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Indo-Bhutan Relations

  May 23, 2020

Indo-Bhutan Relations


India has been an all-weather friend of Bhutan. India supported Bhutan’s admission in the United Nations and has been with the tiny Himalayan nation since decades assisting it for having a distinct place in the global sphere. Even smaller than Nepal in size and population, Bhutan or Druk Yul (Land of thunder dragon) is dependent on India -the two sharing geographical and socio-cultural proximity. 

What is the history of bilateral ties?

▪ India and Bhutan have been sharing ties since 1910 when Bhutan became a protectorate of British India, allowing the British to “guide” its foreign affairs and defence. 

▪ When India became Independent in 1947, Bhutan was among the first nations to recognise it. Since then, the relationship between the countries has become stronger, especially because Bhutan also has a historically tense relationship with China. 

▪ Besides sharing a 700 km border, India and Bhutan also share deep religious-cultural links. Guru Padmasambhava, a Buddhist saint played an influential role in spreading Buddhism and cementing traditional ties between people in both nations. 

▪ The basis for bilateral relations between India and Bhutan was formed by the Indo-Bhutan Treaty of Peace and Friendship of 1949 as it stands amended in 2007. 

▪ Article 6 and 7 in the 2007 treaty covers the issue of ‘national treatment’ and equal privileges for citizens on each other’s soil. 

▪ Marking the Golden Jubilee of the establishment of formal diplomatic relations between India and Bhutan, the Prime Minister of Bhutan, H. E. Dasho Tshering Tobgay visited India in 2018. 

Give basic details of Indo-Bhutan Treaty of Peace and Friendship, 1949 

▪ The Treaty provides for, among other things, perpetual peace and friendship, free trade and commerce and equal justice to each other’s citizens. 

▪ In 2007 the treaty was re-negotiated, and provisions were included to encourage Bhutan’s sovereignty, abolishing the need to take India’s guidance on foreign policy. 

▪ The updated treaty, besides providing close cooperation on national issues, provides for stronger cooperation in cultural and economic fields. 

Highlight important aspects of Bhutan’s importance to India 


▪ Bhutan shares border with four Indian States: Assam, Arunachal Pradesh, West Bengal and Sikkim. 

▪ Nestled in the Himalayas, Bhutan serves as a buffer between India and China. 

▪ Security of Bhutan’s present borders especially its western border is very important for India. 


▪ Bhutan provides a market for Indian commodities and is a destination for Indian investment. 

▪ Also for India, Bhutan is a rich source of hydropower. 


• A politically stable Bhutan is important to India. An unstable and restive Bhutan can provide a safe haven to anti-India activities and anti-India militant groups. 

What are the areas of cooperation?


• The trade between the two countries is governed by the India Bhutan Trade and Transit Agreement 1972 which was last renewed in 2016. 

• The agreement establishes a free-trade regime between the two countries and also provides for duty-free transit of Bhutanese exports to third countries. 

• India is Bhutan's largest trading partner. In 2016, total bilateral trade between the two countries stood at Rs. 8,723 crore with total imports being Rs. 5528.5 crore (82% of Bhutan's total imports) and exports recorded as Rs. 3205.2 crore including electricity (90% of Bhutan's total exports).

• Major exports from India to Bhutan are mineral products, machinery and mechanical appliances, electrical equipments etc. whereas major items of import from Bhutan are electricity, ferrosilicon, Portland cement etc. 

Economic Assistance: 

• India is Bhutan’s leading development partner. Since the launch of First Five Year Plan of Bhutan in 1961, India has been extending financial support to Bhutan’s FYPs. India has allotted Rs 4500 crore to Bhutan’s 12th FYP. 

Water Resources: 

• India is playing an important role in development of hydro-power projects. This not only provides Bhutanese with electricity for domestic use but also revenue from surplus electricity exported to India. 

• So far, Government of India has constructed three Hydroelectric Projects (HEPs) in Bhutan. Currently, India is helping Bhutan in the development of power plant on Mangdechhu River. 

• This hydropower cooperation comes under 2006 Agreement on Cooperation in Hydropower. Under a protocol to this agreement, India has agreed to assist Bhutan in the development of minimum of 10,000 MW of hydropower and import of surplus electricity from same by year 2020. 

