Leaders from small countries rarely use the United Nations General Assembly to praise a larger neighbour. They usually speak about climate, debt, war and peace. On 22 September, Bhutan’s Prime Minister Tshering Tobgay did something different. He opened his address to the 81st session by calling himself “a salesman” where he spent his time inviting the world to invest in the Gelephu Mindfulness City (GMC).
He then placed India at the centre of his pitch. “Gelephu Mindfulness City sits directly on the border with India, our closest friend and neighbour,” he stated. “The vision enjoys the support of Prime Minister Narendra Modi, the Government of India and our neighbours across the border in Assam”. He listed a “trusted relationship with India” alongside Bhutan’s peace, political stability and rule of law as reasons investors should come.
This matters because Tobgay was not making a political gesture. He was making a business case. In naming India, PM Tobgay hinted at global investors that India’s friendship works like a guarantee.
That is the real shift. Strategic trust means one country builds its biggest national project on the other’s border and invites the world to join. PM Tobgay’s speech showed that Bhutan has made that choice with confidence.
To understand why, we must look back at how the two countries built this trust, one decision at a time.
| Time period | What defined this era |
| The Foundations: 1947 to the 1960s | Security came first; development followed from it.India funded, built and trained, since Bhutan had few engineers, a tiny budget and almost no road network.The relationship was personal, carried between the Wangchuck monarchy and Nehru’s government. |
| Stepping onto the World Stage: The 1970s | Bhutan’s sovereignty moved from being assured by India to being displayed internationally.India acted as sponsor and advocate, not just donor.Development spending broadened into education, health and administration. |
| The Hydropower Bargain: The 1980s and 1990s | Aid became investment, with hydropower as a mutually beneficial asset.Economic interdependence began to replace one-sided dependence. |
| Trust Tested and Rewritten: The 2000s | Security cooperation became genuinely reciprocal.India supported Bhutan’s democratic transition without trying to manage it. |
| Rivalry Comes Close: The 2010s | China became an unavoidable third presence.India learned, painfully, that pressure costs more than it gains in Bhutan.Support expanded from roads and dams to digital payments, space and education. |
| Partnership as Co-Creation: The 2020s | India now supports Bhutan’s own vision rather than setting the agenda.Connectivity has taken over from aid as the main theme.The partnership is being opened to third-country investors, with India as the gateway. |
The 1949 Treaty and Its 2007 Revision
India and Bhutan signed the Treaty of Friendship and Cooperation in 1949. It became the foundation of their relationship. Under Article 2, Bhutan agreed to take India’s guidance in its external affairs, and India promised not to interfere in Bhutan’s internal administration. In the context of 1950, the treaty gave Bhutan security at a time when it had almost no army, no roads and few international contacts.
Jawaharlal Nehru reassured Bhutan in person. In 1958, as accounts recollect, he travelled to Paro, partly on horseback, because no motorable road existed. He told the Bhutanese people that India respected their independence and wanted them to grow in their own way. That message shaped the tone of the relationship for decades.
Bhutan grew by joining the United Nations in 1971 with India’s backing, built its own institutions and prepared for democracy. In February 2007, the two countries revised the treaty. They removed the “guidance” clause and replaced it with a commitment to cooperate closely on issues that affect each other’s national interests. Neither side would allow its territory to be used against the other.
Large powers seldom give up treaty rights willingly. India did so because it recognised that a confident, sovereign Bhutan makes a better partner than a dependent one. The revision came just before Bhutan held its first parliamentary elections in 2008, and it sent a clear message: India wanted a partnership of equals.
India and Bhutan’s Planned-Development Journey
Bhutan launched its First Five Year Plan in 1961, and India has partnered in every plan since. India funded almost the entire first plan. In the same year, the Border Roads Organisation began Project DANTAK, which built the roads that link Thimphu, Paro and Phuentsholing to the Indian plains. For a country that had no highways, these roads opened the door to schools, hospitals, trade and government services.
India has kept that commitment for more than six decades. For the 12th Plan, from 2018 to 2023, India committed ₹5,000 crore, and it delivered all 83 major projects and 524 community projects as full grants. For the current 13th Plan, from 2024 to 2029, India doubled its support to ₹10,000 crore, which Prime Minister Modi announced during his state visit in March 2024. This package includes:
- ₹7,000 crore for major infrastructure and development projects
- ₹1,000 crore for small, high-impact community projects in villages
- ₹1,500 crore for an Economic Stimulus Programme
- ₹500 crore as direct budget support
In particular, the Economic Stimulus Programme shows how India listens to Bhutan’s needs. Bhutan designed it to support agriculture, small industries, tourism, start-ups, youth employment and rural housing. India funds it, but Bhutan decides how to spend it. That is what partnership looks like. In the Hydropower sector, India and Bhutan have jointly built five major hydroelectric projects with a combined capacity of 3,156 MW, which make up about 90% of Bhutan’s installed generating capacity. These are:
- Chukha, 336 MW, in 1988
- Kurichhu, 60 MW, in 2001
- Tala, 1,020 MW, in 2007–08
- Mangdechhu, 720 MW, in 2019
- Punatsangchhu-II, 1,020 MW, in 2025
Prime Minister Modi and His Majesty King Jigme Khesar Namgyel Wangchuck inaugurated Punatsangchhu-II together in November 2025. The model benefits both sides. In 2025, Bhutan’s electricity exports to India were worth ₹2,471 crore.
Beyond Dams: Broad-Based Development Support
People often reduce India’s support to hydropower. However, India’s help reaches almost every part of Bhutanese life.
