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Why A Study Of Indo Bhutan Relations History Essay


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The political and economic scenario of the world has changed significantly since the end of the Cold War. The simultaneous rise of India and China while a financial gloom stares at the West, is a development of great significance today. In this context, the Sino-Indian balance of power situation has put the countries of the Indian sub-continent into world focus. Moreover, the traditional concept of national security is being broadened gradually to include human security concerns related to water, food and energy security; climate change, pandemics and natural disasters; migration and preservation of identity and culture. Because of the unprecedented pace of globalisation driven by frontier technologies, borders are gradually losing their relevance. These massive changes, which are likely to accelerate in the next 20 years, have also affected India and its neighbourhood. South Asia is witnessing the competitive rise of India &China which has created a global influx of resources and a new security architecture is being built around it or at least the existing one is being strengthened. That is why the Indian Ocean 'Rimland' has become the big game corridor.

Part of this Rimland are big and small nations all competing in the same space. The diplomatic equation of India with these nations is undergoing metamorphosis, albeit there is continuity in change. In this context, the Indo-Bhutan relationship has become not just more dynamic but also complex. The Bhutanese social and political milieu has been fast changing ever since democracy took feet in the Bhutanese soil. With growing aspirations, Bhutan has realigned herself with real politics of the world. It has begun to come out of its shell and explore better avenues of international co-operation, even thawing to its Northern neighbour, China. Added to this is the unfolding reality of social change in the Bhutanese society and the grave threat of climate change related disasters, which the glacial country is literally living under. Although Indo-Bhutan relationship has withstood the tests of time so far, it would be very ignorant of us if India does not sit up and take notice of these changes so that we may be prepared to recalibrate our policies to prevent them from becoming anachronistic.

1.2 Aim

Given the above context, this thesis is aimed to make an objective study of the security situation, the social-political and economic developments and the climatic changes that define the Bhutan of today. The study aims to highlight and analyse those developments which can be of particular relevance to Indian foreign policy making in the next decade or two. It is aimed to understand the anxieties of our Himalayan neighbour in present times so that we may be able to posture ourselves better to meet the challenges that may be posed to our national interests due to these changes, and also to take advantage of any new opportunities that may arise with them. Thus, recommendations and suggestions are also put forth for making Indian diplomacy more successful in this region in the coming times.

1.3 Scope

The scope of this thesis has been restricted to analysing Indo-Bhutan relations beginning from the end of British Rule and signing of the Friendship Treaty in 1949, although, historical references have been made wherever deemed necessary. However, the main focus of the study is on the contemporary Bhutan and the changes seen in the past 10 years, which have led to the ongoing transformation of Bhutan. It aims to highlight the contemporary developments which have caused or may cause, a shift in the Bhutanese policy imperatives, thus requiring a similar reconfiguration from the Indian side.

1.4 Plan of Presentation

The thesis is divided into five chapters. The first chapter deals with a general introduction of Bhutan as a unique country and the background of Indo-Bhutan relations in various sectors of co-operation. The subsequent three chapters will deal with specific issues which are considered important for Indian foreign policy making. The second chapter will introduce the security issues involved considering the strategic location of Bhutan between two big powers, India and China. The next chapter touches upon the internal developments in Bhutan- social, political and economic- which can have implications for Indian foreign policy imperatives. The one after that deals specifically with the issue of climate change and the implications it may have on the power and water co-operation between India and Bhutan and also on the living conditions of people in the lower riparian Himalayan states of India. The last chapter aims to conclude and summarise the above implications on Indian foreign policy and how India should calibrate its stance taking in account the said developments.

CHAPTER 2: Indo-Bhutan Relations

2.1 Why a study of Indo-Bhutan Relations?

The pace of change in the Asian region will only intensify in the coming years. What does this change mean for India's neighbourhood policy? While India's neighbourhood will throw up several new avenues for co-operation among countries of the region yet fresh security challenges will also arise. Dominated by traditional security concerns for the last six decades, India's policy towards its neighbourhood will require a makeover in the light of the great political, economic and social changes that are taking place. Today the concept of security encompasses several humanitarian cross-border issues like migrations, water sharing, transportation, trade, energy and food security etc. Hence, non-military concerns will need to be incorporated within a broader understanding of national security. This will be a major challenge for India's foreign and security policies in the coming decades.

Bhutan is turning over a new leaf in its history. It is transiting from a monarchical system to democracy. In this context, India has to take into stride the growing presence of China in the region and the fact that a country like Bhutan cannot avoid a political thaw towards a big power without making the animosity evident. It may have to open doors to the Chinese for deepening its economic ties which will help in improving the living standards of its peoples. Moreover, the political tone of the emerging parties is changing with the rise of a strong pro-China and anti-India lobby in Bhutan. India cannot afford to do business as usual with Bhutan as it will also hurt its own interests. In such a scenario, India should be mindful of the changing political discourse in Bhutan as democracy takes roots in Bhutan. Along with this, we have to co-operate to manage the threats of Climate Change which will cause damage beyond boundaries. That is why it is imperative that we understand our small neighbour and not fall in the trap of taking things for granted. In this chapter an attempt is made to build that background perspective which will give force to the arguments presented later and also impart a direction and context to the study.

'DRUKYUL': Land of the Thunder Dragon

2.2 Political History

The political system of Bhutan has evolved over time together with its tradition and culture. In Sanskrit literature it finds mention as Bhotaant. Bhot or Bhotiya are the tribes from Tibet and 'ant' means the end, meaning 'the land where Tibet ends'. It is said that it was ruled by a Hindu king of Indo-Mongoloid origin. From 8th century onwards the Tibetan invaders began to attack the kingdom and subsequently drove out the original rulers and began to call themselves the 'Druk' people. Later, during the 18th century, Bhutan had their first brush with the outside world through the interventions of British East India Co. Bhutan and Assam had been rivals for ages and even after the British occupation of Assam, Bhutan continued to raid it. First the British tried to engage Bhutanese king Deb Raja through diplomatic missions but the ruler did not give up the raids. This led to an expedition by the Company in Bhutan whereby Deb Raja was subjugated and 'The Ten Articles Treaty of Rawa Pani' in 1865 was signed. After Deb Raja, Ugyen Wangchuk came to power. He changed the course of Bhutan's history forever. He became a close ally of the British during the Anglo-Tibet war and this alliance also changed the course of Indo-Bhutan relations in future. It finally led to the signing of the Treaty of Punakha in 1910 which was a prelude to the Treaty of Friendship signed in 1949 between independent India and Bhutan.

