The aid package includes INR 17.75 billion in grants and INR 3.75 billion in loans

Thukten Zangpo 

Bhutan will receive INR 21.5 billion in financial assistance from India in the upcoming fiscal year 2025-26, making it the largest recipient of Indian foreign aid, according to India’s Union Budget.

The allocation represents 39 percent of India’s total foreign aid outlay for the year.

The aid package includes INR 17.75 billion in grants and INR 3.75 billion in loans.

This financial support underscores India’s commitment to Bhutan’s development, according to India’s Union Budget report.

India has also revised its aid commitment to Bhutan for the current fiscal year (2024-25), increasing it by 23 percent to INR 25.43 billion from the initial allocation of INR 20.69 billion. While grants were increased from INR 10.79 billion to INR 16.74 billion, concessional loans were revised downward from INR 9.9 billion to INR 8.7 billion.

For the fiscal year 2025-26, India’s total foreign aid budget—including both grants and loans—has been set at INR 54.83 billion, which is a 20 percent increase from the previous year.

Bhutan remains India’s top aid recipient, followed by Nepal, which will receive INR 7 billion in grants, and Mauritius, which has been allocated INR 5 billion.

Meanwhile, India has increased assistance to the Maldives from INR 4.7 billion to INR 6 billion, coinciding with efforts by Maldives to mend ties with  India after a period of strained relations. Aid to African nations has also been increased.

However, India has halved its foreign aid to Afghanistan from INR 2 billion to INR 1 billion. India’s aid to Myanmar saw a decrease from INR 4 billion to INR 3.5 billion due to ongoing political instability.

India has pledged a total of INR 85 billion to support Bhutan’s 13th Plan, including INR 15 billion for the economic stimulus programme.    

       During the 12th Plan, India provided INR 45 billion in assistance.

The foreign aid to Bhutan will help in developing the country’s economy, education, health, hydropower, sports, space, and technology.

For the fiscal year 2025-26, Bhutan has estimated a budget outlay of Nu 109.35 billion, accounting for 21 percent of the total 13th Plan budget.

The proposed outlay includes Nu 53.79 billion for capital expenditure and Nu 55.56 billion for recurrent expenditure.

The finance ministry has projected total resources of Nu 89.35 billion for the fiscal year, comprising Nu 67.28 billion from domestic revenues and Nu 22.07 billion in external grants.

The fiscal deficit, a gap between the government’s total revenue and total expenditure, which needs to be filled with borrowings, is expected to remain at 5.85 percent of gross domestic product in the fiscal year 2025-26. This is equivalent to Nu 20 billion.

To bridge the deficit, the government plans to rely on external and domestic borrowings.

In the 13th Plan, with the total budget outlay of Nu 512.28 billion, the fiscal deficit is estimated at Nu 55.94 billion, equivalent to 2.97 percent of gross domestic product.

The total grant for the plan period is estimated at Nu 125 billion, constituting 27 percent of total resources, which will finance at least 51 percent of the capital expenditure.

A large chunk of the external grant, Nu 85 billion, comes from India and the remaining Nu 40 billion from European Union, Japan, UN agencies and other development partners.

Advertisement