In the Union Budget 2025, India has significantly increased its foreign aid allocations to neighboring countries, with notable hikes for Maldives, Afghanistan, and Bhutan. The aid to Maldives has surged by ₹130 crore to ₹600 crore, a 27% increase over the revised ₹470 crore allocated in the previous year. This increase signals a possible shift towards stronger diplomatic relations between the two nations after a period of tensions in 2024. The tensions were sparked by a diplomatic row following President Mohamed Muizzu’s election and his request for India to withdraw its troops stationed in the Maldives. However, by mid-2024, relations seemed to improve as both countries worked to mend ties. The increase in financial aid suggests a renewed focus on cooperation between India and the Maldives.

In addition to the Maldives, India's aid to Afghanistan has doubled from ₹50 crore in FY 2024-25 to ₹100 crore in FY 2025-26. This shift underscores India’s continued interest in supporting Afghanistan despite ongoing challenges in the region. The funding for Bhutan, however, has seen a 15% decline, with a revised allocation of ₹2,150 crore in Budget 2025 as compared to ₹2,543 crore in FY 2024-25. Despite this cut, Bhutan continues to receive the largest share of India's development aid among neighboring countries.

Aid Allocations for Neighboring Countries:

India’s foreign aid budget for neighboring countries has seen several changes in FY 2025-26, with some countries experiencing increases, while others see reductions. A look at the revised and new aid allocations:

Analysis of India’s Foreign Aid Strategy:

The strategic increase in aid to Maldives and Afghanistan indicates a clear focus on enhancing regional stability and strengthening relationships with key neighbors. Maldives, after a period of diplomatic uncertainty, appears to be a central point in India's foreign policy in the Indian Ocean region. The doubling of aid to Afghanistan reflects India’s interest in maintaining a presence and influence in the region despite political and security challenges.

On the other hand, countries like Bhutan, Sri Lanka, and Bangladesh have either received stable or reduced aid allocations, showing that India’s foreign aid strategy is evolving based on both diplomatic needs and regional priorities. While Bhutan’s aid saw a cut, it continues to be a key partner for India, underscoring the importance of Bhutanese relations in India’s foreign policy framework.

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