2.2.1 Transition to Democracy:

The Wangchuk dynasty continued to rule Bhutan. In 1952 King Jigme Dorji Wangchuk came to power and he changed the country's course forever. Having been educated in India and abroad, he understood the importance of economic development and democratic values.

If one looks at the class structure of Bhutan, the picture regarding the conditions that might trigger a transition appear almost as non-existent as did the socio-economic factors. Not only is the majority of the population employed in agriculture, there also exists almost no noteworthy middle class that could facilitate change in line with the arguments made by modern sociologists. Therefore, modernization in Bhutan took a completely different shape from that in most countries. Instead of massive social transformation, it appears that development came in the form of "change in continuity". The first structure of Bhutanese culture that promotes this 'change in continuity' is religion. The specific traits that come with Buddhism are probably as conducive to democracy as western culture is thought to be. "Like Buddhism, modern democracy is based on the principle that all human beings are essentially equal, and that each of us has an equal right to life, liberty, and happiness. Thus, not only are Buddhism and democracy compatible, they are rooted in a common understanding of the equality and potential of every individual." (His Holiness the Dalai Lama 1999: 3f) Democracy also requires a system whereby the interests of the individual are balanced with the wider well-being of the community at large. In Buddhism, this dualism between individual and group rights is also well embodied.

Second is the uniquely significant role of agency in Bhutan's transition to democracy. The initiative for democratization emanated solely from the fourth Druk Gyalpo, although some pro-democracy pressure groups did start agitating during the 1990s. Also, no external pressure was put on Bhutan to liberalize, neither from its direct neighbours, nor from its donors. Interestingly, the King had initiated the beginning of the transition, not by liberalization but by strengthening the executive and legislative, thus devolving his own powers and strengthening state institutions. It appears that the whole process had been long planned and envisioned by the King, as for more than 20 years before the introduction of democracy, some form of consensual, participatory 'grass-roots democracy' had been nurtured, which in turn made it possible to publicly discuss and deliberate about the draft constitution. This resulted in a carefully planned and executed policy of 'change in continuity', that did not oppress the people, provided development without uprooting them, and safeguarded the norms, values and institutions which they held dear. This shows the significant role that leadership played in the country's evolution. That is why the fourth King is considered father of Modern Bhutan.

The constitution was launched in 2008 and with it a parliamentary form of democracy introduced. The progression from Hereditary Monarchy to that of a Parliamentary Democracy has been gradual from the institution of National Assembly in 1953 to all the decentralization that followed suit. Thus, in 2008 Bhutan witnessed a major shift in its political system with the first elections launched country wide. The Druk Phunsum Tshogpa was mandated by the people to head the new government with a major victory. Today with 45 elected members, Lyonchen Jigme Y Thinley steers the government with just two opposition members from the People's Democratic Party.

2.3 Bhutan: Economic environment*

Bhutan is a Low Income Country coming under the South Asian Region as per the classification made by the World Bank on the basis of income and region for the year 2006. Bhutan's GDP [1] per capita in 2009 was 1,805 US $, up from 762 US $ in 2000. However, this drastic change probably reflects more on the volatile increase of GDP due to hydro power construction projects than on the real and substantial increase in the peoples' income. Its adult literacy rate is merely 59%, though there appears to be a sharp contrast between urban and rural. Though it is one of the smallest economies in the world, still its fast rising economic growth rate and its developmental efforts have drawn the attention of the world. It has strived hard to achieve the Millennium Development Goals. For instance, approximately 90% of the population is covered by basic health care, while 83.2% have access to safe drinking water.

The Ngultrum is its currency whose value is pegged to the Indian Rupee. The Indian Rupee is also accepted as legal tender in the country. Its economy is largely dependent on agriculture, forestry, tourism and sale of hydro electric power to India. Ninety five percent of the population depends on agriculture and allied sectors. The country has large deposits of marble, dolomite, graphite, lead, copper, slate, coal, talc, gypsum and beryl. Major agricultural products [2] in the country are rice, corn, root crops, buckwheat, barley, oranges, cardamom and dairy products. Important industries in the country are HEP, food processing, cement, wood products and processed fruits. Its tourism industry brings large reserves of foreign exchange to its treasury. Manufacturing has been the weakest link to its industrial efficiency.

60% of its budget expenditure is being financed by the Ministry of External Affairs. Its major export destinations [3] are India, Hong Kong and Bangladesh with electricity, cardamom, spices, handicrafts and timber majorly constituting its export basket. Imports for fuels, grains and machinery are sourced from India, Japan and Sweden. Bhutan has high dependence on developmental aid like in all its major hydro electric projects it has joined hands with many countries like Austria, Netherlands, India etc.

Graph 1: GDP growth rate trend

Graph 2: GDP Growth sector-wise

2.3.1 Macroeconomic Performance in Recent Past

The country's economic growth rate in the 2011-12 was at 8.1 percent. Bhutan was ranked second in South Asia and 11th in the world by the real GDP growth rate for the year 2011. The list of the countries was prepared by the US Central Intelligence Agency. The growth was driven by the industry with hydropower constructions contributing 44.1 percent followed by the service sector at 37.4 percent. The primary sector including agriculture, livestock and forestry contributed 15.1 percent. On the surface, the macroeconomic environment of Bhutan can be described as quite sound in the conventional sense. It has a low budget deficit, a low and stable inflation, a highly open trade regime and a current account surplus (including grants from abroad) in its external transactions. Detailed scrutiny, however, reveals a number of weaknesses. Unlike many other developing countries, Bhutan did not have to undergo a formal structural adjustment programme because it never faced serious macroeconomic imbalances to warrant such a programme. Nonetheless, Bhutan has undertaken a wide range of liberalization programmes especially in the realm of financial policy and trade and industrial policy-that allow for a greater role of the market mechanism in resource allocation and encourages a shift of economic activities from the public to the private sector.

