India-Bhutan Relations | International Relations for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


 
India-Bhutan Relations 
The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between 
India and Bhutan. The two countries also launched a special logo in New Delhi to celebrate their enduring 
partnership 
Historical Background 
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 in?uential 
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. 
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, ‘Article2’ 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. With the 
signing of a new treaty in 2007, superseding the one in 1949, strides were made toward the evolving 
friendship between India and a more sovereign Bhutan by eradicating the advisory role of India and 
recognizing Bhutan as an essential ally 
Convergence 
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 bene?cial cooperation in 
India-Bhutan ties 
Hydropower 
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. 
Modi’s visit in 2014 also raised the prospects of moving forward on Bhutan’s 10,000 initiative, in which the 
Indian government is to fund three hydroelectric projects that upon completion are expected to produce up 
to $1.7 billion worth of electricity 
Hydropower is the centrepiece of Bhutan’s economic prosperity, accounting for 14% of its GDP , economic 
relations between India and Bhutan were based on harvesting Bhutan’s potential to generate hydropower 
for both external trade and domestic use. India has been an incredible asset for Bhutan by providing a market 
for three-fourths of Bhutan’s hydropower while at the same time investing in Bhutan to develop its export 
capacity. 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
!
Page 2


 
India-Bhutan Relations 
The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between 
India and Bhutan. The two countries also launched a special logo in New Delhi to celebrate their enduring 
partnership 
Historical Background 
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 in?uential 
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. 
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, ‘Article2’ 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. With the 
signing of a new treaty in 2007, superseding the one in 1949, strides were made toward the evolving 
friendship between India and a more sovereign Bhutan by eradicating the advisory role of India and 
recognizing Bhutan as an essential ally 
Convergence 
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 bene?cial cooperation in 
India-Bhutan ties 
Hydropower 
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. 
Modi’s visit in 2014 also raised the prospects of moving forward on Bhutan’s 10,000 initiative, in which the 
Indian government is to fund three hydroelectric projects that upon completion are expected to produce up 
to $1.7 billion worth of electricity 
Hydropower is the centrepiece of Bhutan’s economic prosperity, accounting for 14% of its GDP , economic 
relations between India and Bhutan were based on harvesting Bhutan’s potential to generate hydropower 
for both external trade and domestic use. India has been an incredible asset for Bhutan by providing a market 
for three-fourths of Bhutan’s hydropower while at the same time investing in Bhutan to develop its export 
capacity. 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
Economic 
In addition to its lengthy diplomatic relationship, India is far and away Bhutan’s most important economic and 
trading partner, accounting for nearly 78 percent of Bhutan’s exports, and 84 percent of its imports, as well as 
being a vital donor of economic aid to the country. 
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. 
One-third of Bhutan’s exports to India are electricity. Major imports from India to Bhutan are light oils and 
preparations (Diesel), Ferrous products obtained by direct reduction of iron ore, Other (Wood Charcoal), 
Motor spirit (gasoline) including aviation spirit (petrol), Dumpers designed for off-highway use, etc.   The 
major items of Exports from Bhutan are electricity, ferrosilicon, Portland cement, dolomite, carbides of 
calcium carbides of silicon, cement clinkers, timber and wood products, potatoes, cardamom and fruit 
products. 
Foreign Policy 
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 locations has helped India in 
?ushing out militants in the North-East, playing a signi?cant 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.  
Gross National Happiness  (GNH) 
•Coined in 1972 by Bhutan’s fourth king, Gross National Happiness refers to the nation’s policy of 
balancing modernity with the preservation of traditions, mostly by resisting laissez-faire development 
•
The concept implies sustainable development based on a holistic approach, with equal importance 
accorded to the non-economic aspects of wellbeing 
•
Its concept can be explained by its four pillars 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
!
Page 3


 
India-Bhutan Relations 
The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between 
India and Bhutan. The two countries also launched a special logo in New Delhi to celebrate their enduring 
partnership 
Historical Background 
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 in?uential 
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. 
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, ‘Article2’ 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. With the 
signing of a new treaty in 2007, superseding the one in 1949, strides were made toward the evolving 
friendship between India and a more sovereign Bhutan by eradicating the advisory role of India and 
recognizing Bhutan as an essential ally 
Convergence 
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 bene?cial cooperation in 
India-Bhutan ties 
Hydropower 
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. 
Modi’s visit in 2014 also raised the prospects of moving forward on Bhutan’s 10,000 initiative, in which the 
Indian government is to fund three hydroelectric projects that upon completion are expected to produce up 
to $1.7 billion worth of electricity 
Hydropower is the centrepiece of Bhutan’s economic prosperity, accounting for 14% of its GDP , economic 
relations between India and Bhutan were based on harvesting Bhutan’s potential to generate hydropower 
for both external trade and domestic use. India has been an incredible asset for Bhutan by providing a market 
for three-fourths of Bhutan’s hydropower while at the same time investing in Bhutan to develop its export 
capacity. 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
Economic 
In addition to its lengthy diplomatic relationship, India is far and away Bhutan’s most important economic and 
trading partner, accounting for nearly 78 percent of Bhutan’s exports, and 84 percent of its imports, as well as 
being a vital donor of economic aid to the country. 
