India allocates nu 61.6 bn as aid to Bhutan in annual budget

India has allocated its largest share of foreign aid to Bhutan, among its neighboring countries for the fiscal year 2015-2016. This was declared during the presentation on “Indian Budget (2015-16): Opportunities for Bhutan”, organized by the Indian Embassy in Bhutan, for first time, at Hotel Taj Tashi in Thimphu, yesterday.

During the event, the Chief Executive Officer, Druk PNB Bank Ltd, Mukesh Dave, highlighted the direct and indirect impact and opportunities for Bhutan from the allocation of the budget from India.

This fiscal year, 2015-2016, of the India’s total foreign aid of Nu 97.36 bn, India has allocated Nu 61.60 bn solely for Bhutan. This means Bhutan gets 63% share of total grants and loans. Afghanistan has the next largest share at 5.65% followed by Sri Lanka with 5.14% and Nepal with 4.31%.

Bhutan’s plan aid increase is 33% bringing the amount to Nu 49.6bn and non-plan aid increases by 5% to Nu 12bn. Of the total plan aid (Nu 49.6 bn), Nu 17.19 bn (35%) is by grant while 65%, Nu 32.41 bn by loan.

There is also an increase in the development assistance projects in neighboring countries including Bhutan, Afghanistan, and Myanmar since India has emphasized on giving a good hike of 19% in fund allocation to the ministry of external affairs, India from Nu 126.2 bn in 2014-15 to Nu 149.66 bn for 2015-2016.

Nearly 61% (Nu 91 bn) of this is towards technical and economic cooperation with other countries and advances to foreign government. With declaration of India’s budget, Bhutan is also to indirectly benefit or can open areas of opportunities.

Mukesh Dave said there would also see net decrease in excise duty on branded petrol by INR 3.46 per litre, unbranded petrol decrease of INR 3.49 per litre, branded diesel by INR 3.63 per litre and on unbranded diesel is INR 3.70 per litre but total incidence

of excise duties on petrol and diesel for Bhutan remains unchanged.

Mukesh Dave said Bhutan would also see a reduction in import cost due to the reduction of indirect taxes. As reflected in the budget outlay in India, it has reduced the rates of basic customs duty on certain inputs, raw materials, intermediates and components of 22 items where number of items included in the list result in INR outflow for Bhutan.

With the initiation of ease of doing business permissions, e-biz portal integrating 14 regulatory permissions at one source in India, Bhutan has an opportunity, with a business council set up in the country, to ensure smooth systems and procedures to attract foreign capital as well as to improve the domestic business environment.

The initiative “Make in India” budget measures to encourage the manufacturing sector, offering an opportunity for local trade and business community where it would also benefit Bhutan.

Mukesh Dave also said the development in the northeastern part of India would provide business and trade development opportunities.

India government has announced budget for setting up of AIIMS in Assam and setting up of a centre for film production, animation and gaming in Arunachal Pradesh.

In the event, the Ambassador of India to Bhutan, Gautam Bambawale, said all of India’s neighbors must utilize and gain leverage on the growing Indian economy for their own economy development and social progress.

On the direct impact of the Indian economy, “Indian economy, which is projected to grow by 7- 8 percent for the next three years and possibly faster, represents very big and huge opportunities. We will be investing in infrastructure as well as in manufacturing,” Ambassador Gautam Bambawale said.

The Ambassador also added that the larger part of India’s economy, the service sector, would be rapidly developed where Bhutan can sell more hydropower and also receive more tourists from India.

He also suggested that Bhutan should look for development of new

sectors where it has unlimited demand by India. He suggested that Bhutan should increase agro processing of products, such as jam jelly and pickles, which has an unlimited market in India. Ambassador Bambawale said jams produced by the Druk brand is available in and around Delhi market, but it is not available in other cities, like Mumbai, Chennai, Bangalore and Hyderabad.

“If Bhutan is able to increase its production of fruits and vegetable, and expands the processing and bottling of these products, there is a huge scope for the sale of these items in India,” he added.

The President of Bhutan Chamber of Commerce & Industry (BCCI), Ugen Tshechup Dorji also highlighted on the double taxation policy. He said the double taxation has no real benefit for business, as it only helps a Bhutanese person investing in India or an Indian person investing in Bhutan to pay one tax, which ever maybe higher.


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