2.4 Bhutan: Social and cultural environment

Bhutanese people can be generally categorized into three main ethnic groups- Tshanglas, Ngalops and Lhotshampas and about ten minority groups. Together the multiethnic Bhutanese population numbers slightly more than 7 lakh as per the 2011 census. Dzongkha is the official language of Bhutan and it is written in the Classical Ucan Tibetan script. The Bhutanese society is free of class or caste system and any inhibition that is detrimental for a society to progress. In general the Bhutanese have always been gender sensitive.

Bhutan is a Buddhist country and people refer to it as the last stronghold of Mahayana Buddhism. Buddhism was first introduced by the Indian Tantric master Guru Padmasambhava in the 8th century and the original religion was Ponism, an animistic religion. One may still come across animistic traditions and beliefs being practised by the people. However, Buddhism has a strong impact on Bhutan's national life and national affairs. There are many monasteries which are also centres of administration and lamas are exempt from paying taxes.

While Bhutan is definitely one of the smallest countries in the world yet the cultural diversity and its richness are profound. As such strong emphasis is laid on the promotion and preservation of its rich cultural diversity. It is strongly believed that ensuring protection and preservation of its unique culture would assist in protecting the sovereignty of the nation.

2.5 Bhutan: Ecological environment

One of the four pillars of Bhutan's development philosophy of Gross National Happiness is the preservation of its environment. The recently adopted Constitution of Bhutan mandates to have minimum of 60% of the country under forest cover. Today, forests constitute 72% of the country. There are more than 3,281 plant and 770 bird species making Bhutan one of the top 10 bio-diversity hotspots in the world. Although Bhutan's carbon footprint is low because its energy consumption is based less on fossil fuels and more on hydro power, yet it faces an imminent threat due to global climatic changes being a lower riparian state in the glacial valleys of some of the highest and largest Himalayan glaciers.

According to a PTI Report published in the Times of India on Sep 28, 2012, a joint India-UK survey has revealed that Himalayan region will be the worst hit by climate change. According to another set of recent findings, published in three reports by the International Centre for Integrated Mountain Development, based in Kathmandu, Bhutan's glaciers have shrunk by 22 per cent over the last 30 years. Not only does this threaten the viability of its power projects, but also its very survival. Hence, how Bhutan and the world cope with this challenge will have great implications for the whole densely populated region of South Asia.


Bhutan and India have shared a common cultural heritage in many ways and till 8th century Bhutan used to be a Hindu kingdom. Even Buddhism was introduced in Bhutan by an Indian, Guru Padmanasambhav. Cultural exchange and trade at the borders forged close ties among the people, especially in the North eastern region. Political contact was first established when King Ugyen Wangchuk became a close ally of the British during the Anglo-Tibet war and this alliance changed the course of Indo-Bhutan relations in future. It finally led to the signing of the Treaty of Punakha in 1910 which was a prelude to the Treaty of 1949 signed between independent India and Bhutan. This treaty was a landmark in the bilateral relationship of the two countries. For Bhutan, the treaty came as an assurance from the Indian side that its sovereignty as a small but independent country will not be challenged by the 'Big Power' on its southern border. It was critical to her security and existence because at that time, the Big Power on its Northern border, Communist China, was carrying out threatening advances towards Ladakh, Tibet, Sikkim, Nepal and Bhutan, following the 'Palm & Five Fingers' theory of Mao. Under article 2 of the treaty, the Government of Bhutan had to undertake to 'be guided by the advice of Government of India in its external relations'. Hence, Bhutan had to give up its right to have an independent Foreign Policy. For India, this treaty had obvious geo-strategic and security significance. In this regard, Lt Gen B.M.Kaul in his book 'The Untold Story' (Bombay: 1967) quotes Nehru from a private conversation as:

"It was important from India's point of view to strengthen Bhutan's friendship in view of her key position at our border and we must do everything possible to help her. We must treat smaller countries like Bhutan as our equals, and never give them the impression that they are being 'civilised' by us."

Between 1949 and the present times, there have been distinct phases in the evolution of this relationship, while the treaty was still very much like a bedrock. These are marked by four distinct events- the suppression of Tibet by China in 1959, India's defeat at the hands of the Chinese in 1962, the merger of Sikkim in 1974 and finally the establishment of Democracy in Bhutan in 2006. The first three had made Bhutan all the more conscious of the threat to its sovereignty which was imminent from being sandwiched between two big rival nations. Let's understand these events briefly.

The continuous Chinese attacks on Tibet Autonomous Region disturbed the peace of the region. China even built a road through from Sinkiang to Tibet, cutting across territories claimed by India, very near to Bhutan. To counter Chinese designs, Nehru visited Bhutan and convinced the Royal Government to accept India's assistance in building roads through Bhutan to India, to connect strategic territories. Nehru even announced in the parliament that "India would consider any aggression on Bhutan as an aggression on India." With Chinese occupation of Tibet in 1959 and Dalai Lama's political asylum being granted by India, the latter became a bête noir for China and it continued to build troops along the Indo-Bhutan border. The King of Bhutan also came to India to seek its guaranteed military support in case of a war while re-iterating Bhutan's acceptance of India's guidance in foreign matters as a quid pro quo. With these turn of events India and Bhutan came closer.

The Sino-Indian War of 1962 was a setback for Indo-Bhutan relations. Bhutan was jolted to the reality of a full blown war between the two rivals and also to the weak position of India vis-a-vis China. It created the suspicion that if India was unable to protect itself, how it could protect Bhutan. Since then Bhutan became wary of further antagonizing China. Though it still had leanings towards India, it began to expand its horizons to other powers of the world. India also encouraged Bhutan's aspirations in this regard by sponsoring Bhutan's name at international fora such as UN and NAM.

