Providing foreign aid to developing countries is one of the most important aspects of contemporary foreign politics. The article studies relations between India and Bangladesh from the perspective of foreign aid flows and discovers conditions, forms, mechanisms, and trends of India’s aid to Bangladesh from 1971 until today. The research uses the approach of the Organization for Economic Cooperation and Development (OECD) towards foreign aid and understands it as financial assistance, technical assistance, as well as aid in goods in the form of grants and soft loans with the aim to provide economic development and well-being. The author analyzes factors of the geopolitical significance of Bangladesh for India and studies India’s aid to Bangladesh in the context of the history of bilateral relations between the two countries. As a result, a certain correlation is discovered between aid flows and the state of bilateral relations. China’s growing interest is seen as one of additional factors, which cause India to increase volumes of its aid to the neighboring countries, including Bangladesh. China and India are understood as emerging donors who are competing to increase their influence in the world. The two Asian giants have recently taken considerable aid commitments to Bangladesh which indicates that Bangladesh starts to play a more important role in the regional geopolitics. In this context, the article predicts a further growth in the volumes of Indian aid to Bangladesh in the future and concludes that India uses its foreign aid programs as a tool to promote its own economic, political, and strategic interests. Foreign aid, including official development assistance (ODA), is becoming a means of India’s economic diplomacy although some researchers point to the fact that the country’s policymakers still lack coordination to make aid efficient in terms of political gains.