India has significantly reworked its overseas development assistance in the Union Budget 2026-27 and, for the first time, made no allocation for the Chabahar port project, reflecting caution amid renewed US sanctions on Iran.
The Chabahar port, jointly developed by India and Iran, is intended to strengthen regional connectivity and trade. Both nations have also advocated for its inclusion in the International North-South Transport Corridor (INSTC).
The INSTC is a 7,200-km-long multi-mode transport project for moving freight among India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.
In previous years, India had set aside Rs 100 crore annually for the major connectivity project in Iran’s southern Sistan-Balochistan province, where it remains a key development partner.
Last September, the US imposed stringent economic sanctions on Iran but had granted India a six-month exemption for its involvement in the Chabahar project. That waiver is set to expire on April 26.
Speaking last month, External Affairs Ministry spokesperson Randhir Jaiswal confirmed that India is actively engaging with Washington on matters related to Chabahar.
Sources indicate that India has been exploring various options for the project following the Trump administration’s warning of a 25% additional tariff on countries conducting business with Tehran.
Furthermore, Bangladesh saw one of the steepest reductions in Indian foreign aid, with its allocation halved from Rs 120 crore to Rs 60 crore, reflecting strained bilateral relations. Of the Rs 120 crore allocated previously, only Rs 34.48 crore had been disbursed.
Bhutan continues to receive the highest level of Indian assistance, followed by Nepal, Maldives, and Sri Lanka. Overall, India’s “Aid to Countries” allocation has increased to Rs 5,686 crore, up about 4% from last year’s Rs 5,483 crore.
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Published By:
Shipra Parashar
Published On:
Feb 1, 2026