The assassination of Bhutanese PM Jigme Palde Dorji in 1964 led to allegations of Indian official's involvement in the crime and also its interference in domestic matters. However, the air was cleared soon and in 1968, both countries decided to open their diplomatic missions. India sent a Special officer to Thimpu who would help Bhutan foster ties with the outside world. In order to fulfill the condition of having diplomatic missions in other UN countries so as to gain UN membership, Bhutan also decided to open its mission office in New Delhi. During 1960s and 1970s the relationship remained friendly and stable under the leadership of King Jigmye Singye Wangchuk. Another incident that made Bhutan wary was the merger of Sikkim with India in 1974 following an uprising against the feudal exploitation and the monarchy. The Nepali Sikkimese forced Sikkim to merge with the Union of India. Bhutan thought of it as a sad loss of identity and sovereignty of a neighbouring small state. However, the wariness was overcome by the freedom of the newly opened Bhutan. It reached to far-off countries like France, USA, New Zealand, UK, Australia etc. during the 1970s. After that India could not dictate to Bhutan, the terms of engagement with other friendly countries. In 1975, it resulted in opening up of trade and economy to Indian markets and also co-operation in the Hydro Power sector throughout the 1970s & '80s. During the Janta Government rule India pursued a policy of 'Beneficial Bilateralism' under which India ceded to Bhutan's request for establishing bilateral relations with China by sending a diplomatic note to the Chinese embassy in India in 1981. Since then Sino-Bhutan relations have been mainly dominated by boundary negotiations and several rounds of negotiations have been held till now.

During the 1980s Bhutan continued to embark on its new journey to open up-to the world while still maintaining friendly relations with India. By now, liberal interpretation of Article 2 of the Treaty of 1949 was already an established custom between the two neighbours. In 1988, the Chukha hydel project was inaugurated by President Venkatraman, having built by Indian technical and financial assistance.

The 1990s were marked with several ups and downs for both countries. On one hand the Nepali refugee problem raised its head, on the other there were anti Monarchical and pro-democracy movements taking seed in the country. Still Bhutan did a successful balancing act at many points in time. It supported India's stand on issues like CTBT, NPT, permanent seat in UNSC, cross border terrorism etc.

During the late 90s and early 2000s Bhutan was caught in a Catch 22 situation regarding formation of a Joint Indo-Bhutan Army for purging ULFA and BODO militants. On the one hand it did not want to provoke Chinese, who raise their brow on Indian military presence in Bhutan and on the other they did not want the anti-monarchical forces to join hands with the militants as the ultra nationalists would see Indian intervention as compromise of Bhutan's sovereignty. After carefully weighing the pros and cons of all actions, Bhutan finally decided in 2000, to arm and train the Royal Bhutanese Army against the militants hiding in the border areas which were finally purged out in the Operation 'Flush Out'.

After the pro-democracy movement took roots in Bhutan, several changes came into the national consciousness of the Himalayan Nation. The process of debate and discussion on Bhutan's foreign and security policy has started in right earnest. Besides trade and development partnership, power co-operation, climate change, people to people exchange--are all pointers of the deeper engagement they share. Interaction between the democratic institutions of the two countries such as the Parliament and Election Commission has also increased. However, at the domestic level, issues of trade imbalance, disadvantages of over-dependence on India and poor delivery mechanism are being debated in the parliament and the media with increasing regularity. In the national assembly, the representatives are pushing for settling of border dispute with China and normalising relationship with China. Apart from Japan and India, China is likely to come up as a major economic player in Bhutan. On the ethnic front, the issue of Bhutanese refugees of Nepalese origin remains unresolved. This has the potential to strain Nepal-Bhutan relationship and complicate internal security situation in Bhutan. There is also the likelihood of Indian insurgent groups reusing Bhutanese territory against Indian interests.

In the larger context, the bilateral relationship has so far been a rock through time. However, with aspirations come challenges and new choices. This is exactly what today's Bhutan is going through. There are several policy options for it today. The question is whether it will continue to look at India as friend indeed and a partner for all times and strengthen its relationship or try to diversify and move away from it. Which option it will exercise? Only time will tell.

CHAPTER 3: The Chinese Externality (Sino-Bhutan Relations)

3.1 The Background:

With the above backgrounder, we will now look at the specific major issues at hand which could be of particular interest to Indian Foreign Policy makers.

The Sino-Bhutan relationship has always been and will always be the pivot of India's political relationship with Bhutan. It is of great significance because of the security threat involved to India's eastern sector, given the suspicious actions of the PRC and the acrimonious border dispute between the two regional powers. For India, Bhutan is a traditional ally and a kind of buffer for its territorial security in the eastern theatre. For China, Bhutan forms one of the fingers of the 'five finger policy'. China considers Tibet as the 'palm consisting of five fingers' namely, Ladakh, Nepal, Sikkim, Bhutan and Arunachal Pradesh and so it has always strived for a domineering position vis-à-vis the small states. In this quest for power, China's greatest political rival is India. And history of turmoil in the Himalayas is marked by Chinese excursions into the border regions of India which have been mentioned above. Due to these hostilities Bhutan has always turned to India as a friend and advisor. Whereas China, unlike India, even refused to recognize Bhutan's status of an independent nation since the start. That is why bilateral relations have remained strained between the two countries. And in order to assert its suzerainty over Bhutan, China has kept alive the dispute over the 470km border between itself and Bhutan. It has four disputed areas that stretch from Dhoklam in the west, Charithang, Sinchulimpa and Dramana pasture land. China is claiming maximum territory in the western sector that is close to the tri-junction of Bhutan, China and India for strategic purposes. It has offered Thimphu a deal: it wants Bhutan's northwestern areas in exchange for recognizing Bhutan's control over the central areas. The PRC wants Bhutan to compromise on the Chumbi valley which is of extreme strategic importance to India.  The PRC has outlined its plan of extending the railway network from Lhasa to Zangmu on the Nepal border. According to this blueprint, yet another line will branch out midway from the line at Shigatse. This line will move east and go up to Yadong, at the mouth of Chumbi Valley- strategically located at the tri -junction of India-China-Bhutan.

So far, Bhutan has largely toiled under the influence of India. India-Bhutan relations were revised in 2007 with the establishment of democracy and now it is more of an equal relation; with Bhutan being freed from the condition of accepting India's 'guidance' in its external affairs. As democracy started taking ground, special ties with India have been questioned by many quarters in Bhutan. There are lobbies which argue that a Nepal like policy of neutrality towards both countries, India & China, would be more beneficial as Bhutan could then get the 'best of both worlds', even by playing one card against the other. Also Bhutan realizes that it cannot afford to ignore the Chinese overtures without creating animosity between the two. Thus, to neutralize its relationship, Bhutan has started turning towards China. Perhaps, Bhutan is trying to come out of India's shadow and seeks to play a more dynamic role internationally.

