His Majesty Jigme Namgyel Wangchuck, the King of Bhutan is visiting India and was the chief guest at India's 64th Republic Day parade on 26 January 2013. This follows an earlier visit (in January 2013) by External Affairs Minister Salman Khurshid to Bhutan. 

How important is Bhutan to India and vice-versa? What are the contemporary issues between the two countries?

India and Bhutan: Natural Partners

Owing to their geographic location, Bhutan and India are natural partners and their future is inseparable. The economic and political relationship between the two countries however underwent a paradigmatic shift after the visit of Jawaharlal Nehru to Bhutan in 1958 who undertook a strenuous week long trip on a horse back to Bhutan. Infact Nehru in his famous speech at Paro framed the parameters of Indo-Bhutan relations. He said, India and Bhutan “were members of the same Himalayan family and should live as friendly neighbours helping each other.” During the visit, Nehru discussed prospects of Indo-Bhutan bilateral ties including opportunities for Bhutan’s socio-economic development. Nehru’s friendly and candid gesture paved the way for Bhutan’s pro active engagement with India.  Bhutan policy choice was further expedited by China’s aggressive posturing on territorial issues particularly during the 1950s (1954, 1958 and 1961) when China published maps showing Bhutan’s territory as part of China.

 

Although, the trade relations between the Indian states of Assam and West Bengal dates back to colonial period , it witnessed new dimension since 1961 with the launch of first five year plan of Bhutan. Today India stands as Bhutan’s largest development partner. While bilaterally the partnership has broadened over a variety of issue areas, trust and good will between both countries has only deepened. With India being the destination for over 90 per cent of Bhutanese export and source of import for over 70% of total imports, trade relations between both countries are only growing.  Given the long and open borders, huge informal trade is also taking place between the two countries. 

Domestically, Bhutan has made significant social, political and economic progress during last decade. Its per capita GDP in 2011 was recorded at USD 2590, which makes it join the range of middle income countries. The His Majesty the 4th King of Bhutan initiated a democratic process and first democratic election was held in 2008. During the first election, there were only two registered political parties and five parties are registered for the second election which is expected to be held in mid-2013. His Majesty the 5th King of Bhutan, who is rightly called as people’s king has been working tirelessly to strengthen democracy in Bhutan with strong economic and social foundation. Under the guidance of His Majesty the 5th King, Indo-Bhutan relation will be stronger and the people of Bhutan will enjoy greater prosperity. Within a short period of time, His Majesty the 5th King has not only garnered goodwill from people of Bhutan but from across the world.

Bhutan: India as a Developmental Partner

India is also a major developmental partner of Bhutan and the budgetary assistance from the Indian government has increased many folds (see the figure 1). Indeed, the Indo-Bhutan relation has grown beyond the donor-recipient relation into equal partners with mutually beneficial projects particularly hydropower. Several hydropower projects like Chukha Hydropower (336 MW; construction of project started in 1979), Kurichu Hydropower (60 MW, construction of project started 1998), Tala Hydropower Project (1005 MW, the project started in 1999), have been completed and many are in progress (see the table below). The two countries target to harvest to the tune of 10,000 MW by 2020. 

Despite robust economic growth, improvement in Millennium Development Indicators, Bhutan however needs to carefully manage the following economic issues:

i. Rupee crisis and its negative impact on poverty, livelihood and socio-economic and political future of Bhutan  

ii. Increasing debt to GDP ratio, which could adversely affect the future of Bhutanese population

iii. Heavy reliance on hydropower projects

iv. Close to 70 percent of the Bhutanese population are dependent on Agriculture, which contributes to only 16 percent of GDP.

v. Food security in light of climate change and declining agricultural productivity in Bhutan

vi. Employment and human resource development taking to view the small population

 

India and Bhutan: Is the nature of bilateral relations transforming?

Notwithstanding these important pointers, the socio-economic development and India-Bhutan relations can be considered a success story in an otherwise turbulent neighbourhood. However, it needs to be highlighted that the nature of bilateral relations are fast changing. Politically, Bhutan has made a transition to democracy. While the King still holds decisive weight in the political and social life of Bhutan, domestic spaces have opened up, whereby variety of stakeholders have increased in Bhutanese politics. Given that India is a major development partner, issues related to development and economic growth will inevitably rope in debates on India’s role in Bhutan. Addressing the sensitivities of various stakeholders, particularly the business community is thus a challenge that India will have to deftly handle. 

The China Factor: China has been presented as another issue of contention between both countries. While Bhutan has not made official comments on establishing diplomatic relations with China, the Indian, Bhutanese and Chinese media have been quite vocal on this front.  It is inevitable that as the process of democratisation takes roots in Bhutan, there will be certain sections wanting bilateral relations with China. Infact, there are fomenting internal pressures in Bhutan on establishing ‘limited economic ties’ with China. It is argued by certain sections that goods imported from the Calcutta port in India increase transactional costs and that these ‘costs’ could well be reduced, if goods were imported from Bhutan’s North-Western border  via Tibet. However, any decision on this front would require tampering with the much protracted Sino-Bhutan boundary dispute. Pressure groups in Bhutan, as the National Assembly debates reveal have also been insisting on resolving the boundary dispute for quite some time now. Thus, given the complexity of the issue, a middle way to resolve the boundary dispute needs to be devised by both countries. Ingenuity on this front could create a win –win situation for both countries in the long term.   

India and Bhutan: Building a Common Future 

While politically the issues need to be handled through deft diplomacy, there are tremendous opportunities for further strengthening Indo-Bhutan relation through development of premier educational institution, industries along the Indo-Bhutan borders. 

Although India has been providing several privileges to Bhutanese citizen, India could provide more privileges to further strengthen the relation further as the population of Bhutan is too small to make any impact to India (less than one million as against 1.2 billion Indian populations). India therefore should harness this demographic advantage. Geographically, as stated before, Bhutan’s destiny lies with South Asia. India assumes strategic importance for Bhutan as its industrial belt lies predominantly in the South.  

 

Bhutan’s interaction with South and South East Asian countries therefore makes strategic relations with India important. While the Bhutanese policy makers have understood this aspect well, common spaces of cooperation for both countries need to be worked upon to further enhance political goodwill. Cooperation on these issues would also ensure the diplomatic future of India-Bhutan relations in the long term.