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. 
One-third of Bhutan’s exports to India are electricity. Major imports from India to Bhutan are light oils and 
preparations (Diesel), Ferrous products obtained by direct reduction of iron ore, Other (Wood Charcoal), 
Motor spirit (gasoline) including aviation spirit (petrol), Dumpers designed for off-highway use, etc.   The 
major items of Exports from Bhutan are electricity, ferrosilicon, Portland cement, dolomite, carbides of 
calcium carbides of silicon, cement clinkers, timber and wood products, potatoes, cardamom and fruit 
products. 
Foreign Policy 
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 locations has helped India in 
?ushing out militants in the North-East, playing a signi?cant 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.  
Gross National Happiness  (GNH) 
•Coined in 1972 by Bhutan’s fourth king, Gross National Happiness refers to the nation’s policy of 
balancing modernity with the preservation of traditions, mostly by resisting laissez-faire development 
•
The concept implies sustainable development based on a holistic approach, with equal importance 
accorded to the non-economic aspects of wellbeing 
•
Its concept can be explained by its four pillars 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
?good governance 
?sustainable socioeconomic development 
?cultural preservation 
?environmental conservation 
•
Under the constitution, the government of Bhutan is required to preserve at least 60% of the country’s 
forest, creating a new social contact in which nature is given representation 
•
GNH offers security with sustainability, democracy with dissent, and a future with alternatives, going 
beyond annual economic output to look at wealth in its entirety: social, human, natural, mental, physical 
and economic 
•
Critics might say that the idea of GNH is just rhetoric, or is premature, and that implementing a new 
model of development would require a host of resources. Yet Bhutan is trying to build a future that much 
of the world wants, and in this instance it is better to be approximately right than precisely wrong 
Doklam 
The centerpiece of this issue is territory. Between China and Bhutan there are three territorial areas of 
dispute: The Jakarlung and Pasamlun valleys on the Bhutan-Chinese north-central border, and the Doklam 
plateau in Eastern Bhutan. While the two territories to the north are of  interest to China due to their 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
!
Page 4


 
India-Bhutan Relations 
The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between 
India and Bhutan. The two countries also launched a special logo in New Delhi to celebrate their enduring 
partnership 
Historical Background 
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 in?uential 
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. 
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, ‘Article2’ 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. With the 
signing of a new treaty in 2007, superseding the one in 1949, strides were made toward the evolving 
friendship between India and a more sovereign Bhutan by eradicating the advisory role of India and 
recognizing Bhutan as an essential ally 
Convergence 
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 bene?cial cooperation in 
India-Bhutan ties 
Hydropower 
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. 
Modi’s visit in 2014 also raised the prospects of moving forward on Bhutan’s 10,000 initiative, in which the 
Indian government is to fund three hydroelectric projects that upon completion are expected to produce up 
to $1.7 billion worth of electricity 
Hydropower is the centrepiece of Bhutan’s economic prosperity, accounting for 14% of its GDP , economic 
relations between India and Bhutan were based on harvesting Bhutan’s potential to generate hydropower 
for both external trade and domestic use. India has been an incredible asset for Bhutan by providing a market 
for three-fourths of Bhutan’s hydropower while at the same time investing in Bhutan to develop its export 
capacity. 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
Economic 
In addition to its lengthy diplomatic relationship, India is far and away Bhutan’s most important economic and 
trading partner, accounting for nearly 78 percent of Bhutan’s exports, and 84 percent of its imports, as well as 
being a vital donor of economic aid to the country. 
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. 
One-third of Bhutan’s exports to India are electricity. Major imports from India to Bhutan are light oils and 
preparations (Diesel), Ferrous products obtained by direct reduction of iron ore, Other (Wood Charcoal), 
Motor spirit (gasoline) including aviation spirit (petrol), Dumpers designed for off-highway use, etc.   The 
major items of Exports from Bhutan are electricity, ferrosilicon, Portland cement, dolomite, carbides of 
calcium carbides of silicon, cement clinkers, timber and wood products, potatoes, cardamom and fruit 
products. 
Foreign Policy 
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 locations has helped India in 
?ushing out militants in the North-East, playing a signi?cant 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.  
