India’s Neighbourhood Budget Moves Beyond Outlay to Measurable Outcomes
India’s 2026-27 allocations prioritise results driven aid, connectivity, and security engagement in South Asia, the Indian Ocean Region, and the Global South.
NEW DELHI, Jan 25: India’s 2026-27 Union Budget for neighbouring countries signals a shift from mere expenditure to outcome-focused allocations, reflecting a more nuanced and pragmatic approach to its Neighbourhood First policy. Decisions on aid and development assistance are increasingly shaped by political, economic, and security considerations across the region.
While Bhutan remains the largest recipient, with significant support for hydropower projects, urban development, and the Gelephu Mindfulness City, Nepal’s allocation is likely to remain stable or see modest changes, with emphasis on climate resilient infrastructure and cross border power transmission amid political uncertainty. Bangladesh continues to receive consistent support, although most projects are stalled pending elections in February 2026.
Myanmar presents a complex challenge, where allocations are expected to increase for border management, humanitarian aid, and security, including fencing and Assam Rifles deployment, amid military rule and regional instability. Afghanistan continues to receive development aid, focusing on resuming stalled projects and humanitarian support, despite the absence of formal recognition for the Taliban administration.
Strategic connectivity projects, including the Chabahar Port and air freight corridors between Kabul, Delhi, and Amritsar, remain priorities, while the MAHASAGAR initiative broadens India’s outreach to the Indian Ocean Region and the wider Global South. Maldives has emerged as a key partner in the IOR, receiving increased aid linked to trade, defence cooperation, and project benchmarks.
Sri Lanka’s allocation is likely to expand under a proposed “Stabilization and Resilience Window,” co-financing climate adaptation, social protection, and disaster-response initiatives in collaboration with the IMF and World Bank. Across the region, the focus is shifting from abstract allocations to structured, conditional funding that emphasizes measurable outcomes, including trade, connectivity, renewable energy, rare earth processing, and border security enhancements.
The 2026 budget demonstrates India’s intent to leverage development assistance as a strategic instrument, balancing humanitarian objectives with geopolitical and security imperatives, while fostering economic integration, resilience, and regional stability.
