India's Real Problem Lies in its Bhutan Policy, Not the Border

Why did Bhutan, which stood by India during its conflict with China and Pakistan, drift away? What caused the crisis in bilateral relations in 2013?

Modi in Bhutan

Prime Minister Narendra Modi in Bhutan. Credit: Reuters

It is clear that when Prime Minister Narendra Modi came to power three years ago, he was deeply aware of the changing strategic imperatives in the Himalayas. He made Bhutan his first visit abroad, followed by a trip to Nepal in 2014, albeit under his government’s emphasis on the “neighbourhood first policy”.

Bhutan was a protectorate of British India and New Delhi inherited this relationship in 1947. The 1949 treaty of friendship modernised bilateral ties and thought it preserved a key element of the earlier compact until that too was revised in 2007, the actual relationship has remained somewhat complex and enigmatic.

The prime minister’s 2014 visit was dominated by economic themes including the need to further develop Bhutan’s rich natural resources and hydropower potential for mutual benefit, but deep down he was painfully aware of the palpable signs of China stepping up contacts with Bhutan. In fact, before Modi came to power, Beijing had done sufficient ground work to cut India’s “sacred bond” with India first and then create a string of political electrons along the Himalayan region from Arunachal, Sikkim, Nepal to Ladakh.

Indeed, most Indians were not fully aware about the status of Indo-Bhutan relations until critics cried shrilly over the crisis that erupted in the summer 2013 and put India’s “carefully nurtured and fostered” relations with Bhutan under major strain.

However, it needs to be underlined that over the years, India’s traditional ‘sacred bond’ with Bhutan has been disastrously allowed to erode and the Himalayan state merely remained as an object of strategic play against China where cutting deals by using the carrot-and-stick approach became  the rule of the business. This approach was not sustainable; nor was it a sign of prudent foreign policy.

Druk’s allegiance to Gyagar

The 1949 Friendship Treaty has guided the contemporary Indo-Bhutan relationship, ensuring India’s non-interference in Bhutan’s internal affairs, while Article 2 of the treaty critically gave India a role in guiding Bhutan’s foreign policy. It said:

“The Government of India undertakes to exercise no interference in the internal administration of Bhutan. On its part the Government of Bhutan agrees to be guided by the advice of the Government of India in regard to its external relations.”

The treaty, therefore, did embed values of trust and equality that may have kept the spirit and momentum of the relationship moving unhindered.

However, the keystone that drove the main engine of this relationship was Bhutan’s deep devotion to gyagar (the holy-land India) – fidelity embedded into the Bhutanese ethos by the wisdom of the 8th century Indian leader and philosopher Padmasamhava, also known as Guru. He belonged to Uddiyyana of the modern-day Swat Valley of Khyber Pakhtunkhwa, regarded as the third Buddha in the Vajrayana tradition. Largely, this piousness today seems to be confided to one side but the Bhutanese have so far diligently stayed true to their religio-cultural links with India. Sadly, on the Indian side, that sense of historical responsibility and cultural affinity seems to have been lost forever.

However, notwithstanding all geopolitical pulls and pressures, Bhutan steadfastly and unshakeably stood behind India as its most reliable ally. It used to be explicit when the Bhutanese king escorted the Indian prime minister to the dais and waited at the foot of it to walk her/him back to the seat during multilateral summits – he knew what he was doing. The gesture was highly nuanced, very rare in international diplomacy.

The Himalayan nation’s commitment towards India remained unwavering. When King Jigme Singye Wangchuck personally led his troops to confront Indian insurgent groups from the Assam border, it was an unparalleled example of Bhutan displaying its strategic commitment towards the defence of India.

It stood by India in the face of its conflict with China in 1962. When India broke Pakistan into two pieces in 1971, Bhutan and Mongolia were the first to back India’s push for Bangladeshi independence.

Bhutan never played the China card and never ruffled India’s feathers in the region, and never refused India’s exploitation of its hydro-power assets, unlike Nepal.

Prime Minister Narendra Modi with Bhutanese counterpart Tshering Tobgay. Credit: PTI

The drift

If anything it is India which has allowed its strategic sense to erode. Even though the tenability of a colonial-style protectorate had vanished, India’s leaders started to take Bhutan for granted. In fact, they mistook Bhutanese fidelity for obeisance to Indian paternalism. Scores of commentaries have concluded that such misconceptions and mistaken assumptions have bred resentment, resulting in India’s foreign policy towards the kingdom turning topsy-turvy.

