Narendra Modi, India’s newly elected Prime Minister recently completed his maiden foreign trip to Bhutan after being elected to office. The two-day trip involved meetings with his counterpart the Bhutanese Prime Minister and his majesty, the King of Bhutan. Mr. Modi also inaugurated the newly established Bhutanese Supreme court and addressed the elected parliament of the state. While all this might reflect the traditional bonhomie that has existed between the two countries, why was Bhutan chosen as the destination for his first visit after becoming PM?
India remains Bhutan’s largest trading partner contributing to more than 90% of its foreign trade (valued at over 70 billion INR). The main export from the Himalayan kingdom is hydro-power as the country produces surplus power owing to its geographical location and forms the centrepiece of any bilateral trade relation with India. The recent trip also marked agreement on four new hydropower plants that will be built by India.
Though the country has its own currency Ngultrum, the Indian rupee remains the preferred monetary unit for transactions. The visit comes at a time, when Bhutan is looking towards India for financial assistance as the country recorded government debt at 110% of GDP in 2013 and is in severe need for a bailout. Bhutan has traditionally been an Indian ally, however its recent overtures towards China (with several high level visits) was enough to catch the attention of South Block. In choosing Bhutan as the first destination, Mr. Modi has re-emphasised the strategic importance that India accords to the country. Bhutan remains the only Indian neighbour where China still does not have a diplomatic consulate.
In a way, India must be wary of Bhutan becoming part of China’s “string of pearls” endeavour in future. It refers to the military strategy of China to encircle India with naval bases in Indian Ocean, South China Sea, Bay of Bengal and the Arabian Sea. The most notable of these are the “two pearls” of Gwador port in Pakistan and Hambantota port in Sri Lanka, both of which are funded by the Chinese. In case of Hambantota, Sri Lankan authorities had initially asked for India’s help in its construction, however when India refused, they turned to China for assistance. In caseof Bhutan, New Delhi seems keen not to repeat the same mistake.
Mr. Modi recently became the first Indian Prime Minister whose swearing-in ceremony was attended by the head of states of SAARC countries, including arch-rival Pakistan. In what was a clear show of strength as a regional power, it was also an attempt by India to win back the support of its“former” allies Bangladesh, Sri Lanka and Maldives- all of which are increasingly becoming part of Chinese interests in the region. The Chinese have so far tried to downplay the significance of the Bhutan trip with its foreign ministry spokesperson Hua Chunying saying that China is “Happy to see such a development”. The Chinese foreign minister Wang Yi had also recently visited India and met with the Prime Minister and his Indian counterpart on the long standing border issue among other things.
Ironically, Modi’s next high level meet is scheduled for Japan (now delayed due to the upcoming budget) – a country that China associates with its world war II memories of occupation and suffering. China and Japan have also confronted each other over the sovereignty of the Senkaku islands in recent past. Mr. Modi would also be meeting US President Obama in the upcoming months- an event that China in particular would be watching closely. China feels that India is increasingly going to ally with US-Japan in Asia Pacific region, which will be detrimental to its interests. The Chinese President Xi Jinping is scheduled to visit India later this year. While the visit will be historic, Mr. Modi might have already set the agenda for Sino-Indian talks by then with his actions.
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