Besides strategic interests, Bhutan has justified economic interests in opening up-to China, the fastest growing economy. Beijing is exporting farming and telecommunication equipment and has also offered to invest in projects related to health and education services. Unquestionably, for China, Bhutan is also an attractive destination for investment for reasons other than economic. This may not be significant in amount, but may serve as a huge confidence building measure between the two countries.

Thus, any policy towards Bhutan, will have to be carefully calibrated keeping in pace with these developments. India has to sit up and take notice of the turn of events, especially related to border dispute resolution, because if the Chinese gain the long lost confidence of Bhutan, then India may have to rethink its security architecture in the region. Already the negotiations have begun with a renewed thrust and vigour. With this background we shall attempt to understand the border negotiations in a little more depth and try to analyse the possible consequences that India may have to deal with.

3.2 The Negotiation Phases

We have already seen that China was always looked upon with an eye of suspicion by the Bhutanese. The rift became open when in the 1950s, China published maps claiming Bhutanese territory thus sparking a debate in public domain and raising the hostilities between the countries. The disputed areas that China claimed covered a total of 764 square km- in the North West (269 sq km) and in Central Bhutan (495 sq km). While the North West part constitutes the Doklam, Sinchulung, Dramana and Shakhatoe in Samste, Haa and Paro districts, the Central parts constitute the Pasamlung and the Jakarlung valley in the Wangdue Phodrang district.

File:Bhutan CIA WFB 2010 map.png

Source: http://en.wikipedia.org/wiki/File:Bhutan_CIA_WFB_2010_map.png

The intrusion by Chinese soldiers and Tibetan herders has often been an issue of concern in Bhutan's National Assembly discussions. Many chimis (district representatives) have claimed that traditionally the land always belonged to Bhutan. However, for long Bhutan had neither the autonomy nor the gusto to bring this issue up openly with China. Bhutan wanted Indian diplomatic mission to negotiate with China alongside Bhutan but the Chinese never recognized Indian right to do so and always stressed on an independent bi-partite negotiation. Finally, in the 1980s, Bhutan gained much confidence having asserted itself independently from India in world politics to sit face to face opposite the Chinese negotiators.

Prof Medha Bisht, Bhutan expert from the Indian think-tank IDSA has done extensive research on this issue. According to her, if one traces the trajectory of boundary negotiations between Bhutan and China, they can be broadly divided into three significant phases. The first phase can be termed as the engagement phase which started in 1984; the second phase can be termed as the redistribution phase, which marked its incipience in 1996; and third can be termed as the normalisation phase, which describes the present status of negotiations and can be traced to 2000.

In the engagement phase, both parties decided to hold formal boundary talks and discussed issues of mutual concern. The Sino-Bhutan boundary issue till the seventies was being considered under the broader aegis of Sino-Indian border negotiations. The Chinese intent in the engagement phase was to engage Bhutan and create a conducive atmosphere for facilitating bilateral relations. The redistribution phase started in 1996, when China for the first time as part of the resolution package offered Bhutan a package deal, proposing an exchange of Pasamlung and Jakarlung valleys totalling an area of 495 sq km in Central Bhutan, with the pasture land of Doklam, Sinchulung, Dramana and Shakhatoe amounting to 269 sq km in North Western Bhutan. In 1998 both countries for the first time signed a peace agreement promising to 'Maintain Peace and Tranquillity on the Bhutan-China Border Areas.' The agreement was seen as significant in Thimpu because China for the first time acknowledged Bhutan as a sovereign country and stated clearly in the agreement that China fully respects the territorial integrity and independence of Bhutan. This was the first official recognition and Bhutan could break free from the stated Chinese rhetoric of middle kingdom suzerainty. China during the talks also insisted on expanding the zone of engagement towards developing trade and formal diplomatic relations.

The normalisation phase can be called the extension phase as both countries have not shifted positions since 2000. In 2000, Bhutan had extended the claim line of the disputed border. The same year, it had also proposed technical discussions, using maps, between experts from the two sides. Moreover, China-Bhutan engagement has intensified over the years, an aspect which sheds some light on the Chinese intentions of trying to create leverages inside Bhutan. In the December 2009 statement, Ugyen Tshering, the Foreign Minister of Bhutan, in Kolkata claimed that diplomatic and trade ties between Bhutan and China "are definitely conceivable in the future". China, on its part, in the past few years has made inroads into Bhutan by exporting farming and telecommunication equipments. However, it has also not shied away from keeping Bhutan on tenterhooks. While China has been trying to engage Bhutan by promising the carrot of a promising economic engagement, it has also been using the stick by intruding into Bhutanese territory. For instance, Chinese soldiers have touched upon Royal Bhutan Army (RBA) and Indian Army outposts several times. Stealing yaks, medicinal herbs and timber by Tibetan herders is also a common activity - an aspect which directly impacts the livelihood needs of the common people of Bhutan and also of the adjoining regions of Tawang. The unequivocal Chinese response to Bhutanese objections is that since there has been no agreement, it cannot control these activities. This perhaps is a pointer to China's covert support for such activities.

3.3 The Current Status of the Sino-Bhutan Boundary Negotiations

Twenty rounds of negotiation have completed by far. The eighteenth round of talks was held in Beijing in 2006, when both parties decided to discuss the boundary issue at the technical level with the help of experts and then map out the disputed claims. They completed the nineteenth round of boundary talks on January 13, 2010. In the latest round, they gave a joint statement that they would carry out a joint field survey, which would enable harmonising the reference points and names of the disputed areas. Also the focus of the forthcoming survey would be the disputed areas in the western sector which constitute the pastoral lands of Doklam, Charithang, Sinchulumpa and Dramana. The nineteenth round is significant due to its exclusive focus of the North-Western sector. The talks are noteworthy due to some important developments- first, India and Bhutan revised their friendship treaty in 2007 and Article II, which stipulated that Bhutan should be advised by India in its foreign policy decisions, was symbolically dropped; second, China, in the past few years, has made significant progress in constructing roads right next to the disputed border areas: six roads so far have been built by China near Bhutan's North and North-West areas; lastly Bhutan has witnessed several Chinese incursions into its territory in the past two years.

Recently, Chinese Premier Wen Jiabao and his Bhutanese counterpart Mr. Jigmi Y. Thinley held their first meeting on the sidelines of the Rio+20 Conference on Sustainable Development in Brazil. The meeting has raised few questions-Why is China suddenly so eager to reach out to Bhutan and what implications does this have on Indian security?

