India-Bhutan relations are at a crossroads today. For almost 60 years, India-Bhutan relations were guided by the Treaty of Friendship 1949. This Treaty was amended for the first time in 2007. Three significant insertions and changes were made. Firstly, Article 2, wherein India undertook to exercise no interference in the internal administration of Bhutan, and Bhutan agreed to be guided by the advice of India in regard to its external relations, was substantively changed. Article 2 now simply mentions that neither government shall allow the use of its territory for activities harmful to the national security and interests of the other.

Secondly, Article 3 which dealt with the temporary subsidy annual payment of INR500,000 as compensation granted to Bhutan under the Treaty of Sinchula, and Article 4 regarding the return of about 32 square miles of territory known as Dewangiri to Bhutan were struck off the new Treaty.

Thirdly, under Article 6 of the 1949 Treaty, Bhutan was free to import with the assistance and approval of the India, from or through India into Bhutan, whatever arms, ammunition, machinery, warlike material or stores may be required or desired for the strength and welfare of Bhutan. However, under Article 4 of the new Treaty, Bhutan shall be free to import, from or through India into Bhutan, whatever arms, ammunition, machinery, warlike material or stores as may be required or desired for the strength and welfare of Bhutan. This implied that it no longer required the approval of India in doing so.

Evolving relations

There are significant changes and structural transformations in the strategic determinants of the bilateral relationship between India and Bhutan. This has been triggered by the emergence of a new Bhutan with strong doses of democracy, the first constitution and an elected government. A new generation of outward looking Bhutanese led by a young monarch adds a new dimension. Television channels are now available, along with a number of private newspapers. A new crop of politico-bureaucratic leadership has emerged with views that are in stark contrast to those of their predecessors. There is a multiplicity of non-state actors including international agencies, private sector players and NGOs working on various unorthodox areas. Bhutan has published a vision document and path-breaking reports on human development, poverty assessment and environment.

Bhutan’s tourism policy is liberal and most of the top public sector undertakings have been privatised, including Bhutan carbide, Bhutan Board, Penden Cement, Distillery, Bhutan Fruit products and even Druk Satair. There is now a Coca-Cola bottling plant in Bhutan and shopping malls have sprouted up. The rising aspirations of the new generation could even clash with the democratic institutions that were built so slowly.

A paradigm shift in the security and strategic matrices is noticed with the traditional threat perception giving way to non-traditional actors, modes and strategies. The military action against the Ulfa-Bodo-Kamtapuris in 2003 did indicate how security concerns have become more non-traditional and local. The Bhutanese politico-strategic ability had been affected significantly by the long term effects of the violent expulsion of the Lhotshampa refugees from southern Bhutan. Though most of the refugees have left the camps in Eastern Nepal to avail of the third country resettlement options provided by the UNHCR, they still represent a major international embarrassment for Bhutan.

The Doklam controversy in 2017 brought forward an absolutely different, but intriguing, challenge to Bhutanese diplomacy. Balancing a longstanding and comprehensive partner like India with a bourgeoning economic giant to the North is a new ball game entirely for the young monarch. When the Chinese railway and highways crisscross to connect Lhasa and Shigatse with the sensitive biodiversity of Chumbi Valley, and when China entices Bhutan with a plethora of development projects just to get a foothold in Thimphu, India naturally sees the emergence of a new game plan as a result of this rugged connectography.

Assistance

India has effectively used the economic assistance as a major instrument of its foreign policy in Bhutan. Up to 1989-90, India dispersed about INR20 billion as its total foreign economic assistance. Bhutan with a share of over 45 percent topped the list of a variety of recipients including Nepal, Sri Lanka, Indonesia, and African countries. In the following decade, India dispersed another INR33 billion as foreign economic assistance to developing countries where again Bhutan led the recipients group. Bhutan takes almost 70 percent of India’s bilateral assistance. India contributed almost 100 percent of Bhutan’s First Plan’s (1961-66) outlay of INR107.2 million and 98 percent of its Second Plan (1966-71) with an outlay of INR202.2 million. However, over the years, percentage share contribution gradually went down. In the Eleventh Plan (2013-18) it reached as low as 23 percent of the total plan outlay of INR213 million. Will India be able to reorient and integrate its traditional economic assistance with newer issues like democracy, good governance, reforms, trade-investment and non-traditional security threats?

Hydel Power

India-Bhutan cooperation in developing hydel power projects is widely quoted as a successful model. The installed hydropower capacity of 1,615 MW in Bhutan constitutes less than six percent of the total hydropower potential of 30,000 MW. Most of these projects have been built with Indian support initially on an economic assistance basis which now has a much higher soft loan content. Unlike in the past where Indian participation emanated wholly from public-sector organisations such as the National Hydro Power Corporation, private sector participation has steadily increased.

All the surplus power (75 percent of total generation) is exported to India (5,180 million GWh in 2014) generating over INR10.69 billion in 2014, contributing over one-third of government revenues,  over nine percent of the country’s GDP and over 10 percent in its total export basket. With a forward-looking bilateral Power Purchase Agreement in place, the transmission to India is handled by both public and private agencies. Bhutan, with the highest per capita consumption of 2,800 kWh in South Asia, has a target of generating 10,000 MW by 2020.

A recent study by Jaipur based CUTS  found that around the hydel project sites in Tala in Bhutan, 61 percent of households in the surveyed districts have access to mobile phones and 95 percent in the villages of Chukha district had access to improved sanitation. With access to electricity, enrolment of girls increased sharply, reduced the burden of household chores including cooking as they used electric rice cookers, and other electric appliances. In Chukha district some even used electric fencing to guard their crops from wild animals and shifted to commercial crops (from maize as a traditional crop) such as ginger and cardamom, and dairy products.

However, Bhutan wants to come out of the one country buyer model and has been keen to diversify its export market partners in South and South East Asia. It could even bring Myanmar, Pakistan, Bangladesh, Nepal and Afghanistan in its generation and export trajectory. The hydel plants in the North East region of India may turn out to be major competitors.

Bhutan entered into irreversible process of globalisation. A traditionally driven Bhutanese system obsessed with innovative Gross National Happiness concept give reason for apprehension on two major counts. It is likely to impact the socio-cultural values and the economic systems, and the Bhutanese external policy orientations.

The de-culturation process has already shown its tentacles in Thimphu and Phuntsoling. Will the predominant traditional institutions be able to absorb these shocks and thwart the onslaught?

Lama a Senior Professor in Jawaharlal Nehru University, New Delhiwrote the Nathu la Trade Report for the Government in 2005