This is referring mainly to the European setting, but of course perspectives from other academic systems are welcome.
For grant proposals (let's say ERC Starting Grant level), it is important to make credible that you're planning cutting-edge research in a relevant area that deserves funding. One way of ascertaining this is by pointing out that there is a multitude of projects that tackle related questions that are funded in the same program. The argument against this would be that it makes your project seem less novel, which is an other central evaluation criterion.
I'm leaning towards citing as many related proposals as possible, as long as it is clear that the questions targeted in the proposed project are still open and the methods are visibly distinct from what has been attempted before (e.g. because the PI has developed them themselves recently).
I have heard very mixed things from colleagues on this, and I wonder if there is someone who has deeper insights into how this is usually perceived by reviewers / the grant agencies.
