India Boosts Bangladesh Grant Allocation

India has proposed a significant increase in financial assistance to Bangladesh in its draft central budget for the 2026–27 fiscal year, raising the allocation by 74 per cent compared with the revised figures of the previous year. Under the new proposal, Bangladesh is set to receive 600 million Indian rupees in grants or aid. Despite this rise, Bangladesh remains the lowest recipient of Indian assistance among South Asian countries, according to official budget documents.

The allocation is outlined in India’s central budget papers, which state that the funding has been earmarked in line with requirements put forward by the Ministry of External Affairs. The ministry’s country-wise assistance planning reflects a combination of diplomatic priorities, development cooperation objectives, and regional strategic considerations.

In the current 2025–26 fiscal year, Bangladesh received 344.8 million rupees in Indian assistance, based on revised estimates. Notably, the original budget proposal for that year had suggested a much higher grant of 1.2 billion rupees for Bangladesh. However, this figure was later sharply reduced during the revision process, underscoring the fluid nature of foreign assistance allocations and the impact of changing fiscal and policy priorities. Against this background, the proposed increase to 600 million rupees in 2026–27 represents a partial recovery rather than a major expansion of support.

A comparison with other South Asian countries highlights Bangladesh’s relatively modest share. Bhutan remains the largest recipient of Indian assistance in the region. For 2026–27, India has allocated a total of 22.8856 billion rupees to Bhutan, comprising 17.69 billion rupees in grants and 5.2 billion rupees in loans. This compares with 19.5 billion rupees provided in the previous fiscal year. Nepal ranks second, with an allocation of 8 billion rupees, followed by the Maldives at 5.5 billion rupees, slightly down from 6.25 billion rupees last year. Sri Lanka is set to receive 4 billion rupees, an increase of 1 billion rupees year-on-year, while Myanmar and Afghanistan will receive 3 billion rupees and 1.5 billion rupees respectively.

Proposed Indian Assistance to South Asian Countries (2026–27)

Analysts note that the level and form of foreign assistance are closely linked to a recipient country’s economic condition. In recent years, Bangladesh has faced mounting economic pressures, including foreign exchange constraints and rising external liabilities. As a result, many development partners have shifted away from direct grants towards loans with more stringent conditions. India has followed a similar approach, with much of its support to Bangladesh over the past decade channelled through Lines of Credit, primarily for infrastructure and connectivity projects.

India’s Union Finance Minister, Nirmala Sitharaman, presented the proposed budget on 1 February, in keeping with established practice. The total size of the budget stands at 53.50 lakh crore rupees, representing a 7.7 per cent increase over the previous fiscal year. India’s fiscal year runs from 1 April to 31 March. Observers suggest that while the increased allocation for Bangladesh signals continued engagement, the broader pattern reflects India’s evolving preference for credit-based development cooperation rather than large-scale grant assistance.