India and Bhutan: Dawn of New Era

The Politico-Economic Relation Since 1949

Uttam Kumar
Assistant Professor, Department of Geography
J.S.H (P G) College, J P Nagar
INDIA
Email: uttam158@gmail.com

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India and Bhutan: Dawn of New Era
The Politico-Economic Relation Since 1949

The Kingdom of Bhutan is situated in a comparatively inaccessible part of the southern

slopes of the Himalayas. It has an area of about 46,500 sq. km, with its total population
of 672,4251 (2005) Bhutan is the second most populous Himalayan Kingdom after
Nepal. It is relatively compact, with a maximum north-south and east-west distance of
170 kms and 300 kms respectively2 . Bhutan is bounded on three sides by India; Sikkim
in the west, West Bengal and Assam in the south and Arunachal Pradesh (formerly the
North-East Frontier Agency) in the east. Thus Bhutan is a land-locked country
sandwiched between two Asian giants India and China, sharing borders of
approximately 605 and 470 kms with each respectively3. The traditional inhabitants of
Bhutan are of Indo- Mongoloid origin and of the same stock as the inhabitants of the
eastern Himalayan region of India (Sikkim and Arunachal Pradesh).

The kingdom of Bhutan is often described as being physically small with limited
economic scope and military might. In spite of these limitations, Bhutan has earned the
reputation of being a peaceful country where the development of threats from
military, terrorism, and economic disparity within itself has virtually been absent. In
this sense, Bhutan has thus far been more fortunate than many of its neighbors
including India in the South Asia Region.

Background
The relationship between India and Bhutan is as old as the Himalayas. Recorded
historic relation between Bhutan and India dates back to 747 A.D., when the great
Indian saint Padmasambha introduced Budhism in Bhutan, which has since then
permeated all aspects of Bhutanese life. Aside from such shared cultural and religious
heritage, other areas of interaction developed during the British rule in India followed
by treaties and agreements. It was within this period of interaction with the British
that trade between Bhutanese and Indians was also recorded to have taken place for the
first time (1873).
Its recent history begins with the treaty of Sinchula which was signed in
1865 after Duwar war of 1864-65 between the British Government of India and
Bhutan. The British took over Bhutan’s role in Sikkim and Cooch Behar in return for
non-interference in its internal matters. This treaty institutionalised the relationship
between the two counties for the first time and provided basis for future relation.
After 45 years, the treaty of 1865 was modified in 1910 by the treaty of Punakha in
response to the geopolitical changes in the north. There was a strong China’s presence
in Tibet and the British wanted to stop Chinese expansion by keeping Tibet, Bhutan,
Nepal and Sikkim as buffer states. By the treaty of Punakha the Bhutan government
1
http://www.bhutancensus.gov.bt
2
Nagendra Singh, Bhutan: A Kingdom in the Himalayas (New Delhi: Thompson Press, India Limited,
1972), p2.
3
V. H. Coelho, Sikkim and Bhutan (New Delhi: Indian Council for Cultural Relations, 1967), p57.

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entered into a close relationship with British India and agreed to be guided by the
advice of the British government with regard to Foreign affairs. The subsidy paid to
Bhutan was also raised from RS 50,000 to RS 100,0004. Although the treaty of Punakha
served to expel any claims that China might have tried to make, it did not define
Bhutan’s status technically or legally; for the Bhutanese, this was a source of
uncertainty over its relations with India at the time that the British rule was nearing an
end. After India’s independence in 1947, standstill agreements with Sikkim, Nepal and
Tibet were signed to continue existing relations until new agreements were made; for
Bhutan, its status became clearer following Nehru’s invitation for a Bhutanese
delegation to participate in the Asian Regional Conference in 1947. Apart from this,
subsidy with addition, which was granted by the British Indian government for the
duration of the war, was paid. Apart from this, the government of India had also made
arrangements to meet some of the essential requirements of Bhutan, such as patrol for
the transport of its timber5.Following this, the negotiation for a fresh Indo-Bhutan
Treaty started in 1949.

