Budget 2025: Bhutan Tops Foreign Aid List, Maldives Sees Significant Boost Amid Diplomatic Shift

India’s 2025-26 budget allocates ₹5,483 crore for foreign aid, with Bhutan receiving the largest share of ₹2,150 crore. The Maldives sees a significant increase in aid to ₹600 crore, reflecting improved diplomatic relations. Afghanistan’s aid is reduced to ₹100 crore, while disaster relief and cultural diplomacy funding experience notable rises.

CONTENTS:

• Budget 2025: Bhutan Tops India’s Foreign Aid List, Maldives Sees Significant Increase
• Budget 2025: India Increases Foreign Aid to Maldives, While Bhutan Remains the Top Recipient

Budget 2025: Bhutan Tops Foreign Aid List, Maldives Sees Significant Boost Amid Diplomatic Shift

Budget 2025: Bhutan Tops India’s Foreign Aid List, Maldives Sees Significant Increase

Budget 2025: Bhutan Tops Foreign Aid List Bhutan once again secured the largest portion of India’s external aid budget, receiving an allocation of ₹2,150 crore from the total external aid outlay of ₹6,750 crore for the 2025-26 financial year. This budget also maintained an allocation of ₹100 crore for the development of Iran’s Chabahar port.

According to budget documents, the Ministry of External Affairs was allocated ₹20,516.61 crore, which is lower than the revised budget of ₹25,277 crore from the previous year and the ₹22,154 crore allocated for 2024-25.

As part of India’s “Neighborhood First” policy, Bhutan’s aid package was drawn from the external aid budget, which includes grants and soft loans for foreign countries, cultural and heritage initiatives, and international training programs. India had previously doubled its financial support for Bhutan’s five-year plans from ₹5,000 crore to ₹10,000 crore.

The external aid budget of ₹6,750 crore represents about a third of the ministry’s overall allocation, marking an almost 20% increase from last year’s ₹5,667.56 crore. Officials stated that this increase aligns with India’s foreign policy goals and its expanding development partnership.

Approximately 64% of the ₹4,320 crore earmarked for development projects is directed toward India’s neighboring countries. These funds support demand-driven initiatives such as hydropower plants, power transmission lines, housing, roads, bridges, integrated check posts, as well as small-scale community projects and training programs.

The allocations for other countries include ₹700 crore for Nepal, ₹600 crore for the Maldives, ₹500 crore for Mauritius, ₹350 crore for Myanmar, ₹300 crore for Sri Lanka, ₹225 crore for African nations, ₹120 crore for Bangladesh, ₹100 crore for Afghanistan, and ₹150 crore for other developing countries.

Budget 2025: Bhutan Tops Foreign Aid List  While allocations for Bangladesh and Nepal remained unchanged, the funding for the Maldives, Myanmar, Mauritius, and Sri Lanka saw an increase. Conversely, Afghanistan’s allocation was halved from ₹200 crore to ₹100 crore, whereas the Maldives’ aid rose from ₹400 crore in 2024-25 to ₹600 crore for 2025-26.

India played a crucial role in supporting the Maldives’ financial stability in 2024 by resubscribing to specific bonds and offering additional financial assistance. This came at a time when the Maldives sought defense, security, and trade cooperation from China but received limited financial aid.

The continued ₹100 crore allocation for Chabahar port underscores its strategic importance in regional connectivity, particularly through the International North-South Transport Corridor. India and Iran had signed a 10-year agreement for operations at the Shahid Beheshti terminal, with India committing $120 million in equipment investment and offering a $250 million credit line for infrastructure development around the deep-sea port.

The total assistance for Latin America and Eurasia doubled to ₹100 crore for 2025-26. However, the overall external affairs ministry budget of ₹20,516.61 crore does not include any provisions for EXIM Bank funding, which officials noted could be addressed later if necessary.

With the establishment of ten new diplomatic missions in 2024-25, the budget for foreign missions was increased by 9% to ₹4,206 crore for 2025-26. Additionally, funding for citizen services, including passport issuance and the rollout of Passport Seva Project 2.0, saw a 97% increase from ₹970 crore in 2024-25 to ₹1,913 crore for the upcoming fiscal year.

