India and Bhutan- An ideal deal

7 May 2021

Curtain Hug

Certain aspects of this bilateral relationship are:
The Five-year plan: Bhutan launched its Five-year Plans in the 1960s.
Since then, India has been a leading partner in Bhutan’s socio-economic development. India contributed Rs 4500 cr for Bhutan’s 12th Five-year Plan(2018-2023). This made up 73% of Bhutan’s total external grants.

The GOI point of focus were areas such as agriculture, ICT, health, industrial development, road transport, civil aviation, urban development, scholarship, education, and culture.
Bilateral trade:

India is one of the largest trade partners of Bhutan. This value was Rs. 9,227.7 crores in 2018 as compared to Rs 8,723 crore in 2016.
In 2016, the value of total imports from India was Rs. 5528.5 crores.
But Bhutan’s exports to India were around Rs 3205.2 crore in value.
Most imports from India to Bhutan are electrical equipment, plastics, articles, base metals, vegetables, mineral products, and mechanical appliances. Important items imported from Bhutan are Portland cement, electricity, dolomite, calcium or silicon carbides, fruit products, and cardamom.
The India-Bhutan Trade and Transit Agreement in 1972 governs the trade contracts between the two countries. This agreement established a free trade policy between the two countries. Trade between the countries is carried out in Bhutanese Ngultrums and INR. This trade agreement also allows the duty-free movement of Bhutanese exports to various third-world countries.

Hydropower collaborations:
Hydropower projects in Bhutan are economically beneficial for both countries. They provide India with inexpensive and clean electricity.

Besides, they also generate export revenues for Bhutan. This helps in economic integration.
The Indian Government has constructed three Hydroelectric Projects
( HEPs) in Bhutan. These are Chukha HEP, Kurichhu HEP and Tala HEP. These plants are operational and export surplus power to India, about 2136MW. Bhutan exports 3/4th of the generated power. It uses the rest for domestic consumption. The 2006 agreement on Cooperation in Hydropower protocol signed in March 2009 covers the cooperation between the two in the Hydropower sector. In this protocol, the Indian government agreed to help Bhutan in generating at least 10,000MW hydropower. Bhutan had to export this power to India by 2020.
At present, there are three Inter-Governmental (IG) models of implementation. These are Punatsangchhu-I (1200 MW), Punatsangchhu-II(1020 MW ) and Mangdechhu (720 MW).

An Inter-Governmental Agreement signed in April 2014 focuses on the development of four extra HEPs. They will have the capacity of generating 2120 MW Hydropower. Under the Joint Venture Model, these are Kholongchhu(600MW), Bunakha(180MW), Wangchhu(570 MW) and Chamkharchhu(770 MW). Both the JV partners will own 50:50 shareholdings in the JV- company. Equity will be shared by the JV partners. Also, the debt and equity ratio would be 70:30.

Border management
There is a secretarial level of management on the border and security-related issues.
The last meeting was held in November 2016. A Border District Coordination Meeting Mechanism occurs between the Royal Government of Bhutan and the neighboring countries. This facilitates cooperation on issues about border security and management.

Water Resources
India and Bhutan established a Joint Group of Experts (JGE) on flood management. These experts discuss and assess the causes and effects of floods. They focus on erosion and floods in the southern foothills of Bhutan and adjoining plains in India. Also, they recommend appropriate measures to both the Governments. The last meeting of JGE occurred in April 2017 in Thimphu, Bhutan.
This shows commitment from both parties on issues of mutual concern.

Education and Cultural Exchange
India entertains a large proportion of Bhutanese college students. Approximately 4000 Bhutanese students are studying in India. They are self-funded or sponsored by scholarships.
These scholarships aim to attract scholars from Bhutan. Some of them are Nehru-Wangchuck Scholarships, Ambassador’s Scholarship, Aid-to-Bhutan ICCR Scholarship, etc.

Indian diplomacy has empowered deep political and economic ties with Bhutan for the past 60years. They have close and friendly relations build on mutual trust and confidence.
India continues to sustain bilateral cooperation with Bhutan. Both countries show mutual interest in each other’s economic and social development. This can be seen by investments and collaborations in all areas of importance. Such as IT industry, health, infrastructure, education, culture, hydro-power, transport, and communications.

India -Bhutan relationship has stood the test of time. It is one of the strongest bilateral engagements in South Asia. This relationship has helped Bhutan immensely in creating a unique growth trajectory for itself. This development is based on gross National Happiness (GNH).
India and Bhutan bilateral relations are characterized by a regular dialogue at the political level. These interactions are significant in strengthening bilateral ties.