India-Bhutan Relations: Past, Present and Future


The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between India and Bhutan.  Marking the completion of 50 years, Bhutan opened a Consulate in India’s north-eastern city of Guwahati last month. The two countries also launched a special logo in New Delhi to celebrate their enduring partnership. A series of special commemorative initiatives, cultural activities, exhibitions and seminars will continue to take place throughout the year. 

A tiny landlocked state located in the Eastern Himalayas, Bhutan has historically shared deep religio-cultural links with India. Guru Padmasambhava, a Buddhist saint who came to Bhutan from India, played an influential role in spreading Buddhism and cementing traditional ties between people in both nations. 

Bhutan was a protectorate of British India and came under the British suzerainty in 1865. It signed the ‘Treaty of Punakha’ with the British in 1910, which set the stage for any future contact between the two countries after the British left the subcontinent. Throughout this time, India’s relations with Bhutan were handled by a Political Officer based in Sikkim. This continued until 1948, when a Bhutanese delegation visited India and wished to revise the treaties previously signed with the British. Though the Anglo-Bhutanese treaties continued to guide the bilateral relations, Independent India signed a fresh treaty with Thimpu in 1949 – the Treaty of Friendship and Cooperation. This treaty formed the basis for the beginning modern relations between the two neighbors. One of the most important provisions of the treaty, ‘Article 2’ declared that Bhutan’s internal affairs shall function without any interference from India while the foreign relations will continue to take place under its guidance. Formal diplomatic relations were established in 1968 after a special office of India was opened in Thimpu. 

In its relations with India, especially since the late 1950s, Bhutan has repeatedly made efforts to assert its independent identity and often expressed the desire to reduce its overdependence on the former. During the Sino-India war in 1962, Bhutanese king declined to offer base to Indian troops. After securing a UN membership in 1971, Bhutan elevated its diplomatic status in New Delhi to full ambassadorial level and established diplomatic ties with other nations independent of India’s opinion. In 1979, Jigme Singye Wangchuk, the then Bhutanese king stated that India’s advice on foreign relations was not binding on Bhutan. In 2007, ‘Article 2’ of the 1949 treaty was revised, forever changing the terms of the erstwhile India-Bhutan relations. Last year, Bhutan decided to withdraw from the BBIN Motor Vehicle Agreement for the reason that it would adversely affect its environment and sovereignty.

Clearly, the Himalayan kingdom interprets its bond with India differently. Having said that, Narendra Modi’s ‘Bharat to Bhutan (B2B)’ vision on how “Bharat should stand for Bhutan and Bhutan for India”, introduced during his first foreign trip to Bhutan as Prime Minister, is no exaggeration. The two countries have always shared a unique and organic relationship which is often termed as a ‘sacred bond’, largely sustained by regular high level visits and dialogues between the neighbors. Both countries have mutual interests in diverse areas of cooperation – security, border management, trade, hydro-power and many more. Hydropower generation is the single most important area of mutually beneficial cooperation in India-Bhutan ties. Under the 2006 Agreement on Cooperation in Hydropower and the Protocol to the 2006 agreement, India has pledged to assist Bhutan in developing at least 10,000 MWs of hydropower and import the surplus electricity to India by 2020.

For Bhutan’s 11th Five Year Plan, Government of India contributed an assistance of Rs 4500 crore with an additional Rs 500 crore for the Economic Stimulus Plan. Recently, a sum of Rs. 2,650 crore from the Ministry of External Affairs (MEA) budget has been kept aside for Bhutan (among other countries in the neighborhood) as an aid for technical and economic development projects such as the hydro-electric power projects. Governed by the India-Bhutan Trade and Transit Agreement of 1972, the total bilateral trade between the two countries stood at Rs. 8,723 crore in 2016, making India Bhutan’s largest trading partner. Under the agreement, Bhutan also enjoys duty free transit of its exports to third countries.

Bhutan has been central to India’s two major policies – the ‘Neighborhood First Policy’ and the ‘Act-East Policy’. After coming into power, Modi government has laid special emphasis on India’s neighborhood as well as its relations with Bhutan, which have mostly been tension free. Bhutan’s strategic location has helped India in flushing out militants in the North-East, playing a significant role in maintaining internal stability. Bhutan is India’s only neighbor that is yet to express its desire to join China’s B&RI. As P. Stobdan rightly points out that unlike Nepal, Bhutan has never played the China card against India. Since the 1990s, Bhutan has repeatedly turned down Chinese ‘package deal’ offers making bigger territorial concessions to Bhutan in return for the smaller Doklam area (remaining sensitive to India’s security concerns in the area).  During the recent Doklam standoff, Bhutan’s dogmatic stand and the ability to assert the status quo in face of Chinese intrusions, speaks volumes about its commitment to India’s security interests in a region that does not hold equal strategic importance for itself. 

Albeit Bhutan and India share an exemplary bond, there are several issues that exist and require timely intervention to build a successful bilateral relationship. One of the most commonly observed issues is India’s paternalistic attitude towards Bhutan and a tendency to take Bhutan’s loyalty for granted, so much so that Indian policy makers thought it was okay to punish Bhutan for diversifying its foreign relations. Back in 2013, when Bhutan was seen getting comfortable with Beijing, India decided to withdraw all subsidies on cooking gas and kerosene causing a drift in Indo-Bhutan bilateral relations. This was around the same time when elections were due in Bhutan and India’s actions were seen as meddling in Bhutan’s internal politics. 

Another issue is Bhutan’s geographically disadvantaged location that has made its economy hugely dependent on India, giving India an undue advantage over Bhutan’s trade and commerce. 60 percent of Bhutan’s expenditure is on imports from India; 90-95 percent of what Bhutan borrows from India finds its way back to India, tilting the relationship more in favor of the latter. Moreover, India’s assistance in the area of hydropower is also not free from suspicion. Over the years, critics have argued that the economic benefits from collaboration in hydropower have declined. Interest rates have increased and net profit per unit of electricity sold has also fallen since 2007 causing a sharp rise in Bhutan’s debts. India may also not deliver on its promise to harness 10,000 MWs of hydropower potential for Bhutan considering it is having a power surplus lately. At the same time, these projects have failed to create jobs in Bhutan and are seen as adversely impacting the environment. In addition, India’s subsidized imports to Bhutan comprising of almost all essential goods have hurt the growth of domestic sectors within Bhutan while helping India exercise its hold on Bhutanese market.

China is another important dimension in India-Bhutan relations. In recent years, China has tried to establish its influence on Bhutan. It continues to stake claims to important area such as Chumbi valley and Doklam. Of late, the Bhutanese government is also willing to have a deeper engagement with China in areas of tourism, education, culture, agriculture etc. Nevertheless, it might be too early to conclude that China can hurt India’s stake in Bhutan. However, it is a grim reminder that India may not continue to enjoy the leverage it always had with Bhutan.

India and Bhutan share a time-tested relationship that is a perfect example of friendship and cordiality in South Asia. For India to bolster this indispensable partnership may not be too difficult, provided India’s assistance to Bhutan is more about making it self sufficient militarily, politically as well as economically. With India’s help, Bhutan can become economically competitive, militarily advanced and self reliant in matters of national security. Furthermore, as world’s largest democracy, India can guide Bhutan in developing requisite democratic infrastructure and a political establishment  that can sustain the demands of a democratic society. A partnership based on this foundation will ensure future success of Bhutan and secure the long-standing relations shared between the two countries.