crore was planned for the current fiscal year, which was raised in the final revised budget, although it remains significantly lower than last year’s budget estimate.

See Also: Bangladesh's First Female PM Begum Khaleda Zia Passes Away at 80 After Battling Prolonged Illness at Dhaka

No allocation for the Chabahar Port project in Iran came as a noteworthy takeaway in the recent budget disclosure. The project was set to be a strategic initiative jointly developed by India and Iran to enhance connectivity to Afghanistan, Central Asia and Russia. This comes as a byproduct of renewed US sanctions on Iran, along with uncertainty over the extension of Washington’s waiver for India’s involvement in the project, which is set to expire on April 26.

The government has allocated a budget of ₹22,118 crore for the coming fiscal year, compared to ₹20,516 crore in the previous budget estimate. This emphasizes India’s continued focus on external engagement as it readjusts some specific bilateral relationships.

(SY)

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