Fu Ying, the Vice Foreign Minister of China during the 20th round of negotiation stated [4] :

"We (China) are willing to work with Bhutan towards early establishment of diplomatic relations. The two sides should speed up border talks in the spirit of mutual understanding and accommodation, with a view to arriving at a fair and reasonable and mutually acceptable solution. This will contribute to peace and stability in our border areas. We are ready to encourage Chinese businesses to expand their exports to Bhutan and welcome more people-to-people exchanges and tourism, which will help increase the mutual knowledge and friendship between our two people. We believe that Bhutan is well-placed to grasp the opportunity of the development of China and India and benefit from the great historical renaissance of Asia. Maximizing these opportunities will help Bhutan open up a new era of development."

This statement reveals the confidence and readiness of the Chinese to settle the boundary dispute.

Besides the boundary talks, the Chinese are making inroads into Bhutan's economy also. According to a media source, in July 2012, a tender was given to Global Traders and Gangjung (GT), which is a supplier of Chinese vehicles. Significantly, the company's owner is the Bhutanese Prime Minister's son-in-law. The mandated authority, Bhutan Post Corporation Limited (BPCL), has publicly clarified that the TATA city buses- imported from India by Samden Vehicles (SV)-had started giving problems. The episode is symbolic of Bhutan's interest in Chinese goods and also speaks of China's influence on various stakeholders in Bhutan. In 2010, the fifth National Assembly debate in Bhutan had noted that China had already offered to invest in projects related to health and education services. Caroline Brassard [5] , for instance, has mentioned the growing pressure put by the private sector, including the Bhutan Chambers of Commerce, on the government to resolve the boundary dispute so that the economic relation can flourish.

On the conclusion of the 20th round of boundary negotiations, the Bhutanese national daily Kuensel Online carried the following excerpts from press reports [6] :

Bhutan and China reaffirm commitment to resolve boundary issue - 'During the 20thRound of Boundary Talks between Bhutan and China held in the capital today, the delegations from both the countries reaffirmed their commitment through mutual consultation, understanding and accommodation on the basis of the Four Guiding Principles agreed upon in 1988 and 1998 under the Agreement on the Maintenance of Peace and Tranquility in the Bhutan-China border areas.'

Warming up to our north - 'There has been so much speculation by foreign policy hawks on Sino-Bhutan relations and Indo-Bhutan relations ever since the Bhutanese prime minister met the Chinese premier on the sidelines of the Rio Summit on June 21 this year. But the meeting was historic, because it was the first time ever the heads of the two countries had formally met. Otherwise, official meetings between the two countries have always centred on border talks. This has expectedly excited a certain section of the Bhutanese populace, who are eager to explore beyond the northern boundaries offered by the mighty Himalayas.'

A catch-22 foreign policy situation for Bhutan - 'The Chinese government has made its intention very clear. It wants to not only swiftly bring an end to the longstanding boundary issues between the two countries but also forge formal diplomatic ties and trade relations with Bhutan. In effect, China has already extended its hand of friendship towards Bhutan. Should we take it, refuse it, or just procrastinate? Although the choice is still ours, this is a nagging question that irks but deserves an answer. Or even more, it begs for critical perspectives on how Bhutan should tread its foreign policy affairs with China vis-à-vis India. In all its certainty, China's show of gregariousness and camaraderie has jolted Bhutan out of its comfort zone. For one, it's a tricky foreign policy situation for the country. And either ways - whether we choose to embrace China as a comrade or kindly refuse the offer - there is too much at stake.'

These are not indications of change in the political elite merely, but also of the change in the psyche of the masses in Bhutan.

3.4 Impacts of the Package Deal

The protracted nature of Sino-Bhutan boundary talks and the continuous Chinese intrusions into Bhutanese territory reveals the strategic element embedded in the package deal. The potential consequences of an exchange deal would not only raise strategic concerns in India but also, the impact would be felt by the local Bhutanese living in the border areas, as the demographic spread is concentrated more in the North Western areas.

If the dispute were to be settled along the lines of the proposed deal, China could move further south thus occupying the Doklam plateau and attaining strategic vantage position over the Chumbi Valley. China has also announced the plan of a proposed high speed railway network [7] which would be a breakthrough in transcontinental trade. The routes have been developed mainly to connect the major energy suppliers to China, among other things. The first line is proposed to connect Kunming in Southern China to Singapore, through Vietnam, Cambodia, Thailand and Malaysia. A second link originating from Kunming would head into Myanmar, India and Pakistan, finally joining the line which originates in Xinjiang (China) and goes to Tehran (Iran).These developments could make the Siliguri corridor-the connection between mainland India and North East-vulnerable.


Though the issue has been successfully postponed in the past years, domestic pressures in Bhutan are pushing to resolve the issue expeditiously. Intrusions by Tibetan herders in North Western areas of Bhutan have occupied considerable energies in National Assembly debates for the green pastoral land is intricately linked to the livelihood of border people.

3.5 From the Indian Perspective:

We already understand the strategic consequence of this dispute for India's security architecture. Any development in this tri-junction is a matter of concern for India because this region is close to India's 'chicken's-neck: the Siliguri corridor which links the north-east to the mainland India. The move has alarmed New Delhi because it will bring the Chinese forces within a few kilometres of the Siliguri Corridor. Chumbi Valley is of equal strategic significance to China because of its shared border with Tibet and Sikkim. These concerns pose a potential challenge in the coming years, with China's efforts to improve connectivity and enhance trade with South Asian countries.

Urgent and sensitive as this issue is, the historical equation between India and Bhutan has acted as a safety valve and averted any strategic uncertainty in this regard. Over the last 60 years, Indian diplomacy has enabled deep political and economic ties with Bhutan. However, Bhutan is no more under the obligation of accepting India's aid and advice in matters of its foreign policy and it has domestic pressures which are forcing it to accept Chinese 'friendship'. But this may come at great costs to its security and stability, caught as it is between two Asian rivals. Therefore, the question that arises here is whether Bhutan is prepared to make the strategic bargain or not? Meanwhile, Bhutan seems to be buying more time before taking a definitive step. To sum it up, the Bhutanese National Daily, commented on the outcome of the 20th round of negotiation as:

'Like the boundary talks that preceded it, the 20th round of boundary talk that was held yesterday between Bhutan and China yielded no resolve with regards the disputed areas between the two nations. A news release from the foreign ministry stated the delegates representing the two nations at the discussions expressed satisfaction with the talks, and reaffirmed their commitment to resolve the issue at the earliest.'

