Rupee crunch awaits Modi in Bhutan

By: admin | Last Updated: Sunday, 15 June 2014 2:45 AM
Rupee crunch awaits Modi in Bhutan

ictures of Narendra Modi and Bhutanese Prime Minister Tshering Tobgay adorn a Thimphu road ahead of the Indian Prime Minister’s visit. Picture courtesy: The Bhutanese

Thimpu: “Jonpa Lekso” and “Kadrinche” are written all over Thimphu. These two words mean “welcome” and “thank you”, respectively, in Dzongkha (the language the Bhutanese speak).

 

Ahead of Narendra Modi’s first foreign trip as Prime Minister, “Jonpa Lekso” and “Kadrinche” are used in abundance in the picturesque capital of Bhutan, located at the eastern end of the Himalayas.

 

Tshering Tobgay, the second democratically elected Prime Minister of Bhutan, yesterday afternoon described Modi’s decision to visit Bhutan as “historic”.

 

“It has hardly been a month since he has assumed office and he is coming to Bhutan for two days…. We are honoured,” Tobgay told journalists on the sprawling lawns outside his office.

 

Besides holding talks with his counterpart, Modi will meet the King of Bhutan as well as the predecessor king. He will also address a joint session of the National Assembly and National Council of Bhutan, and meet the leader of the Opposition.

 

“He had invited all the Saarc countries for his swearing-in…. Then he chose a Saarc country for his first official visit. It is significant. The relationship between the two countries is exemplary,” added Tobgay, who assumed office in July 2013.

 

With just 7.5 lakh people sparsely distributed across the length and the breadth of the country, Bhutan’s population is around half the number of voters in a Lok Sabha constituency in India. The size of the Bhutanese economy —around Rs 100 billion a year —is no mach for India, the third largest economy in Asia.

 

Still, both countries are inextricably linked because of several reasons — economic as well as strategic — and officials on both sides of the border acknowledge the inter-dependence.

 

“The Indian Prime Minister is visiting Bhutan at a crucial time as the Bhutanese economy is going through a bad phase and there is hope that India can help us tide over the crisis,” said a source in Bhutan who did not wish to be named.

 

Chencho, a taxi driver, echoed the same expectation while waiting for passengers to come out of the airport in Paro, around 50km from the capital city.

 

“Modi aane se Bhutan ka achha hoga, (Modi’s visit will do good to Bhutan),” he said with a smile, unwittingly or otherwise playing on one of the planks (achhe din aane wale hain) on which Modi stormed to power in India.

 

The Bhutanese economy, heavily dependent on India, has hit a slump because of a plethora of reasons, including dwindling reserves of the Indian rupee and high inflation.

 

India is the largest trading partner of Bhutan — the volume is over Rs 6,800 crore — and around 90 per cent of its foreign trade is with India.

 

Although bilateral trade has been a boon for both countries, some in Bhutan are worried about the trade deficit as Bhutan’s payout on import bill in Indian rupees far outweighs its export earnings.

 

“Right now, we are going through a rupee crisis as the trade gap with India is rising…. Besides, our indebtedness is also increasing and the debt stock is more than the size of the economy,” said a source in Bhutan.

 

The rupee crisis had prompted the authorities in Thimphu to ban the import of automobiles from India, which is to be revoked by July, and some fear that the shortage of rupee will intensify thereon unless some measures are taken.

 

The scarcity of the rupee can be felt in the Himalayan state, where the national currency — ngultrum — is pegged to India. From taxi drivers to traders, everyone prefers the Indian rupee as the mode of payment.

 

Some traders said they needed the Indian rupee to pay traders on the other side of the border at Jaigaon, one of the several entry points to Bhutan.

 

“For goods worth Rs 100, if we are making a payment in ngultrum, we have to pay 107 ngultrum. This means, the market has devalued our currency by around 7 per cent,” said a trader.

 

While there are hardly any voices that blame Delhi for this state of affairs in the economy, there is hope that the big brother will do something to ease the flow of the rupee.

 

When Prime Minister Tobgay was asked about his expectations from Modi on the economic front, he did not roll out any list but made a few pledges that will be music to the ears of the Indian establishment.

 

“I would like to say that the Bhutanese territory cannot be used against India’s security interest…, We are vigilant,” the Prime Minister asserted.

 

He reminded how, in 2003, the then King, Jigme Singye Wangchuck, personally led the offensive by the Royal Bhutan Army to cleanse anti-India insurgents from Bhutanese soil.

 

Referring to India’s another concern — China, which has been trying to woo Thimphu to establish diplomatic ties — the Prime Minister reaffirmed that India remained the “bedrock” of the country’s foreign policy.

 

“We engage with China because we share borders…. We don’t have any diplomatic relationship with China,” he said.

 

Although Bhutan has started receiving some Chinese tourists recently and a section of the Bhutanese population is talking of the need for commercial engagement with China, India still remains the most preferred foreign country.

 

Ahead of Modi’s visit, several people this correspondent spoke to said that they want the Indian Prime Minister to be generous.

 

India has already committed Rs 45 billion for Bhutan’s 11th five-year plan, from 2013 to 2018, besides Rs 5 billion as an economic stimulus package.

 

“We want more grants from India…. The other demand is investment from the Indian private sector,” said Phub Tshering, secretary-general of the Bhutan Chamber of Commerce and Industry.

 

According to him, till now, Bhutan has received only Indian public investment in hydropower, which remains the country’s main rupee earner as power generated in Bhutan is exported to India.

 

By exporting around 1,400MW to India, Bhutan earns nearly Rs 8 billion a year, said a source.

 

“The target is to export 10,000MW by 2020. So, you can imagine how our economy will benefit if the target is met. But the problem is we are far behind the schedule,” the source added.

 

During a briefing in Delhi, foreign secretary Sujatha Singh was asked about the reasons behind the delay in releasing resources for the hydropower projects, built with both Indian investment and expertise.

 

She said that the government was considering various models to implement the projects, resulting in a “win-win” cooperation.

 

– The Telegraph, Calcutta

First Published: Sunday, 15 June 2014 2:45 AM

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