India and Bhutan share deep ties through treaties, aid, and strategic cooperation, with recent visits highlighting India's support in infrastructure, energy, education, and security amid regional geopolitical challenges.

Why in the News?

Prime Minister paid a two-day State Visit to Bhutan, at the invitation of His Majesty the King of Bhutan.

More on the News

The visit coincided with the Global Peace Prayer Festival in Thimphu, which featured the exposition of the Piprahwa Relics of Lord Buddha from India.
Major highlights of the visit:
- Inauguration of the Punatsangchhu-II Hydroelectric Project
- India to support Gyalsung National Service Program (mandatory national service for youth in Bhutan) with 200 Crore grant and 1500 Crore concessionary loan.
- MoU for establishment of Railway Links, encompassing the Kokrajhar-Gelephu and Banarhat-Samtse rail links.
- India to allot land in Varanasi for construction of a Bhutanese temple/monastery.

Historical Development of Relationship

Treaty of Friendship and Cooperation (1949) established diplomatic relations
- Security Clause (Article 2): Bhutan was to be guided by India in external affairs; India provided arms, technology, and military training to Bhutanese security personnel.
1949 Treaty revision (2007):
- Removed the clause requiring Bhutan to seek India's guidance in external affairs, ensuring greater equality.
- Revised Article 2 requires both nations to cooperate closely and prevent use of their territory for activities harmful to each other's security.

Significance of India-Bhutan Bilateral Relation

For India
- Strategic Buffer and Security: Bhutan's geographical location acts as a buffer between India and China. Bhutan's western border (Doklam) is vital to ensure the security of India's Siliguri Corridor.
- Energy Security: Bhutan is a dependable hydropower partner, with India involved in five major HEPs totalling 2986 MW (including Chukha, Kurichhu, Tala, Mangdechhu, and Punatsangchhu-II).
- Economic Access: Bhutan remains India's top trading partner and a major investment destination.
- Internationalisation of BHIM UPI & RuPay Card: Bhutan is the first country to adopt UPI standards for its QR deployment. The RuPay Card is fully interoperable.
For Bhutan:
- Economic Development: India is Bhutan's principal development partner, assisting its socio-economic development since its first Five Year Plan in 1961. For the 12th FYP, India's contribution constituted 73% of Bhutan's total external grant component.
- Revenue Generation: Electricity exports to India generate about 40% of Bhutan's revenue and 25% of its Gross Domestic Product (GDP).
- Tackling Landlocked Nature: The 2016 Trade, Commerce and Transit Agreement establish a free trade regime and provide Bhutan duty-free transit of goods to/from third countries.
- Financial Stability: India provides crucial RBI financing facilities, including the INR 1500 Cr Currency Swap Facility and multiple Standby Credit Facilities.
- Education and Capacity Building: India provides several opportunities, including over 1500 scholarships for students (e.g., Ambassador's Scholarship, Nehru Wangchuck Scholarship) and approximately 325 annual ITEC training slots for professionals.
- Space Collaboration: India and Bhutan jointly developed the India-Bhutan SAT (2022).
- Defense Cooperation: The Indian Military Training Team (IMTRAT) trains Bhutanese security personnel.

Challenges in India-Bhutan Relations

Geopolitical Pressure from China: China is making concerted efforts to establish formal diplomatic and economic ties and pressures Bhutan to finalize border demarcation. China's road and railway extensions in Tibet (e.g., Lhasa-Shigatse line extension to Yatung) are beginning to erode India's geographic advantage.
The Doklam Dilemma: China's long-standing 'package deal' offer to settle the border dispute by ceding control of the strategically critical Doklam plateau remains a security concern for India.
Economic Perceptions: Some Bhutanese perceive India's dominance as exploitative. Critics point out that India's aid often creates "jobless growth" and much of the aid flows back to Indian companies.
Hydropower Financing Terms: There is growing domestic criticism regarding India's shifting finance model for hydropower projects.
- Historically, the grant-loan component was 60:40, but this has recently reversed, with loans (often at high interest rates) comprising 60-70% of financial support, raising questions about India's motives.

Conclusion

The India-Bhutan relationship is a unique partnership founded on shared spiritual heritage and deep mutual trust, historically cemented by the 1949 Treaty and its revised 2007 version. Recent visits demonstrate India's commitment to remaining a steadfast and substantive partner through massive financial commitments and crucial connectivity projects.