India Increases Foreign Aid Allocation, Prioritizing ‘Neighbourhood First’ Policy

India’s Ministry of External Affairs (MEA) has allocated INR 54,830 million for foreign aid in the 2025-26 budget, an increase from last year’s budget estimate of INR 48,830 million but lower than the revised estimate of INR 58,060 million.

The overall MEA budget stands at INR 20,516 crore, marking a 15.45% increase over last year’s allocation, excluding provisions for EXIM Bank. However, it remains lower than the previous budget estimate of INR 22,154 crore and the revised estimate of INR 25,277 crore for 2024-25.

Emphasis on ‘Neighbourhood First’ Policy

A significant portion—INR 4,320 crore (64% of the total scheme portfolio)—has been allocated to India’s immediate neighbors for infrastructure projects, including hydroelectric plants, power transmission lines, roads, bridges, and integrated check-posts.

Bhutan remains the largest recipient, receiving INR 2,150 crore, up from last year’s budget estimate of INR 2,068 crore but lower than the revised estimate of INR 2,543 crore.
Sri Lanka’s aid has increased to INR 300 crore from last year’s INR 245 crore.
The Maldives will receive INR 600 crore, up from INR 400 crore (budget estimate) and INR 470 crore (revised estimate).
Nepal’s allocation remains unchanged at INR 700 crore.
Bangladesh’s aid is also unchanged at INR 120 crore.
Myanmar has been allocated INR 350 crore, up from INR 250 crore but down from the revised estimate of INR 400 crore.
Afghanistan’s aid stands at INR 100 crore, reduced from last year’s budget estimate of INR 200 crore but higher than the revised estimate of INR 50 crore.

Global Allocations

Aid to African nations has increased from INR 200 crore to INR 225 crore.
Latin America’s allocation has dropped from INR 90 crore to INR 60 crore, though higher than the initial estimate of INR 30 crore.
Chabahar Port in Iran will continue to receive INR 100 crore.