India, Bhutan agree to expand connectivity, trade

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What’s in today’s article?

  • Why in news?
  • Bhutan-India Relation
  • Background of India-Bhutan Relationship
  • Bhutan – India Economic Cooperation
  • Bhutan - India Development Cooperation
  • Bhutan - India Hydropower Cooperation
  • News Summary: India, Bhutan agree to expand connectivity, trade
  • Key highlights of the visit by King of Bhutan

Why in news?

  • Bhutan King Jigme Khesar Namgyel Wangchuck, who is on a visit to India, held a bilateral meeting with Prime Minister Narendra Modi in Delhi.
  • This is significant amid growing concerns over China’s efforts to forge a bond with Thimphu.

Background of India-Bhutan Relationship

  • Diplomatic relations between Bhutan and India were established in January 1968.
  • Relationship between both the countries are guided by the Indo-Bhutan Friendship treaty. The treaty was signed in 1949 and was revised in 2007.
    • Article 2 of the Treaty declares that India would not interfere in Bhutan’s administrative affairs and the latter would be guided by the former’s advice in its external relations.
    • After the revision of treaty in 2007, Bhutan no longer require India’s approval over importing arms. India supports Bhutan’s progress towards sovereignty and democracy.
    • Also, now there are no limitations of Bhutan with respect to other countries. But Bhutan cannot use its territory for activities against India’s security threat.
  • In 2014, the new Prime Minister at New Delhi chose Bhutan as his first foreign destination.
  • He coined the idea of B2B as ‘Bharat to Bhutan’ for building effective and renewed bilateral relationship.

Bhutan – India Economic Cooperation

  • Bhutanese currency is Ngultrum (Nu) and is officially pegged to the Indian Rupee.
  • India is Bhutan’s top trade partner both as an import source and as an export destination.
  • Since 2014, India’s trade with Bhutan has almost tripled from USD 484 million in 2014-15 to USD 1422 million in 2021-22.
    • This accounts for about 80% of Bhutan’s overall trade, with the balance of trade in India’s favour.
  • India is the leading source of investments in Bhutan, comprising 50% of the country’s total FDI.

Bhutan - India Development Cooperation

  • For the 12th Five Year Plan of Bhutan, India is providing an assistance of Rs. 45 billion.
    • Since the launching of First Five Year Plan of Bhutan in 1961, India has been extending financial support to Bhutan’s FYPs.
  • In the Union Budget 2023-2024, the highest allocation was for Bhutan at Rs 2400 crore.

Bhutan - India Hydropower Cooperation

  • Hydropower projects in Bhutan are an example of win-win cooperation, providing a reliable source of inexpensive and clean electricity to India, generating export revenue for Bhutan and cementing our economic integration.
  • So far, Government of India has constructed three Hydroelectric Projects (HEPs) in Bhutan:
    • 336 MW Chukha HEP, 60 MW Kurichhu HEP and 1020 MW Tala HEP.
      • These three plants are operational and exporting surplus power to India.

News Summary: India, Bhutan agree to expand connectivity, trade

  • The Bhutan King is on an official visit to India from November 3 to 10.
  • The two leaders held discussions on the entire gamut of bilateral cooperation and regional and global issues of mutual interest.

Key highlights of the visit by King of Bhutan

  • 9 steps to expand ties
    • The two sides announced 9 steps to expand ties in trade, technology, cross-border connectivity, mutual investments, education and people-to-people contacts.
    • India also agreed to positively consider Bhutan’s request for concessional financing in skill development and capacity-building.
  • Rail link
    • The two sides agreed on a final location survey for the proposed cross-border rail link connecting Kokrajhar in Assam to Gelephu in Bhutan.
    • The two sides also agreed to consider establishing a rail link between Banarhat in West Bengal and Samtse in Bhutan.
    • It was also decided to designate Haldibari(West Bengal) to Chilahati (Bangladesh) rail route as an additional trade route for Bhutan's trade with Bangladesh.
  • Bridge financing
    • India also decided to provide bridge financing for the period between 12th and 13th Five-Year Plans of Bhutan for India-assisted projects and schemes.
  • Immigration check post between Bhutan and India
    • Both sides agreed to designate Darranga (Assam) and Samdrup Jongkhar (Bhutan) as immigration check post between Bhutan and India.
    • This is to facilitate the entry and exit of third country nationals by land route for enhancing connectivity, and promoting tourism.
  • Strengthen trade infrastructure
    • This includes suitable upgradation of the existing Land Customs station at Dadgiri (Assam) to Integrated Check Post through India's support along with development of facilities on the Bhutanese side at Gelephu.
  • Other announcements
    • Both the leaders decided to
      • safeguard the ecological diversity of the region,
      • allocate additional MBBS seats for Bhutanese students in medical colleges in Assam and
      • double the outlay under Ambassador’s scholarship for Bhutanese students pursuing higher education in India.
    • The leaders agreed to extend the existing India-Bhutan energy partnership in hydro to non-hydro renewables, such as solar as well as green initiatives for hydrogen and e-mobility.

Q1) What is Ngultrum (Nu.)?

The ngultrum (Nu.) is the official currency of Bhutan, a small landlocked country in South Asia. The currency code is BTN. The ngultrum has been the country's official currency since 1974, when it replaced the Indian rupee.

Q2) Where is Bhutan located?

Bhutan is a small, landlocked country located in southern Asia between Tibet and India. The topography of the country can be divided into different regions from north to south based on altitude: the Great Himalayas, the Inner Himalayans and the Southern Foothills.


Source: India, Bhutan agree to expand connectivity, trade | Embassy of India at Thimpu | Business Standard