Arguably, what Indian policymakers thoughtlessly pursued was the colonial-style approach of buying loyalty through economic aid. As aptly analysed by C. Raja Mohan, India needed “to discard the tradition of offering economic subsidies and negotiating project proposals with neighbouring capitals … (and)  focus instead on enabling agreements and let market forces leverage the existing economic and geographic complementarities.” But this did not happen. In fact, unlike other neighbours who quickly learnt the art of balancing the game, Bhutan has been rather late in joining the anti-India ranks. This is because the relationship could continue for so long on the basis of Bhutanese conscientiousness. It seems that the rift would have surfaced long before, had it been left to New Delhi.

A peep into the past suggests that Bhutan started to doubt India’s ability to protect her against China, especially after the Sino-India War of 1962 and the Indo-Pakistan war of 1971. The incorporation of Sikkim by India may have also added to Bhutan’s insecurity.

When India helped Bhutan secure a UN membership in 1971, it was done ostensibly to enable Bhutan to avail international development and financial assistance. China quickly voted in favour of her entry.

Bhutan’s UN membership thus fundamentally impaired the sacredness of Article 2 of the 1949 treaty. Concomitantly, Thimphu affirmed its independent status, that is, it established diplomatic ties with Dhaka and raised its diplomatic representation in New Delhi to full ambassadorial level in 1971.

On the international front, Bhutan started to take a divergent approach – it sided with China and others on Cambodia’s Khmer Rouge issue at the NAM’s Havana summit in 1979; didn’t follow India’s stance on the status of landlocked nations at the UN; signed the NPT in 1985; and supported Pakistan’s Nuclear Free Zone South Asia proposal. Very recently, Bhutan has pulled out of the Bangladesh, Bhutan, India and Nepal Motor Vehicle Agreement for the regulation of passenger, personal and cargo vehicular traffic signed under SAARC in June 2015.

Since 1979, the Druk king started pressurising New Delhi for the boundary resolution and an “update” in the 1949 treaty.

After fathoming the severity of the potential crisis, India ultimately agreed to the amendment and removed Article 2 of the treaty in 2007 and thereby freed Bhutan from, among other things, seeking India’s guidance on foreign policy and obtaining permission over arms imports. Article 2 in the new treaty only says India and Bhutan “shall cooperate closely with each other on issues relating to their national interests. Neither Government shall allow the use of its territory for activities harmful to the national security and interest of the other.”


Though the amendment was enacted in deference to the king’s desires, the festering angst among the Bhutanese elite against India unfairly holding Bhutan hostage for its own geopolitical interests is what led to the change in Article 2. Bhutan had serious misgivings about becoming another Sikkim (which was annexed by India) or meeting the fate of Tibet (invaded by China).

India could take solace in the fact that Article 2 was never invoked and as such was irrelevant for it to retain its influence. If anything, the clause had been a sort of a burden, for it allowed India’s adversaries to accuse it of  having “hegemonic and expansionist ambitions“.

The brewing crisis in Indo-Bhutan relations ultimately exploded in mid-2013, amidst India’s bid to thwart Thimphu’s foreign policy drive, especially its overtures to China in 2012.

Following the voluntary abdication of power by the Druk king in favour of a democratic government in 2007, Bhutan began a shift away from its India-centric foreign policy.

The first democratically elected government led by Prime Minister Jigme Yozer Thinley of the Druk Phuensum Tshogpa (DPT) had managed to broadbase Thimphu’s diplomatic ties – these rose from 25 nations in 2011 to 53 in 2013. The DPT government even bid for a non-permanent seat at the UN Security Council and wanted  the P5 countries to establish their missions  in Thimphu.

The real rift with New Delhi surfaced when a meeting took place between  Thinley and Chinese Premier Wen Jiabao in Rio de Janeiro in June 2012. No substantive deal was made though Thinley had earlier committed himself to  the purchase of 20 buses from China. The meeting deeply hurt New Delhi, which accused Thimphu of a lack of transparency and of acquiring a habit of keeping India in the dark even on matters impinging upon its common security.

India’s key concerns primarily involved the Chumbi valley’s strategic sensitivity and the need to prevent China’s deeper encroachment southwards, and the possible resolution of the China-Bhutan border impinging on India.

The extent to which Bhutan compromised India’s security concerns was unclear but the extra overtures to Beijing seemed to have sowed the seed for mistrust.