Given the above situation, it would not be wrong to surmise that with huge Indian investments in Bhutan's economy and their strong bilateral relationship, such a choice could be difficult at least until 2020 for both India and Bhutan. Thus, this challenge also creates a window of opportunity for India to step its relationship with Bhutan.

Chapter 4: Internal Developments & Indo-Bhutan Relations

4.1 Role of Endogenous Factors:

We have extensively looked at the Chinese externality and its possible impacts on the region in general and on India in particular. However, endogenous factors also play a key role in shaping the outlook of a country towards the world. Developmental goals, social change, political pressures etc can all throw up a number of challenges for a country to cope with through a re-alignment of its position on different policy issues and a re-configuration of its external alliances. Therefore, we must also take a careful look at some of the specific issues of contemporary significance which are current in the Bhutanese psyche.

In this chapter, we will highlight some of these contemporary developments, which have been much discussed and analysed by the Bhutanese media as well as experts of International Relations who study the region.

For sake of restricting the discussion to a manageable length, a few issues have been picked up, namely: The Changing dynamics of economic relations & bilateral trade; Bhutan Foreign Policy: Turning a New Leaf; The Nepalese Ethnic Conflict & Settlement of Refugees; Growth of pressure groups (Civil Society & the Media).

4.2 Changing Dynamics of Economic Relations & Bilateral Trade

Besides the excellent political relation shared by India and Bhutan, we also share a deep economic engagement. India provides development co-operation to its neighbour with a long-term objective of promoting peace and stability in the region. Moreover, India has seen tremendous growth in the past two decades. Bhutan being a small landlocked state of limited resources looks up-to India as a partner in the effort to overcome its developmental challenges.

Bhutan's economic policies are articulated in the Economic Development Policy 2010, Fiscal Incentives 2010, and Foreign Direct Investment Policy 2010. Through these policies one can understand the stated policy objective of growth as: 'To boost private sector growth, attract foreign investment and create employment opportunities for national economic self-reliance'. Eighty per cent of Bhutan's total trade is with India, which accounts for 92 per cent its exports and 72 per cent of its imports and shows a high growth trend. [8] 

Table-1 Rs. In Billion













To India












From India











Source: Royal Monetary Authority, RGoB

Hydropower accounts for 45 per cent of total exports. The Agreement on Trade and Commerce also provides for duty free transit of Bhutanese merchandise for trade with third countries through the Sixteen exit/entry points in India. As per the latest figures available, Bhutan's balance of payments flows continue to be dominated by developments in the hydropower sector and flows of official aid in grants and loans. With the Memorandum of Understanding (MoU) signed on December 2009, India decided to import 10,000 MW of power by 2020. Three projects- Punatsangchhu-I, Punatsangchhu-II and Mangedechhu HEPs are under construction, while on others Detailed Project Reports (DPRs) are being prepared.

Graph 3: Generation, Consumption and Exports

Source: Druk Green Power Co-operation, Annual Report, 2009-10

The 2009 MoU also encompassed issues such as health, prevention of illicit trafficking of narcotic drugs, civil aviation, building of a railway connection to Indian Railways system, construction of a cement plant, co-operation in the field of information technology, agricultural research, cooperation on search and rescue operations and technical cooperation on environment related issues etc. MEA's budget contribution to Bhutan is the largest. For the FYP of 2008-2013, it amounts to Rs 100 bn. India has recently concluded a PFTA with Bhutan in March 2010. India's aid to Bhutan is in the form of 60% grants and 40% soft loans.

These facts clearly illustrate that Bhutan-India relations are becoming even more comprehensive and broad based. Robust and comprehensive as the bilateral relationship is, the strategic location of Bhutan, nevertheless, could pose some challenge. As discussed in the previous chapter, a key concern in the coming years will be China and how India and Bhutan cope with this externality. Also, Bhutan has diversified and enhanced its trade partnership with countries like China, Japan, Netherlands etc. in order to reduce its dependency on India.

However, apart from this, there are other mutual concerns which may hamper the engagement in near future. In the words of Prof Medha Bisht: "As development partnership is an important area in Indo-Bhutan relations, India's role and impact as a development facilitator would take centre-stage in national debates. If Indian aid benefits the people of Bhutan, its soft power can be rewarding in the long term; on the contrary, if Indian aid squeezes up the policy space for domestic stakeholders, perceptions inimical to Indo-Bhutan relationship can thwart the process of official engagement built on decades of trust and political goodwill."

One such specific issue that has been chosen for illustrating the dynamics of challenging trade situation is the Hydro Power co-operation which has come under criticism from several quarters in Bhutan. We shall now see it in further detail.

4.2.1 Contentions regarding Hydro-power Trade:

While India-Bhutan power cooperation has been perceived as an exemplary model in South Asia, challenges can emerge in the coming years. IDSA expert, Medha Bisht has done ample research in this field. According to her, in the first phase of our co-operation, most projects were of the run-of-the-river type whereas today they are reservoir based thus increasing the investments required manifolds. The investment model being followed today is 70% in the form of loans and 30% in the form of grants. This has necessitated that India holds a maximum stake in the poject, i.e 51%, which is highly resented by the media in Bhutan. Clearly, some corporations, contractors and others would like to own what India owns. Moreover, the criticism that these projects do not create employment for the labour force in Bhutan is also doing rounds. Another bone of contention stems from the fact that hydro power generation capacity is seasonal and goes down to one-sixth of its total capacity during the lean season, which means that Bhutan has to import power from India during the winter months to meet its domestic demand. As per some estimates, the domestic winter demand has reached 237 MW and is expected to rise further to 308 MW by 2011. However, according to the Royal Government of Bhutan's projection, by 2016, given the domestic needs, the import of electricity could cost Bhutan Nu 407.3 million. It has been argued that this would put excessive financial pressure on Bhutan. Some people with vested interests have even tried to project through the media, a negative bias among the people that Bhutan is selling its water and power to India and then 'begging' for the same from it.

