India will also provide Rs 400 crore to support spill-over activities from the previous 10th Five-Year-Plan

The Bhutan Prime Minister Lyonchhen Tshering Tobgay arrived here on Friday to receive the financial package. New Delhi had wished the victory of the Peoples Democratic Party in the recent polls which bagged 32 seats in the National Assembly reducing the ruling Druk Phuensum Tshogpa (DPT) to a minority with 15 seats.

India has problems with the DPT Government in Sikkim as the latter tried to open relationship with China. India then witheld its fuel subsidy to Bhutan.

After his victory, this is Tobgay’s first visit to India. Accompanied by his spouce Aum Tashi Doma, the Bhutanese Prime Minister will be in the country will September 4.

The Bhutanese Prime Minister is also accompanied by a high-level delegation comprising Foreign Minister Lyonpo Rinzin Dorje and senior officials. Besides firming up the closer ties, the accent of the visit is on economics.

He will have delegation level talks with the Indian Prime Minister Dr Manmohan Singh on Saturday.

Tobgay has won the elections, focusing on the need for India’s assistance for bailing out his country from the economic mess.

According to sources, while disbursing the financial package assistance, India will ensure that Bhutan put in place adequate “mechanism for ensuring accountability' with 'checks and balances' so that the funds are utilised by the Bhutanese government 'properly and judiciously.'

Apart from seeking assistance from the Indian Government, Tobgay will urge the Indian industry to invest in Bhutan. He will address a business summit jointly organised by three apex Indian industry bodies – Assocham, CII and FICCI – on Monday the September 2.

After Tobgay’s victory, talks between Indian and Bhutanese officials began when a six-member delegation visited Thimphu last week. The Special Secretary of Development Partnership Administration in the Indian External Affairs Ministry PS Raghavan led the Indian delegation.

The proposed financial assistance will be used in areas such as improving infrastructure and road connectivity. The Himalayan nation's roads are in a bad shape and the new regime had promised to better the road conditions.

Also, India will support a variety of small development projects in Bhutan's interiors. The new Indian envoy V P Haran has been tasked by South Block to work with Bhutanese authorities on identifying such projects.

Tobgay will call on the Vice President of India Hamid Ansari on Saturday, while the Indian External Affairs Salman Khurshid will call on him on the same day and the Leader of the Opposition Sushma Swaraj will call on him on Sunday.

On his arrival on Friday, Tobgay was called upon by the Indian Minister of Home Affairs Sushilkumar Shinde, Finance Minister P Chidambaram and Foreign Secretary Sujatha Singh.

On Tuesday Tobgay will be in Hyderabad to visit CII-Godrej Green Business Centre and the Hitech City. He will call on the Governor of Andhra Pradesh who will host a lunch in his honour. He then come back to Delhi on way to Bhutan.