Narendra Modi’s two-day visit to Bhutan starting June 15, his first visit abroad after assuming office as the Prime Minister, is being seen as a clear challenge to China which has been slowly making inroads into the Himalayan kingdom. Modi is expected to hold talks with his Bhutanese counterpart, Tshering Tobgay, and also meet King Jigme Khesar Namgyel Wangchuck.
The visit also reflects the importance India attaches to its ties with Bhutan whose Prime Minister was among the leaders from neighboring countries to attend Modi's swearing-in ceremony on May 26. Modi had also held a short meeting with the Bhutanese leader after being sworn into office.
Bhutan is regarded by many as India's only all-weather friend, despite a notion among foreign policy experts that Bhutan is leaning towards China. Apart from the recent hiccups in relations, which resulted in India suspending supply of subsidised LPG and kerosene, Bhutan remains a major trade and developmental partner. In the meeting with Tobgay on May 27, Modi assured Bhutan that Indian authorities would soon start work on four hydropower projects which would together generate 2,120 MW. Hydropower is one of the mainstays of bilateral cooperation between the two countries.
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Foreign policy experts say that the decision to make Bhutan his first visit highlights the importance Modi attaches to neighbour relations, which suffered under the UPA government. Bhutan may be a small country but it is strategically important with China on the other side.
During a talk at the Observer Research Foundation (ORF) on July 11, 2013 former Indian Ambassador to Bhutan Pavan K Varma said that more sensitivity was required on the part of Indian diplomats in their dealings with Bhutan. Modi’s visit also becomes important as Nepal, which has religious and ethnic relations with India, has now better relations with China than India. In January, China overtook India to become the largest contributor of Foreign Direct Investment (FDI) to Nepal over the first six months of the current fiscal year, underlining the rising Chinese economic presence — and strategic influence — in the country, according to new figures.
Since Bhutan’s first Five Year Plan (FYP) in 1961, India has been extending financial assistance. The 10th FYP ended in June 2013. India's overall assistance to the 10th FYP was a little over Rs 5,000 crores, excluding grants for hydropower projects. Three hydro-electric projects (HEPs) totaling 1,416 MW (336 MW Chukha HEP, the 60 MW Kurichu HEP, and the 1020 MW Tala HEP), are already exporting electricity to India. In 2008, the two governments agreed to further develop a minimum of 10,000 MW hydropower generation capacities by 2020 and identified ten more projects.
During 2012, bilateral trade between India and Bhutan reached Rs 6,960 crore. Imports from India were Rs 4,180 crore, accounting for 79.4 per cent of Bhutan's total imports. Bhutan's exports to India stood at Rs 2,780 crore (including electricity) and constituted 94 per cent of its total exports. Total bilateral trade grew by about 13 per cent in 2012.
As compared to India, China’s power has grown substantially. As the Indian economy has slowed, its ability to engage in the neighbourhood has been affected. China has strategically built its “String of Pearls” in the Indian Ocean by building a network of military and commercial facilities in countries neighbouring India. The two largest projects consist of a Chinese financed commercial shipping center in Hambantota, Sri Lanka and a Chinese controlled deep water port in Gwadar, Pakistan.
Similar port construction projects are also underway in Myanmar (Sittwe port) and Bangladesh (Chittagong port). The Chinese government has financed a container shipping facility in Chittagong. Strategists have also identified the Marao Atoll, in the Maldives, as a potential Chinese military base of operations.