Despite various asymmetries, India and Bhutan acknowledge their dependence on each other and view each other as equal development partners in their efforts towards economic growth, the consolidation of democracy, and regional peace
At the invitation of Prime Minister Narendra Modi, Bhutanese Prime Minister Tshering Tobgay who assumed office in January this year, undertook a five-day maiden visit to India, beginning from March 14.

He was accompanied by four cabinet ministers as well as senior officials from the Royal Government of Bhutan. In addition to meeting President Droupadi Murmu, he held bilateral talks with PM Modi.

Tobgay also met External Affairs Minister S Jaishankar and other dignitaries of India. He traveled to Mumbai to meet with business leaders to discuss increasing investments in Bhutan.

The visit marked a crucial moment for reinforcing bilateral cooperation and addressing mutual concerns. It provided an opportunity for the two countries to review progress in their partnership and discuss ways to expand cooperation.

Historical context and bilateral agreements

Since the establishment of diplomatic ties in 1968, India-Bhutan relationship has stood out as one of the most successful stories in South Asian neighbourhood diplomacy, characterized by mutual trust, understanding, and maturity.

The Golden Jubilee of the establishment of diplomatic relations was celebrated in 2018, highlighting the enduring nature of this relationship. The Treaty of India-Bhutan Friendship and Cooperation, originally signed in 1949 and updated and revised in February 2007, has served as the cornerstone of this enduring partnership.

Despite various asymmetries, both countries acknowledge their dependence on each other and view each other as equal development partners in their efforts towards economic growth, the consolidation of democracy, and regional peace.

India: A valued development partner

The bilateral relationship between India and Bhutan is underscored by numerous institutional arrangements covering areas such as water resources, trade and transit, economic cooperation, security, and border management.

Five-year plan

India has been a key contributor to Bhutan’s socio-economic development since the early 1960s, coinciding with Bhutan’s initiation of FYPs. In the 12th FYP, India provided INR 4500 crore, constituting 73% of Bhutan’s total external grant assistance.

Currently, 83 Projects Tied Assistance (PTA) and 524 High-Impact Community Development Projects (HICDPs) in sectors like education, health, digital development, infrastructure, agriculture, and capacity development are successfully implemented with Indian support.

Furthermore, India has pledged increased support for Bhutan’s 13th FYP, including considering a request for the Economic Stimulus Programme requiring an additional INR 15 billion. This commitment aligns with the vision of a ‘Healthy, Prosperous, and Secure Bhutan’ outlined by the King.

In April 2023, India also agreed to extend an additional standby Credit Facility, providing an additional currency swap support of $200 million over five years, building on a previously offered support package.

Hydro-energy

Hydro-power cooperation has been a crucial pillar of the India-Bhutan bilateral economic partnership. This cooperation is governed by the 2006 bilateral agreements for cooperation and its Protocol signed in 2009.

Currently, four hydroelectric projects are operational, collectively producing 2136 MW of power. Additionally, two projects, Punatsanchhu-I and Punatsangchhu-II, with capacities of 1200 MW and 1020 MW respectively, are in various stages of implementation under inter-governmental mode. 

Approximately three-fourths of the electricity generated is exported to India. India has also committed to assisting Bhutan in achieving a target of generating 10,000 MW of electricity in the future.

Furthermore, in April 2023, India agreed to positively consider Bhutan’s request for the sale of power into the Indian Energy Exchange from the 64 MW Basochhu hydroelectric project.

Trade and Investments

India has emerged as Bhutan’s largest trading partner, accounting for over 82% of Bhutan’s total imports. Additionally, India is a significant investor in Bhutan. The bilateral trade and transit arrangements are governed by the India-Bhutan Agreement on Trade, Commerce, and Transit, first signed in 1972.
In the fiscal year 2021-2022, India’s bilateral trade with Bhutan reached $1422 million, with India’s exports to Bhutan amounting to $877 million and imports from Bhutan totaling $545 million.

Moreover, India is the primary source of investments in Bhutan, contributing to over half of the country’s total foreign direct investments in a financial year. Approximately 30 Indian companies operate across various sectors in Bhutan, further enhancing economic ties between the two nations.

Health

In recognition of the deep bonds of trust and understanding between the two countries, the Indian government has provided significant support to Bhutan’s healthcare sector. Since the first COVID-19 cases were reported in Bhutan in 2020, India delivered 13 consignments of medical supplies, including seven X-Ray machines, paracetamol, cetirizine, hydroxychloroquine, PPE kits, N95 masks, and RT-PCR test kits.

This assistance was provided under the SAARC Emergency COVID-19 Fund, showcasing regional cooperation during the pandemic. Additionally, India gifted 5.5 lakh doses of Covishield vaccines to Bhutan during March-April 2021, contributing to Bhutan’s vaccination efforts.

Moreover, under Bhutan’s 12th FYP, India provided development assistance totaling INR 4.09 billion for various health projects, further strengthening healthcare infrastructure and services in Bhutan.

Education

As part of human resources development and capacity-building programs, India offers over 950 scholarships annually to Bhutanese students in a wide range of disciplines such as medicine, management, engineering, and more, enabling them to study in Indian institutions.

Additionally, approximately 4,000 Bhutanese students are pursuing undergraduate courses in Indian universities on a self-financed basis, further fostering educational opportunities.

Furthermore, under the ITEC program, Bhutan is allocated around 300 slots annually to enhance the administrative and technical skills of its civil servants and private sector employees, contributing to capacity building in various sectors. 

India has also allocated INR 600 million to enhance ICT skills and knowledge among students as part of the Education Flagship Programme, promoting digital literacy and education in Bhutan.

New areas of cooperation

In addition to the existing areas of cooperation, India has extended assistance to Bhutan in several new domains, including the digital economy, governance digitization, startups, and space cooperation. Notably, the India-Bhutan SAT was successfully launched into space by ISRO in November 2022, marking a milestone in space cooperation between the two countries. 

India also supported the establishment of a Ground Earth Station in Bhutan in March 2023, enhancing communication and connectivity capabilities.

Furthermore, just before Prime Minister Tobgay’s visit, the Indian cabinet on March 13, approved two agreements for Bhutan in the areas of energy, including non-hydro renewables, and food safety.

Conclusion

Frequent high-level exchanges have built a strong foundation for India and Bhutan’s development partnership. During bilateral meetings, PM Tobgay invited PM Modi to Bhutan, highlighting mutual trust and equal partnership. 
The visit reinforced commitment to deepen cooperation across sectors, strengthening longstanding ties and paving the way for a brighter future together.
 
*** The writer is a Research Fellow at the MP-IDSA, New Delhi; views expressed in this article are personal.