Making Sense of India-Bhutan Development Partnership

On his first overseas visit after assuming office in February 2024, Bhutanese Prime Minister Tshering Tobgay arrived in New Delhi on March 14. He held talks with his Indian counterpart Narendra Modi and both leaders reaffirmed their commitment to further strengthen their bilateral ties. Over the years, development partnership has remained a vital tool of Indian foreign policy and Bhutan has been an important recipient of Indian aid. In recent months, India, which shares a special relationship with Bhutan, has been wary of the latter’s warmer ties with China. As Modi returned the gesture and visited Bhutan the following week, India is hoping to keep up their outreach and ensure Bhutan stays closer to them.

Taking Stock of India’s Development Aid to Bhutan

If one takes a closer at India’s development assistance figures in the last few years, it can be easily understood that Bhutan has enjoyed a special place among all aid recipients. For instance, in the 2024 interim budget, out of the total amount of ₹ 5,667.56 crores that New Delhi decided to allocate as grants and loans, Bhutan is expected to receive ₹ 2398.97 crores. To understand the context fully, Maldives, which is the second highest aid recipient, got allocated only ₹ 600 crores in 2024. In 2023 too, Bhutan was allocated around ₹ 2400 crores and funds disbursed stood at ₹ 1150 crores (for further details, refer Table 1).

Despite numerous asymmetries in their relationship, both nations are aware of and have acknowledged the need to review and expand their development cooperation on a consistent basis. Since Bhutan began its Five Year Plan in 1971, India has remained its principal development partner. New Delhi’s development aid to its neighbor is coordinated under the overarching mechanism of Bilateral Development Cooperation Talks. During the recent India-Bhutan Development Cooperation Talks held in New Delhi on March 01, 2024, both sides reviewed the progress of the projects supported by India under the 12^th Five Year Plan of Bhutan.

According to the Ministry of External Affairs’ press release, India’s bilateral support to Bhutan’s 12^th Five-Year plan has resulted in the successful implementation of 83 project tied assistance projects and 524 high impact community development projects. The areas of cooperation include health, digital development, capacity development, infrastructure, sports, agriculture and culture. The community development projects are mainly focused on improving the irrigation system, rural infrastructure, drinking water supply, primary healthcare units, and so on. The talks also saw discussions regarding the 13^th Five Year Plan which is expected to begin this year. During Prime Minister Tobgay’s recent visit to New Delhi, Prime Minister Modi reiterated New Delhi’s desire to support Thimphu’s developmental priorities through the 13^th Five Year Plan and also considered a request for an Economic Stimulus Programme, which requires an additional ₹ 15 billion.

Table 1: India’s Development Aid to Bhutan (2021-2024)

Source: MEA Performance Smart Board

Looming Chinese Presence Remains a Worry for India

From a geopolitical perspective, Bhutan is uncomfortably situated between two Asian giants, India and China. For a  small state like Bhutan, it becomes increasingly difficult to manage its own priorities and interests amidst an ongoing strategic rivalry between its neighbours. While it shares a unique relationship with India on the one hand, it has long attempted to ensure stability with China on the other.

Prime Minister Tobgay’s decision to choose India as his first overseas destination is not surprising at all. In 2023, Bhutanese King Jigme Khesar Namgyel Wangchuk travelled twice to India, in April and November. This was largely linked to Bhutan’s attempt to appease India after its renewed border talks with China. To date, Bhutan does not have official diplomatic relations with China. Since 1984, both countries have held 25 rounds of border talks, with the last one being held in October 2023, after a long hiatus of seven years. Following these talks, both Bhutan and China came to an agreement to finalise the delimitation and demarcation of their boundaries, and also discussed the possibility of eventually establishing diplomatic relations. Although a rapid growth of their relationship is not expected as of now, gradual warming of their ties is seen as inevitable.

As Bhutan is seemingly under increasing pressure to settle its border negotiations with China, India would have certainly raised its concerns with its neighbour. Even as it has gone forward to settle its border issues with China, including the demarcation of contested territories, the Doklam region which witnessed a stand-off between India and China in 2017, is excluded from these negotiations. Therefore, while navigating this geopolitical squeeze is essential for its very survival, Bhutan would want to carefully make its balancing move – attain progress with China on its border talks, and at the same time, ensure that India’s security interests are not at risk.

The Way Forward

Since New Delhi continues to be its largest, most dependable development partner, Thimphu would want its trusted neighbour to be on board before reaching any concrete agreement with Beijing. Hence, Prime Minister Tobgay’s recent meeting with his Indian counterpart in New Delhi and the discussions on enhancing development cooperation was not a mere bilateral visit. It is most certainly a part of a larger reassuring act that Bhutan aims to continue with its long-trusted partner.

Simultaneously, India must remain accommodative, understand the logic behind Bhutan’s careful balancing actions and continue supporting its developmental needs on a consistent basis. New Delhi’s long-standing policy of non-reciprocity is of utmost importance in its relationship with its neighbours, and development cooperation must continue to be a crucial diplomatic tool in this context. Prime Minister Modi’s decision to visit Bhutan on March 21 a few weeks before the general elections in India is reflective of the importance that India attaches to Bhutan. With geopolitical competition with China intensifying in its immediate neighbourhood, India would want to step up its outreach activities, ensure consistent high-level exchanges and stand by their developmental priorities and aspirations.