Prime Minister Narendra Modi with Bhutanese counterpart Tshering Tobgay. Credit: PTI

Political hold

Uncomfortable about the increasing cosiness between Bhutan and China, India looked for an opportunity to punish Thinley. Critics in Bhutan suggested that New Delhi had made up its mind to write a fine script for Thinley’s exit from power. Playing with electoral politics was not a big deal. In the days leading up to the Bhutanese general election in July 2013, New Delhi, in an unambiguous signal, abruptly cut subsidies on gas and kerosene sales, among other tough measures to Bhutan.

Some critics inferred the move was simply meant to rock the election campaign. Others saw a clear message from New Delhi to the Bhutanese – be prepared to face sanctions if the DPT is voted back to power. Though the eventual impact of the subsidy cut on the poll outcome is not clear, nobody in Bhutan was convinced that it was purely a commercial decision, which is how Indian officials presented it.

However, the issue unfolding in the Himalayan state did not seem as simple as the usual outcry about China’s assertiveness in India’s neighbourhood. China may well have been the cause but that was not the complete story and was in fact believed that the fissures in the neatly stitched ties remained under wraps for long due to the closely securitised relationship between New Delhi and Thimphu.

Scathing criticism of India’s meddling in the Bhutanese election outcome poured in both at home (India) and from abroad. Many saw it as an act of rage over Thinley’s “harmless” bid to improve relations with China. When the Indian media reacted to Bhutan’s north shift, Kinley Tshering, the former editor of Bhutan Times, thought they were “spinning a yarn of conspiracy theories that are naïve at best and ludicrous at worst”.

In a wave of criticism, the Bhutanese, through websites and blogs expressed shock and dismay at India’s carrot-and-stick policy. Some were simply “baffled and confounded” by the Indian actions they were not used to while others felt “simply stunned, lost and scandalised” by the spate of strange and disconcerting developments. In a scathing comment Wangcha Sangye, a popular blogger, said, “National interests of Bhutan have to rise over and above the politics of always playing the Indian tune and only pleasing India.” In response to articles appearing in the Indian media, Karma Temphel Ngyamtso, a writer and an avid political observer commented, “Our friends in India, unwittingly ensnared in this game of political brinksmanship, must remember that such inadvertent, mercenary and gravely injurious attitudes and moves do not bode well at all for Bhutan-India friendship in the long run.” Such perceptions among the Bhutanese only indicated the degree of erosion that had taken place in the Indian wisdom of handling their friends over the years.

The DPT’s defeat had nonetheless reinforced the Bhutanese fear of India’s arm-twisting. The events led conspiracy theories to flourish. In a tsunami of public outcry, bloggers wrote at length about how the Indian intelligence service had rigged the elections. The comments ranged from how India needlessly punished Thinley to how the “world’s largest democracy could influence elections in the world’s youngest democracy.” Critics urged the Indian media and politicians to stop their “over-lordship” over the kingdom’s affairs and stop treating Bhutan as a “pawn” and manipulating the Bhutanese like “lambs in a pen to slaughter whenever India desires a dish of lamb stew.” One could not imagine such ferocity amongst ordinary Bhutanese against India ever before.

For a while, it appeared as if Bhutan’s eternal goodwill for India had vanished overnight. Given South Asia’s hostile environment, many viewed this as Bhutan too finally joining others who habitually accused India of interfering in their domestic politics. Even at home, critics thought India was needlessly scoring a political self-goal against a tiny but friendly state. They described New Delhi’s handling of Bhutan as “ham-handed”, and the subsidy cut as  “sordid manipulation”, “poorly conceived”, “counter-productive” and “completely disconnected from any strategic thinking”.  Miffed by what seemed like a recurring trend, critical commentators suggested “India’s foreign policy makers rethink their mentality towards neighbours and realise the need to rectify it at the outset.”

The Chinese dailies too quickly commented on India’s coercive and brazen interference in Bhutan’s election and said India was treating Bhutan as its colony to meet its own strategic needs. An article by Liu Zongyi suggested that the intention was to thwart Bhutan’s attempt at freely engaging with China to resolve its border dispute.

The defence of India’s actions came from the former foreign secretary Kanwal Sibal who argued in a column that Bhutan was playing the China card to both balance India and extract more concessions from it. Sibal accused Thimphu of  “disregarding” India’s concerns with some “impunity” by exploiting India’s weaknesses like its “internal problems”, “high level of tolerance”, “lack of consensus”, “existence of sympathetic lobbies and sensitivity to accusations of hegemony”.