The ministry’s total allocation covers expenses for embassies, passport and emigration services, international aid projects, and contributions to institutions such as the Indian Council for Cultural Relations (ICCR) and the South Asian University.

Budget 2025: India Increases Foreign Aid to Maldives, While Bhutan Remains the Top Recipient

Budget 2025: Bhutan Tops Foreign Aid List India has raised its allocation for foreign aid to ₹5,483 crore in the 2025-26 budget, a slight increase from last year’s ₹4,883 crore. The Ministry of External Affairs (MEA) has been allocated a total budget of ₹20,516 crore, with a significant focus on supporting neighboring and strategic nations.

Bhutan Retains Its Position as the Largest Aid Recipient

Bhutan continues to receive the highest share of India’s foreign aid, with an increased allocation of ₹2,150 crore for 2025-26, up from ₹2,068 crore in the previous year. India remains Bhutan’s primary development partner, with funding dedicated to infrastructure, hydropower projects, and economic collaboration.

Increased Support for Maldives Amid Diplomatic Thaw

Budget 2025: Bhutan Tops Foreign Aid List  The aid allocated to the Maldives has risen from ₹400 crore to ₹600 crore, coinciding with recent efforts to restore diplomatic ties following tensions over President Mohamed Muizzu’s pro-China stance. Earlier in 2024, India withdrew its military personnel from the Maldives, and recent high-level visits, including that of Maldivian Defence Minister Ghassan Maumoon to India, indicate steps toward renewed cooperation.

Reduced Aid for Afghanistan

Budget 2025: Bhutan Tops Foreign Aid List  Afghanistan’s aid allocation has been cut to ₹100 crore, down from ₹200 crore in 2024-25. This continues the downward trend from the ₹207 crore granted two years ago. While India maintains cautious engagement with the Taliban government, its support remains focused on humanitarian aid and economic cooperation. Senior diplomat Vikram Misri recently met Taliban officials in Dubai to discuss trade and India’s strategic interest in Iran’s Chabahar Port, which provides an alternative trade route bypassing Pakistan. However, India has yet to formally recognize the Taliban-led administration.

Increased Aid for Myanmar Amid Unrest

Budget 2025: Bhutan Tops Foreign Aid List  Myanmar’s aid allocation has risen from ₹250 crore in the 2024-25 budget to ₹350 crore for 2025-26. The increase comes amid ongoing turmoil, with ethnic armed groups controlling significant territories, including regions bordering India’s northeastern states. The Indian government has recently tightened rules on cross-border movement, reducing the permitted range from 16 km to 10 km under the Free Movement Regime (FMR).

Key Allocations to Other Countries

• Nepal: Aid remains unchanged at ₹700 crore.
• Sri Lanka: Increased allocation from ₹245 crore to ₹300 crore as the country continues its recovery from an economic crisis.
• Bangladesh: Funding remains steady at ₹120 crore, amid diplomatic tensions following the ousting of former Prime Minister Sheikh Hasina, who has been granted asylum in India. The new government, led by Muhammad Yunus, has called for her return.
• African Nations: Aid has been raised from ₹200 crore to ₹225 crore. India’s engagement with Africa has grown, particularly since the African Union’s inclusion in the G20 during India’s presidency in 2023.
• Latin America: Funding has doubled from ₹30 crore to ₹60 crore. India has been expanding its ties with the region, as reflected in Minister of State for External Affairs Pabitra Margherita’s recent visit to Mexico, Grenada, Barbados, and Antigua and Barbuda.
• Iran (Chabahar Port): The allocation remains at ₹100 crore. This port serves as a crucial trade link to Afghanistan and Central Asia.

Disaster Relief and Cultural Diplomacy See Significant Increases

Budget 2025: Bhutan Tops Foreign Aid List The disaster relief budget has seen a sharp rise from ₹10 crore in 2024-25 to ₹64 crore for 2025-26. India has been an active first responder in global disaster relief efforts, providing aid to Turkey after its devastating earthquakes in 2023 and extending support to flood-affected nations such as Laos and Vietnam in 2024.

India is also increasing its cultural and educational outreach. The Indian Council for Cultural Relations (ICCR) has received ₹351 crore, up from ₹331 crore last year. Additionally, funding for international training programs stands at ₹1,247 crore, further strengthening India’s soft power diplomacy.

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