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Bhutan’s Strategic Role in India’s Regional Diplomacy
Context:
Bhutan holds a unique position in India’s South Asia strategy, acting as a crucial ally in countering China’s influence. The Union Budget 2025-26 reflects India’s commitment to strengthening this partnership.
India’s Neighbourhood-First Policy (NFP) and Bhutan’s Importance
- India’s Neighbourhood-First Policy (NFP) prioritises strong regional ties through trust, development, and security cooperation.
- Bhutan remains India’s most committed regional partner, unlike other South Asian nations balancing between India and China.
Budget 2025-26: Financial Commitment to Bhutan
- The Ministry of External Affairs (MEA) received ₹20,516 crore in the new budget, with ₹5,483 crore allocated for aid to foreign nations.
- Bhutan is the largest recipient, receiving ₹2,150 crore, reaffirming India’s long-standing strategic partnership.
- Other South Asian countries, including Maldives (₹600 crore) and Nepal (₹700 crore), also saw financial allocations, but Bhutan remains the primary focus.
Bhutan as a Strategic Buffer Against China
- Bhutan’s geopolitical significance lies in its location near India’s Siliguri Corridor, a vital link between India’s northeastern states and the mainland.
- The 2017 Doklam standoff highlighted Bhutan’s critical role in India’s security strategy.
- India’s continued financial support ensures Bhutan’s political stability and economic growth, preventing Chinese influence from expanding into this crucial region.
Strengthening Economic and Trade Partnerships
- The India-Bhutan Trade, Commerce, and Transit Agreement ensures a free trade regime, making India Bhutan’s largest economic partner.
- Bilateral trade has tripled in a decade, reaching $1.6 billion in 2022-23, with India accounting for 73% of Bhutan’s total trade.
- Budget 2025-26 continues to fund trade corridors and infrastructure development, reinforcing Bhutan’s economic dependence on India.
Hydropower Cooperation: A Pillar of Economic Ties
- Bhutan’s hydropower sector contributes 40% of national revenue and 25% of its GDP, with India as its primary investor and buyer.
- India has developed major hydropower projects, including Tala (1020 MW), Chukha (336 MW), and Mangdechhu (720 MW).
- Future projects, such as Punatsangchhu I & II (2,200 MW) and Kholongchhu (600 MW), will further expand electricity exports to India, benefiting both economies.
Infrastructure and Digital Connectivity Investments
- India’s budget allocation supports border roads, trade facilitation centres, and modern checkpoints, enhancing cross-border trade.
- Digital initiatives, including the RuPay card system and UPI payment integration, ensure smoother financial transactions between India and Bhutan.
Bhutan’s Role in Regional Cooperation Frameworks
- Bhutan actively participates in SAARC, BIMSTEC, and BBIN, strengthening India’s regional coalition against China’s Belt and Road Initiative (BRI).
- India’s investments in Bhutan’s connectivity ensure it remains economically integrated with India rather than exploring trade routes through China.
Future Areas of India-Bhutan Collaboration
- Climate resilience and sustainability: Joint efforts in green hydrogen projects and renewable energy expansion align with India’s sustainability goals.
- Digital economy: Expanding fintech infrastructure, enabling Bhutan to modernise its banking and payment systems.
- Strengthening security cooperation: Continued defence and intelligence collaboration to counter China’s regional assertiveness.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