Coming from India’s bureaucratic elite, Sibal’s language may have either frightened the Bhutanese or perhaps further damaged the already fractured relationship. Clearly, by stoking the discontent within Bhutan, real or imagined, India allowed itself to become a subject of attack and contempt amongst sections of Bhutanese. Surely, Bhutan’s opposition People’s Democratic Party may also have played its role by leveraging on India’s influence. However, India, despite having fully supported Bhutan’s democratisation processes since 2008, now risked the opprobrium of subverting it.

For Bhutan to lay the foundation of democracy on anti-India sentiments surely was not desirable for India. Yet, an image of India as a villain and not a friend began slowly to unfold.

Though the two countries stopped the drift, an element of wariness seemed to have crept into the relationship. Now that the genie is out of the bottle, it may be difficult to put back. There was nevertheless a need for understanding the ominous trends. In fact, it was important for Modi to grasp the issues from a broader perspective that shapes the processes at work. Instead, his advisers appeared to have dealt with Bhutan more ham-handedly in the pretext of countering China.

Economic sway

Without a doubt, the imperatives of geography always determined the fragile nature of Bhutan’s economic independence. However, India’s coercive commercial diplomacy may not only have effectively demonstrated the advantages it holds, but also may have reminded the Bhutanese of the limits of their urge for an independent foreign policy. The economic aspect of Indo-Bhutan relations is not sufficiently articulated in the open strategic discourse as yet but studies have highlighted how Bhutan’s economy has become dependent or auxiliary to India’s economic intervention model. The study has found that over 60% of government expenditure goes into the import of goods from India. This is not only detrimental to Bhutan’s sustainable growth but also unsuitable for a healthy bilateral relationship with India. India’s stranglehold over Bhutan’s economy along with unfair business practices often leads to economic crisis such as the debt and rupee crunch. The fundamentals of economic dependency including the hydropower projects are becoming subjects of debate, essentially to highlight the massive Indian influence in Bhutan. Many Bhutanese analysts have begun to view the dependency relationship in the geopolitical context of India-China zero-sum rivalry and the manner and extent to which Bhutan has been sacrificing its interests. The remedy they see lies in balancing the nature of Bhutan‘s relations with India vis-à-vis China.

A 2012 study by Medha Bisht for the Institute for Defence Studies and Analyses found that India’s limitless budgetary support loans, grants and lines of credit in billions of crore including the setting up of hydropower-plants have been useful for Bhutan, but have also helped India capture the benefits. Bhutan’s merchandise exports (95%) and imports (75%)  to and from India reflect this dependency. A comment cited by the study said, “90 to 95% of what Bhutan borrows from India goes back to India.” Even India’s investment in hydropower industry was squeezing the space for domestic stakeholders thus creating “jobless growth” for Bhutan.  Moreover, over-dependency caused a disparity i.e., the grants inflow did not match up the rupee outflow leading to “rupee” crunch as witnessed in 2012.

The other detrimental aspects highlighted by the study include illegal cross border trade, under-invoicing, tax evasions, illegal bank transaction and unfair, exploitative, monopolistic commercial practices by Indian contractors especially in the mining and construction sectors. Heavy dependency on imports of materials, machineries, labours and the practice of profit contracts by sub-contractors were squeezing the local stakeholders. In addition, decades of subsidy system promoted imports of even essential food products from India with severe consequences that led to neglect of Bhutan’s own agriculture sector, the share of which declined in GDP to 14%. Moreover, the subsidy benefits only helped India captivate the Bhutanese market and the latter’s economy remained highly susceptible to Indian inflationary trends with financial distortions that Bhutan was unable to withstand. Such practices led to continual accretion of public debt, i.e. over 80% of country’s GDP in 2011, as noted in the study. The huge amount of loan and grants rendered to Bhutan ultimately benefited India. Consequently, even the small cut in the fuels subsidy and the delay of currency supply by India led to Bhutan’s economy going into disarray.

The tragedy was that India chose to leverage economic assistance as a tool to influence the election results. The story is no different from what China does to its neighbours. However, China does not allow itself to be seen as interfering in the internal affairs of others. In essence, India’s model of economic assistance to neighbours such as Bhutan and Nepal remains exploitative and no remedy exists for altering it yet.

P. Stobdan, a former Indian ambassador, is an expert on Himalayan affairs