The Indo-Bhutan Treaty of 1949

By the summer of 1949, communist forces had captured almost all parts the Chinese
mainland and were set to establish their own government. The foreign relation as I
believe always responds to the changing dynamics of the global order , therefore, this
development was seen as a threat not only to Bhutan’s security, but also to India’s and
both countries were compelled to maintain close and friendly relation with each other.
While negotiating a fresh treaty, both countries were clear in their objectives –Bhutan
to get the new India’s recognition of its independence like the British and to get back
32 square kilometers Dewangiri(now Dewathang) ceded by the treaty of Sinchula,1865;
and India to restore Dewathang, so as to remove any fear of India’s alleged
imperialistic design, and prevent Bhutan from looking north. As a result, India and
Bhutan signed a treaty of friendship and co-operation at Darjeeling on 8 August 1949.
The treaty conceded the independent and sovereign status of Bhutan and played a vital
role in promoting and fostering friendly relation with India. Thus, the Indo-Bhutan
treaty of 1949 marks the beginning of new era of friendly relation based on mutual
advantages6. As stated in Article2 of this treaty, Bhutan has agreed to be guided by the
advice of the government of India with regard to its external relation and India
accepted the responsibility for Bhutan’s strategic communication and defence. Further,
according to the treaty, the government of India undertakes to exercise no interference
in the internal administration of Bhutan. In addition, the annual subsidy paid to
Bhutan was increased to RS 500,000. An area of about 32 sq miles known as Dewangiri
was also returned to Bhutan by independent India. The treaty of 1949 also guarantees
free trade between the counties and the duty- free transit across India of Bhutan’s

4
C. U. Aitclison, Treaties Engagements and Sanads, (Calcutta 1929-31), Vol. XIV. P. 100
5
The Ministry of External Affairs, Government of India, Annual Report 1948-49; p9.
6
.For the Text of Treaty see: Foreign Policy of India: Documents 1947-1959 (2nd Edition, New Delhi
1959) p17.

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imports. Furthermore, the treaty assures the rights of citizens of each country and the
extradition of criminals seeking refugee in either country.
After India’s independence, relations with Bhutan were conducted through the
Indian political officer at Gangtok. Soon after the conclusion of Indo-Bhutan treaty in
1949, the Indian political officer at Sikkim visited Bhutan in October 1950, personal
contacts were established and friendship was cemented. Since then, there are frequent
state visits between two countries. The Indian Ministers and top Army brass also keep
visiting Bhutan, frequently. In 1958, Indian Prime Minister Jawaharlal Nehru visited
Bhutan he reiterated India’s wish that Bhutan remain an independent country, “taking
the path of progress according to your will”. Speaking at a public function on 23rd
September 1958 he described India and Bhutan a “members of the same Himalayan
family” and said that they should live as “friendly neighbors” so that the freedom of
both countries could be safeguarded from any outside interference7. This visit of the
Indian Prime Minister to Bhutan marks the beginning of greater Indo-Bhutanese co-
operation in the development of Bhutan He discussed at a great length with the
Maharaja the economic development problems of Bhutan, particulars stress was laid in
the talks on the need for road communications between India and Bhutan, and within
Bhutan itself. Further, Nehru declared in the Indian Parliament in November 1959 in
response to Chinese aggression over Tibet in 1959 that “any aggression against Bhutan
……………………. Would be regarded as an aggression against India.”8 A defacto alliance
developed between Bhutan and India by 1960, and Indian aid increasingly bolstered
Bhutan’s strategic infrastructure development.
According to the terms of Articles 2 of the treaty of 1949, in principal,
calls for Bhutan to seek India’s advice in external matters however, in 1958 some
members of the Bhutanese government desired to establish direct diplomatic relations
with friendly western governments especially with United States with a view to obtain
economic assistance. They contended that nothing in the treaty limits the right of
Bhutan to have direct diplomatic relations.
In 1959, India advised the government of Bhutan against opening direct
relations with any other government. The advice had its due effects and the Bhutanese
governments abided by it9. India however, dose not object to Bhutan negotiating with
foreign firms or organisations for development purposes. After the revolt and
disappearance of Tibet 1959, Late Prime Minister Jigme Dorj, of Bhutan came to Delhi
on 12 August, 1959 to have a written guarantee of support of the government of India
in the event of any attack on Bhutan. In response to this request the then Prime
Minister of India Jawaharlal Nehru said in a statement on 25 August,1959 that India
was responsible for the defence of the Himalayan states of Sikkim and Bhutan “Any
such infringement would be an infringement of our undertaking with Sikkim and
Bhutan and we will defend them against any intrusion10.”

