Bhutan is hailed as many by ‘the last Shangri-La’ because it has remained traditional society. It is one of the smallest countries in the world in terms of population and area. Its population is slightly less than 750,000. Its capital is Thimpu and official language is Dzongkha. Its currency is Ngultrum which is fixed equal to the value of Indian Rupee. It is located highlands of Himalayas and is sandwiched between two giant neighbors- India and China. This country is predominantly Buddhist country and people follow the principles of Buddhism in their daily lives. Interestingly, this country has been in the list of the happiest countries in the world for many years. It is very famous for its ban on tobacco sale and its use of Gross National Happiness (GNH) principles.

Takeshang Gompa, Tiger’s Nest Monastery

Takeshang Gompa, Tiger’s Nest Monastery

Punakh(It serves as winter residence for the central Monk body and administration center for the valley.)

Bhutanese Royal Palace

Bhutan was able to retain its cultural heritage for many years because it remained isolated from outside world. The government also made attempts to keep the traditional and cultural values intact. In fact, television and internet were only introduced in 1999. Even today, it is considered to be inaccessible country by many people. But, many political reforms have been made in past decade. In 2008, Bhutan changed from absolute monarchy to constitutional monarchy and held its first elections. In addition, King Jigme Singye Wangchuk also transferred many administrative duties to elected cabinet and also added the provision of impeachment of the king by two-thirds of majority. In 2008, his eldest son Jigme Khesar Namgyel Wangchuck was crowned king.

Bhutan has been historically, culturally, traditionally related to Tibet. Its languages, Buddhism, cultural values are similar to Tibetian ones. But, Bhutan closed its borders to inhibit the influx of the refugees in 1960s when China captured Tibet. After that, Bhutan’s relations with China remained very limited.

Hence, Bhutan is largely dependent on India due to its location. India is its largest trading partner and the relation between them has remained quite stronger. Bhutanese and Indian citizens can travel freely without visa and Bhutanese citizens can also work in India. Historically, Bhutan was one of the first countries to recognize India when India got its independence in 1947. Before independence, Britain controlled the external relations of Bhutan which were transferred to India after independence. The Indian-Bhutan Friendship Treaty of 1949 allowed India to control the external affairs of Bhutan. This treaty was finally ratified in 2007 and Bhutan resumed the control of its own foreign relations.

In 2003 and 2004, Bhutanese Royal Army also helped India by destroying the militant camps set up by Indian separatist groups United Liberation Front of Asom (ULFA) and National Democratic Front of Bodoland (NDFB). This significantly helped India to bring the peace into Northeastern India because this groups killed many civilians and hampered the economy of the region.

Historically, the relationship between Bhutan and China remained very limited due to trust deficit. Bhutanese border to China has been closed for many years after China captured Tibet in 1960. In addition, there are various border disputes between them. The border issue has also severed the relation when attempts were made to build roads and bridges into the disputed lands and Chinese soldiers crossed into the disputed territories. So, there are no formal diplomatic ties between China and Bhutan. But, Bhutan maintains the honorary consulates in Macau and Hong Kong. In addition, there has been many talks held from 1980s onwards to ease the border tensions and some delegations from both sides have also met many times over the years. In 2012, Chinese president Wen Jiabao and Bhutanese King met during Rio+20 Summit where they discussed the possibility of establishing formal relations.

For India, Bhutan is very important because of its proximity with its sensitive northeastern border with China. Especially, the sensitive area of Chumbi Valley is very important from security standpoint.  Bhutan has assumed the position of neutrality since the 1962 Sino-Indian war but it will be interesting to view how Bhutan’s diplomatic relations with other countries grow especially China. China will be very attractive partner in terms of FDI but it will also hurt the strategic interests of India. Hence, Bhutan could exploit its position being located between two giant countries. Japan has also committed to establish formal relations with Bhutan by 2014.

Although Nepali speakers constitute around 40% of population, the issue of Nepali refugees has remained very strong underlying issue. Since 1991, more than one sixth of the population of Bhutan has sought asylum in India, Nepal and other countries. In Nepal alone, more than 105000 refugees have been living in camps setup by UNHCR. Many Southern Bhutanese who were predominantly Nepalese speaking were considered ‘illegal immigrants’ and forced to leave the country in 1990s.

Bhutan’s economy has also been traditional economy as it is largely based on agriculture and forestry. Due to its location, there has been little growth in industrialization. The infrastructure has also played significant role in that. Due to difficult terrain, building roads and railways has been very impossible. Currently, there is no railway in Bhutan, but Indian Railways has started building railway network in the country recently. India is Bhutan’s largest trading partner and trade with China is nonexistent.

Bhutan’s economy has been growing very rapidly in last decade due to the influx of FDI. Although it is still largely dependent on India for most of the projects, many countries are interested in invest in Bhutan due tourism, hydropower and other renewable energy alternatives, organic farming,

But, Bhutan has a long way to go because of infrastructure development, land ownership issues, establishing more diplomatic ties, education. It will also need to balance between its relationship with China and India because trade with China will open many opportunities in Bhutan.


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