Health: During the Covid-19 pandemic, Bhutan became the first country to receive Indian vaccines under Vaccine Maitri in January 2021. Bhutanese citizens still recall how quickly the doses arrived. In addition, last week, India’s External Affairs Minister S. Jaishankar inaugurated the 65-bed Gyaltsuen Jetsun Pema Mother and Child Hospital in Mongar; signalling a continuous investment in High Impact Development Projects (HICDP).
Education: India has doubled ICCR scholarships for Bhutanese students from 30 to 60 places and raised Nalanda University scholarships from 30 to 55. Thousands of Bhutanese professionals, from doctors to engineers to civil servants, have studied in Indian institutions.
Finance: India supports Bhutan’s economic stability through currency swap arrangements and standby credit facilities, and it cut the interest rate on those facilities from 5% to 2.5% in 2022. In July 2026, Bhutan signed a ₹4,000 crore concessional line of credit with India’s Exim Bank for new energy projects.
Digital and space: Bhutanese citizens can now make UPI payments in India through their own mobile apps, signifying the adoption of a two way transaction mechanism. The two countries have also agreed to use Indian satellite data to monitor glaciers, forests, floods and farming.
Youth and national service: India provided a ₹1,500 crore concessional credit for Bhutan’s Gyalsung national service infrastructure, and a ₹200 crore grant for the “Desuung for Gyalsung” programme. This breadth explains why ordinary Bhutanese people, and not just officials, see India as a partner.
Gelephu Mindfulness City as the Next Chapter: Assam as Bhutan’s Gateway Partner
His Majesty King Jigme Khesar Namgyel Wangchuck announced the Gelephu Mindfulness City in December 2023. It is Bhutan’s boldest idea yet. GMC is a self-governing special administrative region created under a Royal Charter, with its own laws, banking system and courts. It aims to attract green, clean industries such as AI, data centres and advanced manufacturing, all guided by the values of Gross National Happiness.
Gelephu sits right on the border with Assam, and that location makes Assam indispensable. Bhutan is landlocked. Every investor, worker and container that reaches GMC will pass through Assam. Tobgay recognised this when he thanked “our neighbours across the border in Assam” in his UN address.
In this regard, India and Assam are already building the links:
- Railways: India announced Bhutan’s first-ever cross-border rail links in September 2025, costing more than ₹4,000 crore. The Kokrajhar- Gelephu line will connect GMC directly to the Indian rail network, and construction on both routes is due to begin in early 2027.
- Border facilities: India has opened a Land Customs Station at Samrang in Assam and has committed to an immigration check post at Hatisar to help investors and visitors reach GMC.
- Joint planning: Both sides have agreed to handle GMC issues through a dedicated Joint Working Group.
For Assam, this is a historic opportunity. A thriving city across the border can bring jobs, trade and investment to districts such as Chirang and Kokrajhar, which have long waited for growth.
GMC and the Indo-Pacific Economic Map
GMC’s importance goes beyond Bhutan and Assam. Tobgay described the city as a gateway to markets across South Asia and Southeast Asia. According to the Bhutanese government, projects worth nearly USD 5 billion are under negotiation, covering an airport, railway, energy, digital and urban infrastructure.
That vision fits neatly into India’s own strategy. India’s Act East Policy aims to connect the Northeast with Southeast Asia. BIMSTEC links the countries around the Bay of Bengal. If GMC succeeds, it can become a new node on this map: a green, stable, well-governed hub at the meeting point of India’s Northeast and the wider Bay of Bengal region.
This matters for the Indo-Pacific balance too. Across South Asia, China has offered ports and highways through the Belt and Road Initiative, often with heavy debts attached. Bhutan chose not to join the BRI. GMC offers a different model: a project that a small nation designed on its own terms, that India supports without controlling, and that the world can invest in openly. If it works, it will show the region that partnership with India delivers growth without debt traps.
The Limits of the “Special Relationship”
The India-Bhutan relationship is strong and therefore further requires strengthening of its critical sectors.
Hydropower debt and pricing. Bhutan owes large sums on its hydropower loans, and the two sides regularly negotiate over electricity tariffs and trading rules. If Bhutan feels it receives too little for its power, goodwill can wear thin.
Trade imbalance. India is Bhutan’s largest trading partner, but outside electricity the balance tilts heavily towards India. Bhutanese businesses want easier access to Indian markets. The two sides are still discussing renewal of their Agreement on Trade, Commerce and Transit.
Memories of pressure. In 2013, just before Bhutan’s second election, India withdrew subsidies on cooking gas and kerosene. Many Bhutanese saw this as interference. Although India repaired the damage quickly, the episode reminds New Delhi that pressure costs more than it gains.
The China factor. The 2017 Doklam standoff showed that Bhutan sits on a sensitive frontier. Bhutan continues boundary talks with China, and it may eventually open formal ties with Beijing. India should accept this calmly. Bhutan’s closeness to India rests on choice, not on isolation.
Delivery on GMC. India’s credibility now depends partly on Gelephu. If rail links slip, if border posts move slowly, or if investors face red tape on the Indian side, the pitch that Tobgay made in New York will suffer, and India’s reputation with it.
Therefore, a special relationship still needs daily work.
Conclusion
When Tshering Tobgay called India Bhutan’s “closest friend and neighbour” before the world, he spoke for seventy-five years of shared history: a treaty that grew into an equal partnership, roads that opened a mountain kingdom, rivers that became electricity, and a neighbour that kept its promises.
India now faces a simple test. It must help Gelephu succeed, deal fairly on power and trade, and continue to respect Bhutan’s choices. If it does, the India-Bhutan partnership will remain what it is today: South Asia’s clearest example of how a large country and a small one can grow together through trust.
Source: Compiled by the Author
