India Halves Bangladesh Aid, Raising Questions on Regional Strategy

India’s Union Budget 2026 27 was touted as reinforcing its “Neighborhood First” policy — but the halving of development aid to Bangladesh raises serious questions about whether that policy is being applied consistently. In its latest budget, New Delhi cut Bangladesh’s allocation from ₹120 crore to just ₹60 crore, even as aid to other neighbors like Bhutan, Nepal, Sri Lanka, Maldives, and Afghanistan was maintained or raised.
This isn’t a minor adjustment. A 50% drop in bilateral assistance to Bangladesh — a key South Asian partner — stands in contrast to a rising share for Bhutan (which received over ₹2,288 crore) and funding boosts to other regional states. The disparity in budgetary treatment suggests that New Delhi’s commitment to equal partnership with all of its neighbors may be selective or conditional — depending more on political climate than on an enduring regional strategy.
Official commentary points to strained bilateral relations following political changes in Bangladesh and diplomatic tensions over issues such as minority safety and foreign policy alignment. Even so, cutting aid to Bangladesh by half while continuing or increasing assistance elsewhere gives the impression that economic diplomacy is being used as leverage rather than as a steady platform for cooperation — a shift that critics say undercuts the very essence of Neighborhood First.
At the same time, the budget completely omits funding for the Chabahar Port project, a strategically significant initiative linked to regional connectivity, while stepping back on development support to Dhaka. Observers argue that these moves, taken together, signal a recalibration of India’s regional priorities — but one that may prioritize strategic competition over long term partnership with Bangladesh.
For a policy that was supposed to place equal emphasis on friendship, connectivity and cooperative growth, the 2026 budget cuts throw up a fundamental question: is Neighborhood First still a guiding principle, or has it become a tool for political signaling?