Indo-Bhutanese Bilateral Ties: Critical Issues

Indo-Bhutanese Bilateral Ties: Critical Issues

Question: Since the choice of visiting Bhutan as his first foreign trip, PM Modi has made considerable contributions into the Indo-Bhutanese framework for strengthening bilateral ties. Discuss the problems that stand in the way of the latter.

- After cross border raids into Myanmarese territory, India chose to state it was in hot pursuit and would carry out detailed strikes. Operation All Clear had been carried out by Bhutan with much effort to assist India and India’s stand is a denigration of Bhutanese efforts to fight militants

- Joint report of the CAG and RAA found that there were major issues in awarding the 1200 MW Punatsangchu I hydroelectric dam.

- Geological Survey of India indicated that there might be geological surprises, but project was awarded without considering this

- This has taken the cost of the project to a higher amount besides promoting a delay

- Project was being financed by grant and loan whereby loan accounts for 60 percent. Bhutan will have to take on major losses.

- As much of the material for constructing hydroelectric dams for Bhutan comes from India, a persistent BOP crisis has impacted Bhutan’s economy over the past three years

- As per the Bhutan Royal Monetary Authority, total external debt towards the close of the year 2014 was 112% of the GDP of the nation with rupee debt accounting for 70%.

- Debt caused by loans for hydropower projects constitutes 85% of the rupee debt burden of Bhutan

- Limited profits from these projects form another roadblock in Indo-Bhutanese bilateral ties

- A minority of policy makers have considered China and not India to be the natural partner of Bhutan

- China is targeting Bhutan through soft diplomacy and India is competing with it

Facts and Stats

- Signing of the Motor Vehicles Agreement with BBIN countries is likely to benefit Bhutan and India

- India is the largest trading partner of Bhutan

- An FTA regime exists between Bhutan and India

- Bilateral trade between the two nations reached INR 7965 crore in 2014

- Imports from India constituted 84.13% of the total imports of Bhutan amounting to INR 4785 crore

- Bhutanese exports to India were pegged at INR 3179 crore and constituted 89.38% of the total exports

- Bilateral trade increased by around 9.31% in 2014