The dynamics of the economic relationship between India and Bhutan

Karma Dechen and Sasiphattra Siriwato

Abstract

              India and Bhutan have maintained their friendship for decades now. Over the years, India and Bhutan have cooperated in various economic cooperation such as hydro-power projects which has helped further strengthen the economic integration of the two countries. This paper aims to analyze the economic relationship between India and Bhutan and to analyze whether China as a neighbor of India and Bhutan has had any impact on the relationship between India-Bhutan relationship. Qualitative method was used to collect data. Approximately, three participants who have worked for the government of Bhutan for over ten years were interviewed. This research found that India and Bhutan have formed an economic relationship with mutual benefits with hydropower project being one of the most important projects between the two countries. The difference in the GDP of the two countries, inflation and the hydroelectricity tariff are some of the challenges faced. As the GDP between India and Bhutan is of big difference, it is seen as a challenge as Bhutan is concerned about trade deficit. If the relationship between India and Bhutan were to become unstable, it would affect Bhutan greatly. This research also found that while there is no big impact of China as their neighbor, there are some minor impacts which cannot be overlooked. The minor impact includes the fact that if Bhutan were to form diplomatic relationship with China in the future, it would affect the India-Bhutan relationship which was once felt by Bhutan in the past in 2013 when the then Prime Minister of Bhutan had some unofficial meetings with few Chinese officials which resulted in India cutting off subsidized oil and gas provided to Bhutan. India and Bhutan have formed various economic cooperations in attempt to minimize the impact of the challenges. Thus, it can be said that India and Bhutan have based off their relationship on mutual trust and respect and have found ways to mutually benefit from each other.

Keyword : India and Bhutan Relationship, Economic Cooperation, Chinese Impact, Hydro-Power Project

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