India and Bhutan: Civil Services Mentor Magazine - January - 2015

India and Bhutan

Bhutan is a Himalayan Buddhist Kingdom it is a physically small state and economic development is also less as compared to its neighbours. Despite all this Bhutan was never colonised while its neighbors were colonised for decades. Bhutan and India has always had special ties between each other. The first visit of India’s Prime Minister Jawahalal Nehru in 1958 was the initiation of a “special relationship” between the two countries. India has always extended its support to Bhutan in every possible field, although Bhutan has several donor’s India still provide the highest assistance for the Himalayan country. India’s relations with Bhutan are not only economical they are centuries-old cultural links. And these cultural ties are always maintained despite the changing times. India’s new Prime Minister Narendra Modi has chosen Bhutan for his first state visit to a foreign country. The choice of Bhutan as a first state visit is strategic and natural, it shows the importance new government is placing on its neighbours.

The basic framework of India-Bhutan bilateral relations is the Treaty of Friendship and Cooperation signed in 1949 between the two countries, which was updated and signed in February 2007. The updated treaty reflects the need of changing times and provides more importance to contemporary issues. It also reflects that both country’ are considered as equal and it provides a win-win situation for all the parties.

India is Bhutan’s largest trading partner and also trade between India and Bhutan is covered under free trade agreement. The India-Bhutan Trade and Commerce Agreement provides for duty free transit of Bhutanese merchandise for trade with third countries. During 2012, trade between the two countries reached approximately 7000 crore rupees, which represents a total bilateral trade growth by about 13% in 2012. Major exports from India to Bhutan are High Speed Diesel, ferrous products, Motor Spirit including aviation spirit (petrol), Copper wire, Rice, Wheat Flour, Wood Charcoal, Hydraulic turbines, machinery items, Coke and semi coke of coal, soyabean oil, milk Powder etc.

Both countries quest for development this provides a powerful reason to energize the relation between the world’s largest and youngest democracies. India contributes a hefty chunk of financial assistance to Bhutan. Indian government provided assistance of 4500 crore in 11th plan. Recently India announced the assistance of Rs 500 crore to a special Economic Stimulus Package (ESP) devised by Thimphu to facilitate loans for private sector from banks and enhance youth employment. This assistance go for health infrastructure, ICT development, schools and housing projects. India provides a backbone for the development of Bhutan.

Hydropower is one of the main pillars of bilateral cooperation. Three hydropower projects from Bhutan are presently supplying the electrivity to India. Recently both governments’ has identified more projects which will provide 10,000 MW electricity by 2020. AS India is power deficient nation and it needs power for the development of the country, Bhutan provides a valuable assistance to India in this field. Prime Minister Narendra Modi during his visit to Bhutan in June 2014 laid the foundation stone of Kholongchhu HEP. Cooperation in the hydropower sector between our two countries is a true example of mutually beneficial relationship.

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