India Bhutan Sign Bilateral Trade Agreement

IAS Prelims 2023

Commerce and Industry Minister Nirmala Sitharaman and Tengye Lyonpo Lekey Dorji, Minister for Economic Affairs, Royal Government of Bhutan signed the Agreement on Trade, Commerce and Transit between India and the Royal Government of Bhutan in the presence of Lyonchhen Tshering Tobgay, Prime Minister of Bhutan at the Gyalyong Tshokhang in Thimphu on 12 November, 2016.

The first Agreement on Trade and Commerce between Bhutan and India was signed in 1972. Since then, the Agreement has been renewed four times.

The last Agreement was renewed on July 28, 2006 and was valid till July 29, 2016. The validity of the Agreement was extended for a period of one year or till the date of coming into force of the new Agreement, whichever is earlier, by exchange of diplomatic notes between the two countries.

The new bilateral Trade Agreement aims to enhance trade between the two countries through trade facilitation by improving procedures, cutting down on documentation and adding additional exit/entry points for Bhutan’s trade with other countries.

It is also expected to further strengthen the excellent relations between the two countries.

During the visit, the Commerce and Industry Minister also had a bilateral meeting with a high level Bhutanese delegation led by Lyonpo Lekey Dorji, Minister for Economic Affairs of Bhutan where both the leaders discussed various issues related to bilateral trade, transit and investment.

India-Bhutan Relations:

The bilateral relations between the Himalayan Kingdom of Bhutan and the Republic of India have been traditionally close. India remains influential over Bhutan’s foreign policy, defence and commerce.

In 2012-13 fiscal, India’s budgetary support to the Kingdom country stood at USD 600 million (around INR 30 billion). It steadily rose over the years to reach USD 985 million (INR 61.60 billion) in 2015-16 making Bhutan the largest beneficiary of India’s foreign aid.

Bhutan’s Prime minister secured an additional aid package from India worth INR 54 billion (USD 819 million, as per the exchange rates at the time of signing the deal) for his nation during his visit to New Delhi in August 2013.

Five-sixth of this amount (INR 45 billion) has been earmarked for Bhutan’s 11th Five-Year plan. INR 4 billion was for the pending projects of the previous plan period. The remaining INR 5 billion was part of India’s “Economic stimulus package” for Bhutan’s slowing economy.

India operates 3 hydel power projects, of 1,416 MW in Bhutan and 3 more of 2,129 MW are under construction.