7
Keesing’s Contemporary Archives, Vol. No. XII 1959-60 p.15955
8
Ibid.
9
‘Bhutan Thought of Sovereignty’, Far Eastern Economic Review, Vol. XIX No. 3, July-September 1963,
p212
10
Keesing’s Contemporary Archives, Vol. No. XII 1959-60 p.17115

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 Indo-Bhutan relations began to take on concrete form following state
visits made by the third King Her Majesty Jigme Dorji Wangchuk to India, and by
Prime Minister Jawaharlal Nehru to Bhutan between 1954 -61. Besides emphasising
India’s recognition of Bhutan’s independence and sovereignty in his public statement
in Paro, Nehru’s visit in 1958 marks the beginning of greater Indo-Bhutanese co-
operation in the development of Bhutan. It was Nehru who advised Bhutan to end its
self isolation policy and accept India’s economic assistance. Apart from facilitating
economic aid the government of India had sponsored the membership of Bhutan to the
Colombo plan; Bhutan joined the Colombo plan in 1963. Beginning with India,
Bhutan begins to diversify its relations with the international community. With India
sponsoring Bhutan’s application for UN membership in 1971, the leaders of the two
countries demonstrated that Article 2 of the Indo-Bhutan Treaty was not a restricting
factor in the exercise of Bhutan foreign policy. Bhutan’s Foreign Minister Jigmi Y.
Thinley had said on 24 February 1999 that the Treaty of 1949 has never been a
constraint in conducting Bhutan’s foreign relations establishing diplomatic relations,
engaging in various international forums, and in pursuing the paths with respects to its
aspirations11. Bhutan is now a member of more than 150 international orgnisation.
However, Bhutan even after diversifying its international relation always supported
India in the UN and tows Indian line in the SAARC and other international forums.
The official visit of Bhutan King Jigme Singhye Wanchuck from November 24-29 and
barely after two months as the Chief Guest at India’s Republic Day Function on
January 26, 2005 clearly exhibit how deep Indo-Bhutan relation is in 21st century. A
historic development took place on 8th Feb. 2007 when the present king Jigme khesar
Namgyel Wangchuck came India on official visit and signed the updated treaty in New
Delhi that removes much controversial provisions which have become obsolete over
time i.e; Article 2 of 1949 treaty that curtailed Bhutan from freely conducting its
foreign and defense policies12. Thimpu had been asking for a revision of the India-
Bhutan Friendship Treaty for years, and its resent steps towards democratisation
propelled New Delhi towards a speedy settlement of the matter to bring Bhutan much
closer to New Delhi. Since Bhutan is strategically important for India as it borders the
Tibet autonomous region of China in the north and shares a 700-km border with the
Indian sates of Sikkim, Arunachal Pradesh, West Bengal and Assam to the south- some
of which are insurgency-prone, this renewed treaty will have great bearing on South
Asian geopolitics in general and Indo-Bhutan strategic relation in particular.

Development Assistance and Economic Relation

Bhutan’s economy is wholly dependent on India. It was the benevolent Nehru, who
put Bhutan on the path of economic development. As a least developed country
Bhutan depends on foreign aids for financing its developmental programmes and
establishment costs. India has been the largest donor of external aid to Bhutan and its
main development partner. It was at the Indian initiatives that Bhutan launched its

11
Transcription of talk given to the students of Sherubtse college,Kanglung, on 24 February ,1999
12
Hindustan Times (2007) ‘ India, Bhutan ink friendship treaty’, p16, 9 February, New Delhi

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planned development in 1961. Bhutan’s first and second Five Year Economic
Development Plans were totally funded by India. Over the years, India’s assistance has
increased steadily from Rs 107 million in first Five Year Plan to Rs 9000 million in the
Eighth Five Year Plan. Road construction by the Indian Border Road Orgnisation
started in first Five Year Plan (1961-66); the second five year plan (1966-71) focused on
public works, education, agriculture and health. While Bhutan source of foreign aid
has diversified significantly since it became a member of the United Nation, however
India continues to be the major donor of external aid to Bhutan. India’s assistance
accounted for 41% of total external outlay during the Eighth five year plan (1997-
2002)13. Over the last four decades, India has provided assistance mainly in the social
sectors such as education, human resource development, health etc. In addition India
also provides practical or full grant assistance and gradually, economic relations
have evolved with cooperation extending towards mutual beneficial projects such as in
Hydro-power development and industrial projects.

