Neighbourhood focus in foreign aid
The Union Budget 2026-27 underscores India’s twin priorities of reinforcing regional partnerships and accelerating long-term domestic growth, with a strong emphasis on tourism, mobility, and human capital development. While neighbouring countries continue to receive priority under India’s overseas development assistance, the travel and hospitality industry has welcomed the budget’s alignment with the Vision 2047 roadmap.
Bhutan has emerged as the largest recipient of Indian development assistance, with an allocation of Rs 2,288 crore for the coming fiscal year-an increase of around Rs 138 crore over last year. Nepal has been allocated Rs 800 crore, while the Maldives and Mauritius will receive Rs 550 crore each. Overall, the Ministry of External Affairs (MEA) has been allotted Rs 22,118 crore, up from the current fiscal’s budget estimate of Rs 20,516 crore, reflecting India’s sustained focus on regional engagement and diplomatic outreach.
Under the Overseas Development Partnership portfolio, Rs 6,997 crore has been earmarked for 2026-27, accounting for over 31 per cent of the MEA’s total allocation. Of this, Rs 4,548 crore has been reserved for immediate neighbours.
According to officials, the funds will be utilised for a wide range of projects, including large infrastructure initiatives such as hydroelectric power plants, power transmission lines, housing, roads, and bridges, as well as smaller community-level development programmes aimed at improving livelihoods.
In contrast, India has sharply reduced financial assistance to Bangladesh, allocating only Rs 60 crore in the new budget compared to Rs 120 crore last year. The cut comes amid strained bilateral relations, driven by concerns over violence against minorities-particularly Hindus-in Bangladesh and shifts in Dhaka’s foreign policy following political changes in 2024, including its outreach to Pakistan.
The MEA has reiterated that it is closely monitoring the situation of minorities in Bangladesh and has raised the issue repeatedly at diplomatic and political levels.
Minister of State for External Affairs Kirti Vardhan Singh recently told the Rajya Sabha that Prime Minister Narendra Modi had also discussed the matter with Bangladesh’s Chief Advisor Mohammad Yunus.
Among other allocations, Myanmar will receive Rs 300 crore, a reduced amount compared to the previous year. The Maldives’ allocation has also been lowered, while Bhutan continues to receive enhanced support, reflecting the depth of bilateral cooperation between the two countries. In a notable departure from previous budgets, no funds have been allocated for the Chabahar port project in Iran. Last year, Rs 100 crore had been earmarked for the project, later raised to Rs 400 crore in revised estimates, highlighting a shift in India's overseas infrastructure spending priorities.
Alongside its foreign policy focus, the budget's domestic growth agenda-particularly for tourism and mobility-has drawn positive reactions from industry stakeholders. Zubin Karkaria, Founder and CEO of VFS Global Group, said the Union Budget lays out a strong roadmap towards Vision 2047 by positioning tourism, mobility, and human capital as engines of long-term growth. He noted that recognising tourism as a driver of employment, foreign exchange earnings, and regional development would help create a more competitive and resilient travel ecosystem.
Karkaria also welcomed the emphasis on capacity building through infrastructure development, skill enhancement, and institutional support. He said initiatives such as the National Institute of Hospitality, upskilling of tourist guides, and the National Destination Digital Knowledge Grid would have a lasting impact on service quality, destination readiness, and ease of doing business. Support for sustainable, heritage, experiential, and medical tourism, coupled with reductions in TCS on overseas tour packages and TDS under the Liberalised Remittance Scheme for education, and is expected to ease financial pressure on Indian travellers and students while boosting global mobility and connectivity.
