Bhutan is a landlocked Himalayan state that shares approximately 700 km of its border with India. It borders four Indian states viz Sikkim, West Bengal, Assam, and Arunachal Pradesh. Apart from India, Bhutan also shares its borders with China and Nepal. The bilateral relations of both countries have been very cordial. No wonder, PM Modi chose to visit Bhutan as the destination of choice for his first foreign visit as Prime Minister in 2014. Bhutan is a monarchical democracy with Jigme Khesar Namgyel Wangchuk as the current king of Bhutan. Most of its population follows Buddhism. It is one of the top countries in the world in terms of human happiness and its then king Jigme Singye Wangchuck gave the world, the concept of the Gross National Happiness Index way back in 1972.
Both countries have an open borders system i.e. their nationals do not require visas to visit the other country. The boundary between the two countries is defined by the Treaty of Sinchula 1865 between British India and the Kingdom of Bhutan. In the modern era, the basic framework of India-Bhutan relations is the Treaty of Friendship and Cooperation signed in 1949 between the two countries, which was re-negotiated, and provisions were amended to encourage Bhutan’s sovereignty, abolishing the need to take India’s guidance on foreign policy. The formal diplomatic relations between India and Bhutan were established in 1968.
Trade and Economic Ties
The India-Bhutan Agreement on Trade, Commerce, and Transit – was first signed in 1972 and revised and renewed most recently for the fifth time in 2016. India is Bhutan's top trade partner both as an import source and as an export destination. In 2021-22, India's bilateral trade with Bhutan was USD 1422 million, of which India's exports to Bhutan amounted to USD 877 million and India's imports from Bhutan were USD 545 million. India is also the leading source of investments in Bhutan, comprising 50% of the country’s total FDI. There are about 30 Indian companies in Bhutan operating in various sectors - banking, manufacturing, electricity generation, agri/food processing, ITES, pharmaceuticals, hospitality, and education. India has been extending economic assistance to Bhutan’s socio-economic development since the early 1960s when Bhutan launched Five Year Plans. India continues to be the principal development partner of Bhutan. For the 12th Five Year Plan (2018-23), India’s contribution of Rs. 4500 cr. constitutes 73% of Bhutan’s total external grant component. In order to facilitate trade and people to people connect, both countries are opening more trade routes. In fact, in 2021 alone, India and Bhutan agreed to open seven new trade entry and exit points in addition to the 21 land/air routes approved in the 2016 treaty.
Bhutan has big potential for hydropower. It has a theoretical potential of 30,000 MW. No wonder, India is playing an important role in the development of hydropower projects in Bhutan. This not only provides Bhutanese with electricity for domestic use but also revenue from surplus electricity exported to India. So far, India has constructed four Hydroelectric Projects in Bhutan including the 60 MW Kurichhu HEP; 1020 MW Tala HEP; the 336 MW Chukha HEP; and the 720 MW Mangdechhu HEP. Also, three Hydroelectric projects that are under construction include the 1200 MW Punatsangchhu-I, the 1020 MW Punatsangchhu-II, and the 600 MW Kholongchhu.
There is close bilateral cooperation in the educational and cultural fields between India and Bhutan. Over 950 scholarships are being provided annually by GoI for Bhutanese students to study in India in a wide range of disciplines including medicine, engineering, etc. It is estimated that approximately 4,000 Bhutanese are studying in undergraduate courses in Indian Universities. Further, about 50,000 Indian citizens are working in Bhutan, mainly in the construction sector, education, and technical consultants involved in infrastructure projects. Some Indian daily workers also enter and exit Bhutan every day in the border towns, as a sign of the close economic inter-dependence between both countries.
Border and Security issues
Both countries carry very cordial security relations. Bhutan has been historically sensitive to India’s security concerns, Bhutan is supportive of India's campaign against various insurgent groups of North East and has conducted/supported military operations to flush out such insurgents from its soil.
As mentioned above, India and Bhutan share a 699 km long border, which has been largely peaceful. However, Bhutan has a very strategic location between India and China. India sees Bhutan as a buffer between India and China. China's increasing presence in Bhutan, particularly along the border between Bhutan and China, has raised concerns in India. The Doklam standoff in 2017 was a major flashpoint in the India-China-Bhutan tri-junction. The Doklam trijunction is crucial for India as it lies precariously close to the Siliguri Corridor otherwise known as India’s Chicken’s Neck. Recently, China has also claimed the Sakteng sanctuary, which is on Bhutan’s east and does not border India. China has also encroached on various villages on northern borders (like Beyul). It appears China is trying to create pressure on Bhutan by garbing other border areas so that Bhutan acceded to China in the Doklam sector. Though Bhutan is sensitive to India’s concerns, however recent statement by Bhutanese PM Lotay Tshering suggests that Bhutan may be taking a more pragmatic approach to the Doklam dispute with China, potentially at India's expense, thus raising concerns in India.
In a nutshell, the overall relations of both countries have been very cordial. However, Bhutan sometimes feels sandwiched between two giants India and China and thus tries to balance relations between the two. Also with rising and maturing democracy, Bhutan's aspirations have been rising especially of the younger generation which is exposed to the world. Sometimes, there is a feeling in Bhutan about India playing the role of big brother, however, India has always been sensitive to Bhutan’s needs (as reflected in the 2007 treat). Bhutan is also well aware of the threat from China (as also seen in the case of Tibet and China’s boundary issues with almost every neighbor) while on the other hand relations between India and Bhutan are based on mutual trust and cooperation.