By Ritika Chauhan
The bilateral trade relations between India and Bhutan have always been warm and special for both the countries. On his first foreign visit, Prime Minister Modi travelled to Bhutan to honour the relationship that he refers to as unique and special. The Himalayan kingdom is protected and evidently influenced by India in matters of commerce, defence, and foreign policy. It is hence, obvious, that any kind of policy changes in India is likely to impact the Bhutanese economy as well.
Trade channels disturbed
According to reports, the total trade between India and Bhutan amounted to USD 817 million in the year 2016-17. Items of import for Bhutan included iron and steel, fibre, medical equipment, processed food, among others. Items of export to India included pepper, household articles, electricity. and others.
When GST was rolled out on July 1 this year, India was not the only country that faced the impact, be it positive or negative. Among other economies, the Bhutanese economy was affected, and this effect was mostly adverse. According to a report by Asian Development Bank (ADB), the trade and revenue channels between India and Bhutan have been disturbed and interrupted since July.
Exports losing their edge
Experts believe that the goods imported by Bhutan are likely to increase as these goods are zero-rated under GST in India. However, goods exported to India will lose their competitive edge in the market, as they will be subjected to GST which will lead to a loss in budget revenue.
Another issue that puts constraints in the Indo-Bhutanese relationship is infrastructural inadequacy at Jaigaon Land Customs Station. Jaigaon accounts for almost 90% of the bilateral trade. After the introduction of GST, certain clearances are required online, which were earlier cleared manually. Internet connectivity has been reported to be ranging between poor and non-existent. As a result, numerous trucks are held for days, and sometimes weeks, causing unnecessary delay.
An interim measure
For now, as an interim measure, the Bhutanese government has decided to lower the heavy taxes on goods imported from India, and instead use credit policy to restrain import demand. Further, Jaigon has been relieved from the online clearances as long as they update their data online for some time till an alternative was found.
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