After the renewal of the Indo-Bhutan Treaty in 2007, Bhutan took charge of its foreign and defence policies which were till then guided by India. But economically, the country is still majorly dependent on India and the level of Indian investments coming into the country would make it difficult for Bhutan to have its own independent economic policy.

But China today is a reality for Bhutan and India cannot afford to ignore this, if it wants stable relation with Bhutan which shares a border with China. But will Bhutan be able to hold on to its ties with India without getting attracted to Chinese aid and lucrative business deals which some believe can hasten the development of Bhutan?  Will the trust that exists between Bhutan and India sour with Bhutan now taking independent decisions? Will India accept Bhutan as an equal partner unlike in the past?

Bhutan's Dependency on India
Bhutan today, is heavily dependent on India. Many see the economy of the country, as an extension of the Indian economy. Indeed, Bhutan has always maintained that without the support and the aid from India it would not be where it is today, politically and economically.

Even the main purpose of the Indian foreign secretary Ranjan Mathai’s two day visit to Bhutan, from 14 -16 May, 2013 was to discuss all aspects of the bilateral relations with more emphasis on Indian assistance to development plans. The government of India has committed Rs 34 billion for the 10th plan of Bhutan of which Rs. 20 billion is project tied assistance and Rs 7 billion each for program grant as budgetary support and small development project. Equal amount of importance has been give to investments in the hydropower sector to harness 10,000 MW by 2020.

The relationship with China is still at the informal level and hence there is no concrete economic policy towards Bhutan. And also China is being cautious while dealing with Bhutan because it understands well, the intrinsic political and economic relation Bhutan shared with India for decades. But none the less, China is being soft on Bhutan by going slow on the border issue and trying to establish a rapprochement clearly based on economy and non-political activities. All said and done, due to more than 60 years of economic dependency, it would be difficult for Bhutan to detach itself from India. In fact, investment especially on hydro-power projects will keep India occupied in Bhutan for some time.

Model of Partnership and Cooperation?
The governments of India and Bhutan today echo the same understanding regarding their friendship which they say is a “model of inter-state relations”. And due to this reason, the borders are porous and free trade exists between the two countries. Both these countries believe that despite vast differences in size and population, the relationship stand as a “model of partnership and cooperation”.

But in spite of  both the governments expressing the confidence on the Indo-Bhutan relations, the recent deluge of negative news of Bhutanese engagement with China  by several Indian ‘experts’ has not been taken  appropriately and have made  Bhutanese to introspect on its sovereignty. Many are worried whether Bhutan could exercise its ‘independent’ voice which they thought the renewed Indo-Bhutan Friendship treaty of 2007, granted.  

The first historic meeting between the Prime Minister of Bhutan, Jigme  Thinley and his Chinese counterpart   Premier Wen Jiabao  took place in Rio de Janeiro in 2012. The government of Bhutan believes that for the good of its own security and sovereignty, it was necessary to talk to the Chinese, and such informal talks would not hamper relations with India at all. In fact, the Bhutanese government has lashed out at the media in both countries for souring Indo-Bhutan relationship and also negated the false rumour that India was cutting the funds for Bhutan.

But still, many are critical about the future of Indo-Bhutan relations; in fact they still believe that India treat Bhutan as a junior partner and a sense of “paternalistic friendship” exists between them. And that India still dominates Bhutan in all aspects of its relations. Bhutan, post 2007 Treaty seeks to extend its hand of friendship to other countries, and China will be its prime focus.  Bhutan believes for the friendship to be equal, India needs to now accept the new reality of Bhutan (renewal of friendship treaty in 2007) and that India too should be grateful to Bhutan as much as it is towards its giant neighbour.