Gross National Happiness  (GNH) 
•Coined in 1972 by Bhutan’s fourth king, Gross National Happiness refers to the nation’s policy of 
balancing modernity with the preservation of traditions, mostly by resisting laissez-faire development 
•
The concept implies sustainable development based on a holistic approach, with equal importance 
accorded to the non-economic aspects of wellbeing 
•
Its concept can be explained by its four pillars 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
?good governance 
?sustainable socioeconomic development 
?cultural preservation 
?environmental conservation 
•
Under the constitution, the government of Bhutan is required to preserve at least 60% of the country’s 
forest, creating a new social contact in which nature is given representation 
•
GNH offers security with sustainability, democracy with dissent, and a future with alternatives, going 
beyond annual economic output to look at wealth in its entirety: social, human, natural, mental, physical 
and economic 
•
Critics might say that the idea of GNH is just rhetoric, or is premature, and that implementing a new 
model of development would require a host of resources. Yet Bhutan is trying to build a future that much 
of the world wants, and in this instance it is better to be approximately right than precisely wrong 
Doklam 
The centerpiece of this issue is territory. Between China and Bhutan there are three territorial areas of 
dispute: The Jakarlung and Pasamlun valleys on the Bhutan-Chinese north-central border, and the Doklam 
plateau in Eastern Bhutan. While the two territories to the north are of  interest to China due to their 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
proximity to Tibet, as well as what it perceives as its “historic claims” to the areas, the Doklam Plateau is what 
it covets most.  
The Doklam Plateau lies immediately east of Indian defences in Sikkim. Chinese occupation of Doklam would 
turn the ?ank of Indian defences completely. This piece of dominating ground not only has a commanding 
view of the Chumbi Valley but also overlooks the Silguri Corridor further to the east. 
Bhutan and Northeast India 
The Bhutanese Airline, Druk Air, marked a big step forward in increasing Northeast India’s connectivity with 
ASEAN countries. A direct ?ight route was launched in 2018 between Guwahati and Singapore. 
Gains for Northeast India 
•The new ?ight route will provide direct connectivity to Singapore for travellers from Assam and other 
northeastern states 
?This will be a boon for people from the northeast, who till now had to travel via other airports in the 
country to travel to Singapore and other destinations in Southeast Asia 
•
It is also hoped that it will facilitate increased tourist footfalls in Assam and the other states in northeast 
India, given their pristine beauty and also given the Buddhist heritage in some parts of the northeast 
•
The states of the northeast are also beginning to court foreign investment as seen in the maiden Global 
Investors’ Summit in Guwahati, Assam. In February 2018, the government of Assam signed an 
agreement with the National Building Construction Corporation (NBCC) to build a 65-story Twin T ower 
Trade Center in Guwahati, Assam, which is trying to be a hub of India’s engagement efforts with the 
ASEAN countries.  Two land border crossings were also opened in Manipur and Mizoram, which will 
allow for overland travel between India and Myanmar 
Gains for Bhutan 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
!
Page 5


 
India-Bhutan Relations 
The year 2018 celebrates the Golden Jubilee of the establishment of formal diplomatic relations between 
India and Bhutan. The two countries also launched a special logo in New Delhi to celebrate their enduring 
partnership 
Historical Background 
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 in?uential 
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. 
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, ‘Article2’ 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. With the 
signing of a new treaty in 2007, superseding the one in 1949, strides were made toward the evolving 
friendship between India and a more sovereign Bhutan by eradicating the advisory role of India and 
recognizing Bhutan as an essential ally 
Convergence 
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 bene?cial cooperation in 
India-Bhutan ties 
Hydropower 
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. 
Modi’s visit in 2014 also raised the prospects of moving forward on Bhutan’s 10,000 initiative, in which the 
Indian government is to fund three hydroelectric projects that upon completion are expected to produce up 
to $1.7 billion worth of electricity 
Hydropower is the centrepiece of Bhutan’s economic prosperity, accounting for 14% of its GDP , economic 
relations between India and Bhutan were based on harvesting Bhutan’s potential to generate hydropower 
for both external trade and domestic use. India has been an incredible asset for Bhutan by providing a market 
for three-fourths of Bhutan’s hydropower while at the same time investing in Bhutan to develop its export 
capacity. 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
Economic 
In addition to its lengthy diplomatic relationship, India is far and away Bhutan’s most important economic and 
trading partner, accounting for nearly 78 percent of Bhutan’s exports, and 84 percent of its imports, as well as 
being a vital donor of economic aid to the country. 
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. 
One-third of Bhutan’s exports to India are electricity. Major imports from India to Bhutan are light oils and 
preparations (Diesel), Ferrous products obtained by direct reduction of iron ore, Other (Wood Charcoal), 
Motor spirit (gasoline) including aviation spirit (petrol), Dumpers designed for off-highway use, etc.   The 
major items of Exports from Bhutan are electricity, ferrosilicon, Portland cement, dolomite, carbides of 
calcium carbides of silicon, cement clinkers, timber and wood products, potatoes, cardamom and fruit 
products. 
