Bhutan Secures Largest Share of India’s 2025-26 Aid

In a bold reaffirmation of its commitment to regional development, India has earmarked INR 21.5 billion in financial assistance for Bhutan in the upcoming fiscal year 2025-26, making the Himalayan kingdom the largest recipient of Indian foreign aid. This generous allocation, detailed in India’s Union Budget, represents a significant 39 percent share of the country’s total foreign aid outlay for the year.

A Comprehensive Aid Package

The aid package is structured with INR 17.75 billion provided in grants alongside INR 3.75 billion offered as concessional loans. This move underscores India’s ongoing strategic partnership with Bhutan and its dedication to supporting the kingdom’s multifaceted development goals, which span from hydropower and education to health, sports, space, and technology.

The 2025-26 aid plan comes on the heels of a revised commitment for the current fiscal year (2024-25), during which India boosted its assistance to Bhutan by 23 percent – from an initial INR 20.69 billion to INR 25.43 billion. In that revision, grants saw a substantial increase from INR 10.79 billion to INR 16.74 billion, while concessional loans were slightly adjusted downward from INR 9.9 billion to INR 8.7 billion.

Expanding Regional Outreach

India’s overall foreign aid budget for fiscal year 2025-26 has been set at INR 54.83 billion, marking a 20 percent rise from the previous year. While Bhutan remains at the forefront of India’s aid initiatives, neighboring Nepal is slated to receive INR 7 billion in grants, and Mauritius has been allocated INR 5 billion. In addition, India has boosted assistance to the Maldives from INR 4.7 billion to INR 6 billion, reflecting an effort to strengthen ties with the island nation after a phase of strained relations. Aid to several African nations has also been increased as part of India’s broader development strategy.

Conversely, in response to evolving political scenarios, India has pared down its financial support to certain regions; the foreign aid to Afghanistan has been reduced by half—from INR 2 billion to INR 1 billion—while aid to Myanmar has seen a slight decline from INR 4 billion to INR 3.5 billion.

Support for Bhutan’s 13th Plan

Complementing the fiscal assistance, India has pledged a total of INR 85 billion toward Bhutan’s ambitious 13th Plan, including INR 15 billion dedicated to an economic stimulus program. This commitment is a substantial increase over the INR 45 billion provided during the previous 12th Plan period. The multifaceted support aims to catalyze Bhutan’s progress across several key sectors.

For the upcoming fiscal year, Bhutan has projected a budget outlay of Nu 109.35 billion, representing 21 percent of the overall 13th Plan budget. The allocation is divided almost evenly between capital expenditure (Nu 53.79 billion) and recurrent expenditure (Nu 55.56 billion). Bhutan’s finance ministry expects total resources of Nu 89.35 billion for the year, combining domestic revenue of Nu 67.28 billion with Nu 22.07 billion in external grants. Despite these resources, the fiscal deficit is projected to remain at 5.85 percent of the gross domestic product, roughly equivalent to Nu 20 billion, which the government plans to address through both external and domestic borrowings.

Over the full span of the 13th Plan—with a total budget outlay of Nu 512.28 billion—the fiscal deficit is estimated at Nu 55.94 billion (2.97 percent of GDP). External grants play a crucial role in this financial framework, with an anticipated total of Nu 125 billion, 27 percent of the overall resource pool. Notably, a significant portion of these grants, amounting to Nu 85 billion, is expected from India, while the remaining Nu 40 billion will come from the European Union, Japan, UN agencies, and other development partners.

A Strategic Partnership for the Future

India’s increased financial support to Bhutan reflects a broader strategic partnership aimed at fostering regional stability and development. As both nations navigate economic and geopolitical challenges, such robust financial ties are set to fortify their longstanding relationship and spur collaborative progress across a diverse array of sectors. With these initiatives, India and Bhutan are poised to drive economic growth and innovation, setting a benchmark for international cooperation in South Asia.

Total
0
Shares
Related Posts