By Sanjeev Miglani
THIMPHU (Reuters) - Prime Minister Narendra Modi assured Bhutan on Sunday of India's support during his first trip abroad, a move seen as an attempt to assert his country's influence in south Asia where China is steadily making inroads.
His decision to make tiny Bhutan his first destination was the latest in a series of unconventional policy choices by India's new prime minister who came to power last month on the promise of making his country an economic and military power.
He previously invited South Asian leaders to his inauguration and has exchanged friendly letters with Pakistan's Prime Minister Nawaz Sharif in a bid to re-establish India as the dominant power in the region.
While India has struggled recently with policy paralysis and a slowing economy, China has been building ports in Sri Lanka, Bangladesh and its "all-weather ally", Pakistan. It overtook India as the biggest foreign investor in Nepal in the first six months of this year.
Modi, given a ceremonial welcome in Bhutan's capital Thimphu nestled in mist-covered mountains, opened a Supreme Court building constructed with Indian assistance.
On Monday he will lay the foundation for a 600 megawatt hydroelectric power station, part of an energy cooperation plan to feed demand in Bhutan, and also India.
"PM underlined that he would not only nurture strong bonds but would also strengthen them," a government official said after Modi's talks with Bhutan's King Jigme Kesar Wangchuk and Prime Minister Tshering Tobgay.
Bhutan, wedged in the Himalayas between India and China is the closest India has to an ally in South Asia, a region home to over 1.5 billion people but held back by bristling rivalries.
Modi's Bhutan visit shows an astute sense of the region's critical importance to India's economic dynamism and strategic strength, said Alyssa Ayres, a South Asia expert at the New York-based Council on Foreign Relations.
"Of course, India is also closely watching China's border talks with Bhutan and China’s recent efforts to establish stronger ties with Thimphu," she said.
On Sunday, hundreds of school children dressed in traditional red and green tunics lined the route from the airport to wave the Indian flag as Modi's motorcade arrived in the kingdom which for centuries was closed to outsiders.
"Bhutan and India share a very special relationship that has stood the test of time," Modi said before he left New Delhi. "Thus, Bhutan was a natural choice for my first visit abroad."
Modi's government aims to make India the dominant foreign investor across South Asia as well as the main provider of infrastructure loans, in the same way China has done in much of the rest of Asia and in Africa.
"Although India would like to have a greater say in South Asian matters beyond trade, so far we have not been able to exercise substantial political clout," said P.D. Rai, a lawmaker from the state of Sikkim, which shares a border with Bhutan.
"Modi's first visit to Bhutan will have to be looked at in this light."
Bhutan, the size of Switzerland and with a population of 750,000, has only recently emerged from centuries of isolation.Its first road was built in 1962 and television and the Internet arrived in 1999.
It is the first country to monitor gross national happiness, an alternative to gross domestic product, to balance a tentative embrace of modernity with an effort to preserve traditions.
But Bhutan, which made the transition from absolute monarchy to parliamentary democracy in 2008, is struggling with high unemployment and a growing national debt.
The government that took power in 2012 says it wants to focus on obstacles to happiness.
"It is good that we are being connected to the world, we are all on Facebook," said schoolgirl Tenzin Lamsang, as she and a group of friends prepared to greet the Indian leader.
(Editing by Robert Birsel, Clarence Fernandez and Sophie Hares)