Foreign Policy 
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 locations has helped India in 
?ushing out militants in the North-East, playing a signi?cant 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.  
Gross National Happiness  (GNH) 
•Coined in 1972 by Bhutan’s fourth king, Gross National Happiness refers to the nation’s policy of 
balancing modernity with the preservation of traditions, mostly by resisting laissez-faire development 
•
The concept implies sustainable development based on a holistic approach, with equal importance 
accorded to the non-economic aspects of wellbeing 
•
Its concept can be explained by its four pillars 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
?good governance 
?sustainable socioeconomic development 
?cultural preservation 
?environmental conservation 
•
Under the constitution, the government of Bhutan is required to preserve at least 60% of the country’s 
forest, creating a new social contact in which nature is given representation 
•
GNH offers security with sustainability, democracy with dissent, and a future with alternatives, going 
beyond annual economic output to look at wealth in its entirety: social, human, natural, mental, physical 
and economic 
•
Critics might say that the idea of GNH is just rhetoric, or is premature, and that implementing a new 
model of development would require a host of resources. Yet Bhutan is trying to build a future that much 
of the world wants, and in this instance it is better to be approximately right than precisely wrong 
Doklam 
The centerpiece of this issue is territory. Between China and Bhutan there are three territorial areas of 
dispute: The Jakarlung and Pasamlun valleys on the Bhutan-Chinese north-central border, and the Doklam 
plateau in Eastern Bhutan. While the two territories to the north are of  interest to China due to their 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
proximity to Tibet, as well as what it perceives as its “historic claims” to the areas, the Doklam Plateau is what 
it covets most.  
The Doklam Plateau lies immediately east of Indian defences in Sikkim. Chinese occupation of Doklam would 
turn the ?ank of Indian defences completely. This piece of dominating ground not only has a commanding 
view of the Chumbi Valley but also overlooks the Silguri Corridor further to the east. 
Bhutan and Northeast India 
The Bhutanese Airline, Druk Air, marked a big step forward in increasing Northeast India’s connectivity with 
ASEAN countries. A direct ?ight route was launched in 2018 between Guwahati and Singapore. 
Gains for Northeast India 
•The new ?ight route will provide direct connectivity to Singapore for travellers from Assam and other 
northeastern states 
?This will be a boon for people from the northeast, who till now had to travel via other airports in the 
country to travel to Singapore and other destinations in Southeast Asia 
•
It is also hoped that it will facilitate increased tourist footfalls in Assam and the other states in northeast 
India, given their pristine beauty and also given the Buddhist heritage in some parts of the northeast 
•
The states of the northeast are also beginning to court foreign investment as seen in the maiden Global 
Investors’ Summit in Guwahati, Assam. In February 2018, the government of Assam signed an 
agreement with the National Building Construction Corporation (NBCC) to build a 65-story Twin T ower 
Trade Center in Guwahati, Assam, which is trying to be a hub of India’s engagement efforts with the 
ASEAN countries.  Two land border crossings were also opened in Manipur and Mizoram, which will 
allow for overland travel between India and Myanmar 
Gains for Bhutan 
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
! 
•Bhutan hopes to increase tourist numbers into the country.  In addition, it also hopes to draw in more 
tourists from the northeastern states of  India. Bhutan already has close ties with the northeastern 
states, especially with Assam 
•It is important to note here that India is one of the fastest growing aviation markets in the world. New 
Delhi has a Regional Connectivity Scheme (RCS), also known as UDAN (Ude Desh Ka Aam Nagrik), which 
was ?rst announced last year. The Assam government has been trying in its own way to foster increased 
connectivity with ASEAN and will be providing  $13 million  per annum for three years to help start 
international ?ights to the ASEAN region. In addition to Singapore, Guwahati is likely to have direct 
connectivity with other international destinations in the neighborhood soon 
Challenges 
•
The biggest challenge will be to ensure that the ?ights are full capacity; otherwise, they may not 
continue for long. 
•
There has to be a concerted push by all the northeastern states to promote tourism in this region so as to 
draw tourists from the ASEAN countries 
•
The hospitality industry in the region also needs a shake up in order to cater to the needs of an 
international clientele 
Irritants 
Although the older Bhutanese generations looked to India with gratitude, the newer generation tends to look 
more deeply–and with more dissatisfaction–at the situation. 
•Despite the updated treaty, India has continued to pressure Bhutan to dominate the foreign relations of 
the country—to such an extent that Bhutan, to this day, does not engage in diplomatic talks with China. 
Much of the Bhutanese population considers this as a direct threat to the sovereign character of the 
country and also a major hindrance to settling the border between Bhutan and China 
•
Bhutan has repeatedly made efforts to assert its independent identity and often expressed the desire to 
reduce its over-dependence on India. 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. 
•
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 ?nds 
its way back to India, tilting the relationship more in favor of the latter.  
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
!