• Also, there is a Joint Group of Experts (JGE) on flood management between India and Bhutan. 

Border Management: 

• There is a Secretary-level mechanism on border management and security related matters between the two countries. 

• There is also a Border District Coordination Meeting (BDCM) Mechanism between the bordering States and the Royal Government of Bhutan (RGoB) to facilitate coordination on border management and other related matters. 

Educational and Cultural Cooperation: 

• A large number of college going Bhutanese students study in India. Government of India provides number of scholarships to Bhutanese students. 

• Regular cultural exchanges take place between the two countries. One of the basic objectives of India Bhutan Foundation established in 2003 is to enhance people to people exchange in cultural field. 

Indian Community: 

• About 60,000 Indian nationals live in Bhutan, employed mostly in the hydro- electric power construction and road industry. 

• In addition, around 8000-10,000 daily workers enter and exit Bhutan everyday in border towns. 

Multilateral Partnership: 

• Both India and Bhutan are founding members of South Asian Association for Regional Cooperation (SAARC) that deals with economic, social and cultural development of South Asian Region. 

• Both of them also share other multilateral forums such as BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation) etc. 

Is the China factor influencing the India-Bhutan relation?

Bhutan does not have diplomatic relations with China. China has a questionable role in its territorial relation with Bhutan. Several attempts were made by China to exercise historic rights over Bhutan and the first attempt was in 1930.In 1958, new maps in China started showing large parts of eastern Bhutan as part of Chinese territory, and China went on to occupy around 300sq km territory in northeastern Bhutan. In 1960s China declared Bhutanese, Sikkimese and Ladakhis perceived subjects of China to form one united family in Tibet. 

Bhutan and China have a 470 km border which is still not demarcated officially, both the nations have issues over the border, China had made several geographical intrusions and the latest being in Doklam which sparked tensions between both the nations. 

A section of experts say that Bhutan may get closer to China as China can offer Bhutan more economic support and tourism exchanges and also Bhutan can get bargaining power vis a vis India. Bhutan is weary of China and its territorial claims as seen in the past.

However, the India-Bhutan relation is multidimensional. India’s Friendship Treaty with Bhutan makes it “mandatory for Bhutan to take into account India’s concerns before striking any border negotiation deal with the Chinese.

What challenges are there for the relation?

• Bhutan’s concern regarding profitability of its Hydropower projects in the wake of India’s shift to renewable sources of energy like wind, solar etc. 

• From internal security perspective, illicit establishment of camps by militant outfits in the dense jungles of south-east Bhutan is a cause of concern for both the nations. 

• China’s continuous claims to important border areas such as Chumbi valley and Doklam and its continuous efforts for establishing strong diplomatic and economic relations with Bhutan have been continuous source of concern for India. 

What is the way forward?

• India needs to step up efforts to publicise the benefits that accrue to Bhutan from Indian projects. 

• India continuously needs to explore new areas of cooperation with Bhutan. Decision of setting up of ISRO’s ground station in Bhutan is a welcome step. The station will help Bhutan in providing weather related messages to its far flung areas. 

• Safety of Border from China is a concern for both nations. Therefore, both sides need to work together on this issue. Also, it needs to be ensured that border areas remain militants free. 


India’s effective neighbourhood approach will prove conducive towards building a cohesive and durable relationship with Bhutan in the coming days. Our bilateral political relations with Bhutan have matured over the years and are characterised by close trust and understanding and extensive cooperation in the field of economic development, particularly in the mutually beneficial sector of hydroelectric power. 

Bhutan’s assertion of sovereignty and democracy in recent years should be steered by India for the improvement of bilateral relations as India is the most vibrant democracy in the region. India has advocated and supported sovereignty and right of self-determination of nations across the world. 

The hydropower projects that India is building in Bhutan should be completed without delays in commissioning by the Indian companies.

The tariffs need to be re-negotiated, if need be in favour of Bhutan. 

Another issue is: India’s pursuit of wind / solar is seen to make it more difficult for Bhutan to ensure that its hydropower sector becomes profitable. Such misconceptions need to be neutralised as India needs all forms of energy being a fast developing major economy.