India has significantly reduced its allocation for Bangladesh in the Union Budget 2026-27. The government has allocated Rs 60 crore to the neighbouring country, a 50 per cent drop from the Rs 120 crore allocated in the previous fiscal year.
This reduction comes amid escalating diplomatic friction over violence against minorities, particularly the Hindu community, and a notable shift in Dhaka's foreign policy toward Pakistan following the fall of former prime minister Sheikh Hasina's regime in 2024.
On Thursday, the Ministry of External Affairs informed Rajya Sabha that the government "continues to monitor" reports of attacks against minorities in Bangladesh, including on their homes, properties, businesses and places of worship.
"India has consistently raised the matter of safety and security of the minorities with the authorities in Bangladesh, at both political and diplomatic levels on several occasions," Minister of State for External Affairs Kirti Vardhan Singh said.
He said the issue was raised by Prime Minister Narendra Modi during his meeting with Chief Adviser of Bangladesh Muhammad Yunus on April 4, 2025. Check Budget live updates here.
The ministry also criticised the "troubling tendency" of the interim government in Bangladesh to attribute such attacks to personal rivalries or political differences. The ministry noted that such rhetoric "only emboldens the extremists and the perpetrators of such crimes, and deepens the sense of fear and insecurity among the minorities."
The current administration in Bangladesh has been actively pursuing closer ties with Pakistan, a significant pivot despite the tumultuous history and atrocities committed during the 1971 liberation struggle.
In 2024, Yunus met Pakistan's Prime Minister Shehbaz Sharif at the sidelines of a conference in Egypt and said he wanted to resolve outstanding grievances from Dhaka's 1971 bloody separation from Islamabad. Shehbaz Sharif had responded, saying he had a "warm and cordial exchange" with Yunus.
Since then, Pakistan and Bangladesh have agreed to grant visa-free entry to holders of diplomatic and official passports from the other side. The two countries have also agreed to revitalise the existing Joint Economic Commission (JEC) and set up a new Trade and Investment Commission to explore trade and investment potential of both countries. The last Joint Economic Commission (JEC) meeting between Bangladesh and Pakistan was held in 2005.
Cargo ships are sailing directly between the two countries and direct flights are also planned in the days to come with Pakistani carriers Fly Jinnah and Air Sial, getting clearances to launch direct flights.
And recently, a flight from Dhaka landed at the Jinnah International Airport in Karachi on Thursday, restoring non-stop air connectivity between the countries after 14 years.
These developments come as India-Bangladesh ties have continued to deteriorate since 2024.
No Budget Allocation For Chabahar
In a departure from the past, India has not allocated any funds for the Chabahar port project in its Union Budget, a move that appears to be a strategic response to fresh economic sanctions imposed on Iran by Washington.
India is a major partner in the development of the Chabahar port.
In September last year, the US imposed crippling economic sanctions on Iran but had granted India a six-month exemption from the punitive measures on the Chabahar port project.
The waiver will come to an end on April 26.
Meanwhile, Bhutan remains the largest recipient of India's foreign aid, with an allocation of Rs 2,289 crore, an increase from Rs 2,150 crore last year.
Finance Minister Nirmala Sitharaman presented the 2026-27 budget in parliament on Sunday, her 9th, focussing on manufacturing growth and job creation.