As a panacea to this challenge, in the last Eastern Regional Power Committee Meeting on June 20, 2011, Bhutan proposed to supply peaking power from its existing hydro-power plants to coincide with India's peaking hours in return for importing power in the off-peak period. Apart from this proposition, Bhutan has also emphasised that such an arrangement should have no financial implications for the net energy imported by Bhutan to meet its shortages. Some alternative proposals under deliberation are: (a) the netting off module, under which power would be imported at the same tariff as that which it is exported; (b) diversions of streams in Bhutan to Chukha and Tala, with an added power generation capacity of 30-40 MW; (c) power banking, where power can be exported tariff-free in summer to an energy bank, which can be later used in winter; and (d) construction of thermal plants based on gas and coal in Eastern Bhutan.

Other technical and quality problems associated with Indian projects are also emerging as areas of concern. Recently, the Tala hydel project had some technical problems with four runners worth Nu 280 million showing cracks. Also, a 500 MW High Voltage cable worth Nu 40 million failed after being installed in the Tala power house [9] . There are also questions about the quality of construction, increased sedimentation and design flaws.22 In comparison to the other hydel projects, Tala was also the worst hit by the floods caused by cyclone Aila in 2009.

4.2.2 Implications for India:

Some of these solutions may not go down well with the Indian side as they have clear monetary implications for business and will also affect our energy security which is critical for a large and growing country like ours. However, if an acceptable solution to this is not found, then this model-like co-operation may turn into a rather acrimonious one. Hence, even though the first phase of power cooperation between both countries had been progressive, there is no certainty that a similar pattern will be replicated in the second phase. Both countries will have to sit down and negotiate in the near future over these concerns in order to have a symbiotic relation in the sector.

4.3 Bhutan Foreign Policy: Turning a New Leaf

Bhutan is no more obligated by the 1949 Friendship Treaty Agreements on accepting Indian advice on Foreign Policy matters. We have already seen how Bhutan has made astonishing progress in establishing links with the outside world in the past few decades. It has embarked a new journey in its global partnership story exhibiting a successful role-model for other small countries. We have also discussed in considerable depth, the changing political relation of India and Bhutan vis-à-vis China. However, we would be quite benighted to turn a blind eye to the dynamically evolving foreign policy of a new and assertive Bhutan towards other nations. Therefore, we shall try to look at least some of the important changes that have freshly occurred in the external relations of Bhutan, particularly with the South Asian (SAARC) neighbours, as this may be of immediate concern to us.

4.3.1 Relations with Pakistan:

A potential shift in Bhutan's foreign policy in the coming years would be the way in which Bhutan manages its bilateral relations with the SAARC countries. Till now Bhutan has refrained from engaging with Pakistan, but this might change as both countries have been expressing their interest to cooperate closely. Issues of sharing information and good practices on hydel power generation, preservation of environment and disaster management amongst others, have been identified by both countries as potential areas of mutual cooperation. This is a critical development in light of the existing China-Pakistan nexus which has kept us wary of their activities at the Northern borders. If Bhutan comes into the fold of China, then India would become surrounded from all three sides along its land frontier. Therefore, India should have a careful approach on this issue and watch it closely as it unfolds in order to intervene at the right time.

4.3.2 Relations with Bangladesh:

Following a look South Policy, Bhutan has always seen Bangladesh as an ally in partnership and trade. Particularly because Bhutan would like to cultivate Bangladesh to have access to sea-trade routes other than Kolkata. Therefore, alternative transit has been an issue of some interest between both countries, where Bhutan has expressed interest for using the Mongla Port for trade with third countries. It has been deliberated that Banglabandha land port will be used as an entry and exit point for Bhutanese transit goods and the Teesta River could be used as the potential water way transit, particularly through the Doikhawa border in Lalmonirhat district. Bangladesh, on its part, has expressed keen interest in importing power from Bhutan. However, developments on these fronts are fluid and contingent on India's political gesture to facilitate subregional trade between both countries. India will stand to lose some revenue but the politicial costs of not being a facilitator would be higher than the financial losses. Another visible trend between both countries is the absorption of Bangladeshi labourers in the growing construction industry in Bhutan. These low-wage labourers will definitely cut into the market of Indian labourers. Immigration will also lead to demographic changes in the society, same as there have been in India. This often results in acts of ethnic cleansing by local communities who feel ousted from their native land and occupations. Despite its length and breadth even India has not been able to integrate them into mainstream, hence it's quite possible that the issue may blow up into a migrant and ethnic problem in Bhutan as well and spill over into our side.

4.3.3 Bhutan-Nepal: The Nepalese Ethnic Problem & Settlement of Refugees

Bhutan-Nepal relations have been frozen over the issue of refugees in the last few decades. The Nepalese, who were brought to Bhutan mainly as labourers by the British in the early 20th century, gradually settled into South Bhutan and became a strong community. They occupied agricultural land, took to wage labour and developed a strong political backing and some Nepalis became quite well to do. They were granted citizenship by the government in 1958. Since then migration to Bhutan came to be looked upon as a fine livelihood opportunity. Thus, a renewed wave of illegal migrants came into Bhutan between 1958 and 1980. They were more literate and more enterprising than the locals. Slowly, resentment built up against these 'outsiders' in the Bhutanese society. Moreover, Bhutan embraced the 'One Culture, One Nation and One People' through its 6th FYP in order to strengthen and preserve its cultural identity, which is an important of the 'Gross National Happiness' also. For instance, all Bhutanese people are required to wear the Bhutanese National Dress. The Nepalese considered this as an onslaught on their cultural & ethnic identity and a socio-economic rift was created between the two communities. Nepali political groups in Bhutan agitate actively, supported as they are by their Maoist counterparts in Nepal. Some even participated in anti-monarch protests. The people of Bhutan are absolutely loyal to the Royals. Therefore, this led to further escalation of tensions. The whole phenomenon led to the King of Bhutan to order an exercise in determining the validity of the citizenship claims of particularly that section of Nepali migrants which had come in the later years. This led to a mass exodus of about 1lakh people from Bhutan to Nepal. Nepal internationalized the whole issue on humanitarian grounds and refused to accept these people who have since then been residing in camps in eastern Nepal. In July 1993, the fourth King of Bhutan, Jigme Singye Wangchuk, and the then Nepalese Prime Minister, Girija Prasad Koirala, exchange

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