Model Answer

Introduction

India and Bhutan share a robust and time-tested relationship rooted in the 1949 Treaty of Friendship, updated in 2007 to reflect evolving dynamics. This partnership has been underpinned by economic cooperation, hydropower development, and cultural ties. However, emerging challenges now pose concerns for this historically strong relationship.

Strengths of the India-Bhutan Relationship

Trade and Economic Ties

• India as Bhutan’s top trading partner: The bilateral trade agreement revised in 2016 enables duty-free transit for Bhutanese exports.
• Trade Statistics: In 2021-22, bilateral trade amounted to USD 1,422 million, demonstrating economic vitality.

Hydropower Cooperation

• India has helped Bhutan harness its hydroelectric potential, exemplified by the 720 MW Mangdechhu Hydroelectric Power Project, which benefits both nations through energy generation and socio-economic development.

Development Partnership

• India’s contribution of ₹4,500 crore to Bhutan’s 12th Five-Year Plan constituted 73% of Bhutan’s total external grant component, underscoring India’s pivotal role in Bhutan’s development.

Educational and Cultural Cooperation

• Over 950 scholarships are offered annually to Bhutanese students in India, with initiatives like the Nehru-Wangchuck Scholarship Scheme strengthening educational and cultural ties.

Emerging Challenges

Border Security and Territorial Negotiations with China

• Bhutan’s discussions with China, particularly involving Doklam—strategically crucial for India—raise security concerns, especially regarding the Siliguri Corridor.

Economic Diversification and Ties with China

• Bhutan’s growing economic engagement with China, reflected in the surge of imports from INR 2 billion in 2020 to INR 15 billion in 2022, indicates a shift in economic reliance.

BBIN Motor Vehicle Agreement

• Bhutan’s hesitation on the BBIN agreement due to environmental concerns could hinder India’s regional connectivity ambitions.

Sustainable Development Fee (SDF)

• Bhutan’s imposition of a daily SDF on Indian tourists in 2020 has impacted cross-border tourism dynamics.

Conclusion and Way Forward

To address these challenges, India and Bhutan must reinforce their relationship through:

• Enhanced security collaboration in sensitive border areas.
• Economic partnerships aligning with Bhutan’s diversification goals.
• Strengthening regional connectivity while respecting environmental concerns.

India’s ‘Neighbourhood First’ policy can guide efforts to ensure mutual growth, security, and prosperity.