India’s economy continues to demonstrate strong resilience amid global uncertainties, with sustained growth prospects offering positive spillover effects for Bhutan, whose economy remains closely integrated with its southern neighbour through trade, investment and financial cooperation.
India’s Gross Domestic Product (GDP) is projected to grow between 6.3 and 6.4% in FY2025–26 and FY2026–27, supported by a strong financial and corporate sector and manageable external debt levels. The latest International Monetary Fund (IMF) Article IV Consultation projects growth at 6.6% in FY2025–26, moderating slightly to 6.2% in FY2026–27 due to transitional effects from Goods and Services Tax (GST) reforms and ongoing structural adjustments. Despite the continued imposition of 50% US tariffs, India’s growth momentum remains firm.
A resilient labour market has underpinned industrial and services sector output, while inflationary pressures remain subdued. India’s Consumer Price Index (CPI) rose by just 0.25% year-on-year in October 2025, aided by low food prices and one-off GST-related effects.
India’s trade performance has also remained robust, with cumulative exports of goods and services rising 4.48% to USD 491.8 billion (B), driven by strong demand from key markets including the United States, China, Hong Kong, Spain and the United Arab Emirates (UAE). Major international institutions—including the IMF, World Bank, Organization for Economic Cooperation and Development (OECD), Moody’s and S&P—have revised India’s growth forecasts upward for the 2025–27 period, citing the impact of structural reforms, digital transformation, trade promotion, and labour and tax reforms.
Positive Spillovers for Bhutan
Bhutanese economic officials say India’s strong performance provides an important external anchor at a time when Bhutan is navigating post-pandemic recovery, fiscal consolidation and efforts to stimulate private sector growth.
“India’s sustained economic expansion has a direct and positive bearing on Bhutan’s economy, particularly through trade, hydropower revenues and tourism,” a senior official from the Ministry of Finance (MoF) said. “Stable demand from our largest trading partner helps mitigate external shocks and supports overall macroeconomic stability.”
As Bhutan’s largest trading partner and primary source of foreign investment, India plays a critical role in Bhutan’s export earnings, especially in hydropower, agriculture and manufactured goods. Continued cooperation in the hydropower sector remains central to Bhutan’s long-term revenue generation and energy security.
An official from the Royal Monetary Authority (RMA) noted that strong economic conditions in India also help support Bhutan’s balance of payments and foreign exchange position. “Healthy growth in India strengthens trade flows and cross-border financial linkages, which is particularly important for maintaining external sector stability,” the official said.
Members of Bhutan’s business community have also expressed cautious optimism, noting that India’s growth outlook bodes well for cross-border commerce and investment.
“India’s expanding economy creates opportunities for Bhutanese exporters, especially in agri-products and niche manufactured goods,” said a representative from the Bhutan Chamber of Commerce and Industry (BCCI). “Improved demand and stable market conditions in India help businesses plan investments with greater confidence.”
Tourism operators say the outlook is also encouraging, as rising incomes and economic confidence in India are expected to support visitor arrivals. “A strong Indian economy usually translates into more regional travel,” said a hotelier in Phuentsholing. “This is important for border towns and small businesses that depend heavily on Indian tourists.”
While Bhutan continues to face structural challenges, including a narrow export base and dependence on hydropower, policymakers say the favourable regional environment provides a foundation for sustained growth.
“India’s economic resilience gives Bhutan valuable breathing space as we push ahead with economic diversification and private sector development,” a planning official said. “Leveraging this regional strength will be key to building a more resilient and inclusive Bhutanese economy in the years ahead.”
In general, India’s positive growth trajectory is expected to remain a critical pillar supporting Bhutan’s economic stability, reinforcing trade, investment and development cooperation between the two countries.
Tashi Namgyal
From Thimphu