Bhutan as a land-locked country relies on India for access to the sea. India has been and
is a trading partner of Bhutan in her economic development and external trade. In
1999, India accounted for 65 percent of Bhutan’s import and 94 percent of its export14.
Before, 1980s third country import and export was non-existent in Bhutan but after
1990s with economic liberalization in India Bhutan is facing a gradual loss of its
protected trade status, and unless Bhutanese industries are able to remain competitive
they could loss their market share in the increasingly open market in India. The King
Jigme Singhye Wang chuck took a number of decisions to reduce economic
dependence on India to minimize the risk arising out of the New Economic Policy of
India i.e. now Bhutanese’ market are flooded with foreign consumer goods.
Bangladesh, Singapore and Kuwait are the new export destination countries hitherto to
exclusively an Indian domain. Despite the efforts of diversification, India has been the
biggest market for Bhutan products and imports. Over the period of 1981-2001,
Bhutan’s export to India accounted for an average of 86 percent of its export and,
imports from India accounted for an average of 79 percent of the total imports15.

The economic relationship between India and Bhutan is not a unidirectional one.
Although to lesser a degree compared to Bhutan’s dependence on it, India also relies on
the Bhutan for economic matters. Apart from helping Bhutan, its investment in
Bhutan survived to boast the economics of the Indian states that border Bhutan. Most
of the industries in the West Bengal now depend on electricity imported from Bhutan.
Many Indians are employed in Bhutan. Indo- Bhutan Trade Treat was signed in
1972(renewed at every 10 years), since then India is not only a major foreign aid
contributor to Bhutan’s economic development, but a mainstay for its economic
survival.

13
http://www.pcs.gov.bt.
14
Planning Commission (2000). National Accounts Statistics 1980-1999, Thimphu: Central Statistical
Organisation, Royal Government of Bhutan.
15
http://www.pcs.gov.bt.

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Conclusion:

The initiation of Indo-Bhutan friendship as stand today is credited to the efforts of

Indian Prime Minister Pt. Jawaharlal Nehru and His Majesty Jigme Dorji
Wangchuchk, the third King of Bhutan. Their meeting in the 1950s sparked the
dialogue for the development cooperation. Bhutan is easily India’s most friendly
neighbour, and has consistently supported New Delhi in regional and international
forums. India in turn, has helped the tiny, land-locked Himalayan state with generous
monetary and infrastructure-building assistance, including in its recent foray towards
democracy. Further strengthening this India and Bhutan renewed their nearly six-
decade old treaty on 8th Feb. 2007 (India’s External Affairs Minister Pranab Mukherjee
and present king Jigme khesar Namgyel Wang chuck of Bhutan signed the updated
treaty in New Delhi)16by agreeing to enhance economic relations and prevent the use
of their territories for activities harmful to each other.
Looking back over the decades since then, and under the continued guidance of the
King Jigme Singye Wangchuchk, Indian assistance has greatly expanded in every field
of Bhutan’s development and its socio-economic growth. To this day, India continues
to provide the largest and most diversified assistance to Bhutan among all other
donors. Often cited as a “Shining” example of friendship and cooperation between a
large country and a small neighbour, relation between the two continue to grow at all
levels.

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16
Hindustan Times (2007) ‘ India, Bhutan ink friendship treaty’, p16, 9 February, New Delhi

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Websites:
http://www.geocities.com
http://www.ciaonet.org
http://www.bhutancensus.gov.bt
http://www.bhutannewsonline.com/foreign-relations.html
http://www.meadev.nic.in/foreign/bhutan.html
http://www.nepalresearch.com