India has reduced its budget allocation for Bangladesh by 50 per cent in the Union Budget 2026-27. The government has set aside Rs 60 crore for Bangladesh, down from Rs 120 crore in the previous financial year.
This sharp cut comes at a time when relations between New Delhi and Dhaka have become strained. Tensions have risen due to repeated reports of attacks on minority communities, especially Hindus, in Bangladesh.
Rising Strain Over Minority Safety
The reduction in funding coincides with growing diplomatic concerns over violence against minorities in Bangladesh. India has raised the issue multiple times through political and diplomatic channels.
Earlier on Thursday, the Ministry of External Affairs told the Rajya Sabha that it continues to track reports of attacks on homes, businesses and places of worship.
“India has consistently raised the matter of safety and security of minorities with the authorities in Bangladesh at political and diplomatic levels on several occasions,” said Minister of State Kirti Vardhan Singh.
He added that Prime Minister Narendra Modi discussed the issue directly with Bangladesh’s Chief Adviser Muhammad Yunus during a meeting on April 4, 2025.
The ministry also criticised Dhaka’s response to the violence. It warned that blaming attacks on personal disputes or political rivalry “embolden extremists and deepen fear among minority communities.”
Bangladesh Moves Closer to Pakistan
At the same time, the Yunus-led administration in Bangladesh has taken steps to improve ties with Pakistan. This shift comes after the removal of former Prime Minister Sheikh Hasina in 2024.
The move marks a major change in Bangladesh’s foreign policy. Relations between Bangladesh and Pakistan have remained sensitive since the 1971 liberation war, when large-scale human rights violations were committed in what was then East Pakistan.
Growing Pakistan-Bangladesh Engagement
In 2024, Muhammad Yunus met Pakistan Prime Minister Shehbaz Sharif in Egypt. Since then, both countries have expanded cooperation.
They have agreed on visa-free travel for diplomatic and official passport holders. They have revived the Joint Economic Commission and announced plans for a Trade and Investment Commission.
Cargo ships now travel directly between the two countries. Direct air links are also returning. On Thursday, a Dhaka-Karachi flight resumed non-stop connectivity after a gap of 14 years.
These developments have unfolded as India-Bangladesh relations have continued to weaken since 2024.
No Budget Support for Chabahar Port
India has also made a major strategic change in the 2026-27 Budget. For the first time, it has not allocated any funds for the Chabahar port project in Iran.
This decision appears linked to renewed US sanctions on Iran. India remains an important partner in developing the port, but the US exemption that allows India to continue work will expire on April 26.
Bhutan Remains India’s Top Aid Partner
While support for Bangladesh has been cut, Bhutan continues to receive the highest foreign aid from India. The government has allocated Rs 2,289 crore for Bhutan in the 2026-27 Budget. This is higher than last year’s allocation of Rs 2,150 crore.
Bhutan remains India’s largest and most consistent recipient of overseas development assistance.