India-Bhutan trade relationship and their geopolitical issues

[YAGAY andSUN]

The India-Bhutan trade relationship and their geopolitical issues are influenced by their historical ties, geographical proximity, and strategic alliances. India has traditionally been Bhutan’s closest partner in both trade and geopolitics, and the two countries share a strong economic and political bond. However, their relationship has also been shaped by China’s growing influence in the region and other geopolitical factors, creating both opportunities and challenges for both nations.

1. India-Bhutan Trade Relationship:

India is Bhutan's largest trading partner, and the two countries share a long-standing trade and economic relationship. Trade between India and Bhutan is governed by both bilateral agreements and initiatives focused on regional economic integration, such as the South Asian Free Trade Area (SAFTA).

Key Points of Trade:

• Trade Volume: Bhutan's trade is highly dependent on India, both in terms of exports and imports. India accounts for around 80% of Bhutan’s total trade, and Bhutan exports more to India than it imports.
• Exports from Bhutan to India: Bhutan primarily exports hydropower, mineral resources, agricultural products, timber, and handicrafts to India. Among these, Bhutan's hydropower exports are especially significant, as India imports electricity from Bhutan, making it a crucial source of revenue for Bhutan. Bhutan also exports products like cardamom, apples, citrus fruits, bamboo, and vegetables.
• Imports from India: Bhutan imports a wide range of products from India, including machinery, automobiles, food products, petroleum, and consumer goods. Most of Bhutan’s industrial goods, fertilizers, building materials, and medical supplies come from India.
• Hydropower Projects: One of the key components of the India-Bhutan trade relationship is the development of hydropower projects. India has invested heavily in Bhutan’s hydropower sector, including large dams like the Chukha Hydro Power Plant and the Tala Hydroelectric Power Station. The electricity generated is largely exported to India, and hydropower exports contribute significantly to Bhutan’s economy.
• Border Trade: There is also significant border trade between India and Bhutan, especially in areas like Jaigaon (India) and Phuentsholing (Bhutan). This informal trade involves goods such as food products, textiles, and other consumer items, and is often vital for the livelihoods of people living in the border regions.

Strategic Significance:

• Economic Dependence on India: Bhutan's heavy reliance on trade with India for its economic activities is critical for its development. India not only serves as Bhutan's primary trading partner but also provides financial assistance and technical support for various infrastructure and development projects.
• Landlocked Status: Bhutan, being a landlocked country, depends on India for access to sea ports for the transportation of goods. Indian ports like Kolkata and Haldia serve as crucial gateways for Bhutanese trade with the rest of the world.

2. Geopolitical Issues:

The geopolitical landscape between India and Bhutan is shaped by several factors, particularly their strategic cooperation and the influence of China. India has been a key ally for Bhutan, especially given Bhutan’s landlocked geography and reliance on India for trade, security, and economic development. However, the growing influence of China in the region has led to both opportunities and challenges in the India-Bhutan relationship.

Key Geopolitical Issues:

1. India-Bhutan Relations and China’s Influence:

• China’s Border Claims: Bhutan shares a border with China, and there have been long-standing territorial disputes over certain areas. One key area of contention is the Doklam Plateau (also called Donglang), which is strategically located near the tri-junction of India, Bhutan, and China. This region became a focus of tensions in 2017 when China attempted to build a road in the disputed area, leading to a standoff between Indian and Chinese troops. Bhutan has been involved in the issue, as it claims Doklam as part of its territory. India has a vested interest in Bhutan’s territorial integrity, as any Chinese advance in this region could have serious security implications for India.
• China’s Belt and Road Initiative (BRI): China’s growing presence in the region, particularly its Belt and Road Initiative (BRI), has raised concerns for both India and Bhutan. Bhutan has not joined the BRI, but China has made attempts to increase its influence in the region, especially by seeking stronger ties with countries like Nepal and Sri Lanka. India’s efforts to maintain its influence in Bhutan have been partly driven by concerns about China’s growing footprint in South Asia.
• China-Bhutan Relations: While Bhutan has historically been aligned with India, it has also sought to maintain cordial relations with China to avoid being overly dependent on India. Bhutan and China have held several rounds of negotiations to settle their border disputes, though progress has been slow. Bhutan’s cautious approach to its relationship with China is partly due to its desire to preserve its sovereignty while balancing the influence of both India and China.

2. India’s Role in Bhutan’s Security:

• Military Cooperation: Bhutan does not have a standing army and relies heavily on India for its security needs. India is responsible for Bhutan’s defense under the India-Bhutan Friendship Treaty, which was revised in 2007 to strengthen ties between the two countries. This treaty allows India to maintain a strong military presence in Bhutan, particularly along the Bhutan-China border, to prevent encroachments by Chinese forces.
• Internal Security Issues: Bhutan has also faced internal security challenges, including insurgencies from rebel groups based in Nepal and India. Bhutan has cooperated closely with India in combating these insurgencies, and Indian forces have helped Bhutan in maintaining internal security.

3. Bhutan’s Diplomatic Position and Regional Cooperation:

• Neutral Foreign Policy: Bhutan has traditionally followed a neutral foreign policy, avoiding direct involvement in global conflicts. This approach has allowed it to maintain positive relations with both India and China while protecting its sovereignty. However, Bhutan’s foreign policy has been somewhat shaped by India’s geopolitical interests, especially in the context of security and trade.
• Regional Cooperation: Bhutan has been a member of the South Asian Association for Regional Cooperation (SAARC), an organization focused on regional cooperation and development in South Asia. India’s role as the largest economy and political power in the region has influenced Bhutan’s regional engagements. Bhutan has also supported India’s position in various international forums, including its stance on climate change and global security.

4. India-Bhutan Relations and International Concerns:

• International Support: Bhutan has received significant international support for its sustainable development model, which prioritizes Gross National Happiness (GNH) over traditional economic indicators like GDP. India has been a key supporter of Bhutan's development projects, and international organizations, such as the United Nations, have also recognized Bhutan’s efforts in preserving its environment and fostering socio-economic well-being.
• Role of Other Nations: Bhutan's relationship with India, though historically strong, has also been influenced by external powers, especially China. While Bhutan is not a member of the China-led Shanghai Cooperation Organization (SCO) or the Belt and Road Initiative (BRI), China has attempted to build bilateral ties, especially in trade and infrastructure development. Bhutan’s relationship with these external actors often leads to nuanced diplomatic positioning to safeguard its sovereignty and maintain stability.

3. Future Prospects:

• Strengthening Economic Ties: India and Bhutan are likely to continue strengthening their economic ties, particularly in sectors like hydropower, agriculture, education, and healthcare. Both countries will benefit from continued trade and investment cooperation.
• Geopolitical Balance: Bhutan will likely continue to maintain a careful balance in its foreign policy, fostering strong ties with India while cautiously engaging with China. The Doklam region will remain a sensitive issue, and India will continue to be a key partner for Bhutan in ensuring territorial integrity and security.
• Regional Cooperation and Security: With the growing strategic importance of the Indo-Pacific region and India’s efforts to contain China’s influence, Bhutan will play a key role in regional security dynamics, especially in its proximity to the tri-junction of India, China, and Bhutan.

Conclusion:

The India-Bhutan trade relationship remains robust, with India being Bhutan's primary trade partner. The relationship is shaped by economic cooperation, particularly in hydropower exports, agriculture, and infrastructure. However, geopolitical issues, especially China’s growing influence in the region and the Doklam dispute, pose challenges. India’s security role in Bhutan, along with Bhutan's careful diplomatic positioning, will continue to define the future of their bilateral relations.