NEW DELHI – Indian Prime Minister Narendra Modi reaffirmed the “unique ties of friendship and cooperation” between his country and Bhutan when meeting King Jigme Khesar Namgyel Wangchuck on Monday evening.

But while the declaration seemed like routine diplomatic parlance between the two neighbouring countries, analysts noted its significance in the backdrop of China trying to gain a foothold in Bhutan.

The tiny Himalayan nation of 700,000, wedged between China and India, is the only country in South Asia where Beijing does not have a presence or formal diplomatic ties.

But that could change with Bhutan said to be close to resolving disputes on its western and northern borders with China, which is also pushing for the establishment of formal diplomatic ties.

India views South Asia as its zone of influence, but has had to contend with the rising Chinese presence in the region, built up through a mix of diplomacy, financial aid and economic linkages.

Despite criticism that it is pushing nations into a debt trap, China remains influential in Pakistan and Sri Lanka, even as it has been making inroads into Bangladesh. In the Maldives, Beijing recently got a boost with a regime seen to be China-friendly coming to power. 

“If you look at it in the long term, India will have to compete with China for favours in the region. India cannot automatically have a veto on everything the neighbours do,” said Professor C. Raja Mohan, a visiting research professor at the Institute of South Asian Studies.

“The only concern is that what the neighbouring countries do doesn’t hurt India’s security. Second, we do more things with them.”

Just two weeks prior to the visit of the Bhutan King to India, Bhutanese Foreign Affairs and External Trade Minister Tandi Dorji became the country’s first foreign minister to visit China, for the 25th round of boundary talks on Oct 24 and 25.

During the visit, the two sides agreed to speed up border talks. China’s state-run news agency Xinhua reported that Chinese Foreign Minister Wang Yi told Dr Dorji that establishing diplomatic ties between the two nations will serve both their long-term interests.

Boundary negotiations between Bhutan and China, which started in 1984, have in recent years picked up pace.

Bhutan Prime Minister Lotay Tshering, in an interview with The Hindu in March, said that resolution of the border issue is imminent, noting that Bhutan wanted to “be able to draw a line called the China-Bhutan border line”.

He also said Bhutan could not remain shut off from China.

For India, concerns centre on whether a final border deal would include land swops, particularly in Doklam, a disputed area between China and Bhutan which is also close to India’s Siliguri Corridor.

Called the chicken’s neck, the narrow Siliguri strip of land connects India’s north-east to the rest of India.

Any land swop could bring China closer to this sensitive area.

India, too, has longstanding border issues with China, and tensions continue to simmer along the 3,440km-long border that is undemarcated in many parts with little solution in sight.

In 2017, India got involved in a border dispute between Bhutan and China in Doklam. Indian and Chinese troops faced off in the disputed plateau, withdrawing only 73 days later after negotiating an agreement for withdrawal.

The episode triggered worry in Bhutan about being caught between its two large neighbours – something analysts say it very much wants to avoid.

“Bhutan is getting worried about the China-India contestation sharpening, and therefore it perhaps also wants to get its border issues sorted out with China before any more intensification of this conflict between India and China,” said Professor Harsh V. Pant, vice-president for studies and foreign policy at New Delhi-based think-tank the Observer Research Foundation.

Bhutan will have to manage India’s red lines, “given that it has a special relationship with India”, he added.

India, under a 1949 friendship treaty, had oversight over Bhutan’s foreign policy and arms purchases. While that provision was scrapped in 2007, India continues to be the most influential country in Bhutan.

Their economies are so closely linked that the Indian rupee can be used freely throughout Bhutan. India, through four hydropower projects which it helped finance and build, also buys electricity from Bhutan.

The two countries are also seeking to expand economic and trade linkages. Discussions between Mr Modi and Bhutan’s powerful and much loved King on Monday evening covered “the entire gamut of bilateral cooperation and regional and global issues”, said a joint statement.

It also included discussions on moving forward with the first rail link between the two countries, connecting the Indian state of Assam to Bhutan, exploring a second rail link with the Indian state of West Bengal, and helping facilitate trade between Bhutan and Bangladesh.  

There is also an assessment in India that China wants to keep their border row unresolved to use as a pressure point on India, which has been deepening cooperation with the US.

“China intends to resolve the territorial disputes with Bhutan. But it has not pushed for a solution with India,” said Prof Srikanth Kondapalli of Jawaharlal Nehru University.