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An Evaluation of Macroeconomic Indicators in India and Bhutan From 2015 To 2019
An Evaluation of Macroeconomic Indicators in India and Bhutan From 2015 To 2019
MACROECONOMICS 1
SUBMITTED BY :
KOMAL PHUTANE (MAECO2033)
SALONI SOM (MAECO2037)
Though Bhutan is physically small with a limited scope, it has proved itself to
be one of the most peaceful economies which is free of threats from terrorism,
militancy etc. Indeed, Bhutanese students enroll almost 4 000 Bhutanese
students at Indian Universities at all times; many of them still have Indian
government bursaries.
This study will explore the trend wise comparative analysis of both the
countries taking macroeconomic parameters such as GNI per capita, GDP,
trade, inflation, Human Development Index, Gender Parity Index, Consumer
Price Index, forest area, population growth etc, into consideration.
The bilateral relations between India and Bhutan were formed when the Indo-
Bhutan Treaty was signed. India with a GDP of $2.7 T, was the 7th largest
economy while Bhutan was the 172th with a GDP of $2.4 B. The purchasing
power parity conversion factor was noted to be 21.81 for Bhutan and 18.1 for
India and the GNI per capita was noted to be $3 k for Bhutan and $2 k for
India respectively. In India, the literacy rate was noted to be 74.4% as of 2018
whereas in Bhutan, it is 66.6% marked in 2017. In India, 8.5% of adults are
unemployed in 2017, the number is 3.25% for Bhutan. Bhutan accounts for 40%
of all its revenues and 25% of its Gross Domestic Product, from its energy
export to India. Planned attempts to establish Bhutan started at the beginning
of the 1960s. In 1961 Bhutan's First Five Year Plan began. India has also
extended funding to the Bhutan's Five Year Plan. India remains the main
donor to Bhutan's socio-economic growth. The two countries exchange a
vibrant cultural heritage. Bilateral relations between India and Bhutan are
marked by frequent high-level political exchanges, which help to reinforce
bilateral ties. If we look at the past 20 years, Bhutan has been a recipient of aid
not only from India but also for other countries. This eventually helped
Bhutan in achieving its economic goals as the country managed to be called a
developing from a least developed one.
India and Bhutan share an almost five decade old golden bond. This has led to
not only changes in Government of India, but also in layering out the larger
geopolitical or social circumstances. These countries share a long standing
cordial relationship, which has its roots in goodwill and mutual understanding.
This was further accompanied by a tag known as, ‘Treaty of Friendship’ signed
between both countries in 1949, which was updated in 2007. The original
treaty stated that Bhutan was to be guided by India in its foreign policy.
According to amendment none of the countries will let anyone to use their
territories for any activity.
The year 2018 marks 50 years of friendship between the two countries. The
initiation of this bond is credited to the efforts of Indian Prime Minister
Jawahar Lal Nehru and his Majesty Jigme Dorji Wangchuck, who is known as
the third king of Bhutan.
Bhutan is aligned with India via trade, and links related to the monetary sector.
It signed a memorandum with India and Bangladesh in July 2017. It was agreed
upon, to construct a hydro-power plant in order to export electricity to
Bangladesh. The cooperation in hydro-power projects is one of the most
highlighted examples of a win-win situation between the two. Bhutan was
always pivotal in India’s major foreign policies, Neighbourhood First Policy
and Act East Policy,
The total trade increased by about fifty times during 2000-2019. The bulk of
Bhutan’s trade is engaged with India. Though Bhutan’s share in India’s total
exports to the world has been fluctuating. Nevertheless, India stands as
Bhutan’s largest trading partner and the most prominent source of its imports.
Cross border trade of electricity between India and Bhutan is taking place
under the Bilateral Power Trade Agreement, which was signed between both
the countries in 2006.
India stands as Bhutan’s leading development partner. As the First Five Year
Plan of Bhutan was launched in 1961, India was present to financially support
Bhutan’s FYPs and allotted Rs 4500 crore to Bhutan’s 12th FYP. While India
and Bhutan share a remarkable bond, issues such as the state of relations with
China prove to be a matter of concern for both countries.
The year 2014 marks PM Narendra Modi, who led BJP Government being into
power put major emphasis was on India’s neighbourhood and its relations with
Bhutan, which have been tension free since then. It has been observed that
over the last 40 years, the interactions of Bhutan have significantly increased at
bilateral and multilateral levels. We observe the phase of Bhutan’s transition to
democracy. From 1998 onwards, India performed as a steadfast support
system for Bhutan in various ways to achieve economic stability.
India and Bhutan experience a positive Gross National Income per capita for
the years 2015 to 2019. India experiences an approximate 28% increase in the
GNI per capita starting from $5400 to $ 6290 for the time period. Bhutan has a
27% increase starting from $8820 to $11230. Bhutan's GNI per capita is higher
by $4940 in 2019, than in India. Overall, Bhutan fairs better than India as it
starts off with the higher GNI value in 2015, although it it has a similar rate of
growth.
India experiences a steady decrease in the GDP growth over the years from
2015 to 2019. The highest amount of GDP growth was experienced in 2016
which was 8.3 %, and the lowest amount of GDP growth was experienced in
2019 which was 4.2 %. The difference between the GDP growth of these two
years has been 4.1 %. The GDP of Bhutan has followed of fluctuating pathway.
The highest GDP growth rate in Bhutan was in the year 2016 which was 8.1 %
and the lowest was in the year 2018 which was 3.1 %. This makes a difference of
exactly 5% in the the growth of GDP in the country over these five years. The
average GDP growth rate of India has been 6.7% Whereas the average GDP
growth rate in Bhutan has been 5.6%.
The inflation in India has experienced a study increase from 2015 to 2018 and
experienced a sudden fall in the inflation in 2019. There was a steady increase
in the inflation rate in Bhutan from 2015 to 2017, after which there was a steep
reduction in the inflation in the year 2018. The inflation rate reduced even
more in 2019. While India reached the peak of its inflation rate in 2018,
Bhutan simultaneously experienced its steepest fall in the inflation rate in the
same year. The average inflation rate in India is 3.4 % while it is 3.18% in
Bhutan.
India and Bhutan are running in negative net profits implying that the exports
are lesser than the imports for both the countries. The net profits in India
reduced from 2015-2018 and experienced a hike in 2019. The net profits in
Bhutan have been steadily increasing during the five-year period. The
reduction of the net profits in India have been on an average 2.74%. While the
net profits reduced by 24.74% in Bhutan, the reduction in net profits in India is
extremely low when compared to that of Bhutan.
There is a steady increase in the consumer price index for the countries of
India and Bhutan in the time period of 2015 to 2019. While the average value
of the CPI is 162.5 in India, it is 157.1 in Bhutan. The dispersion of the CPI
values for the time period for both the countries is significantly close to that of
the previous year.
The final consumption expenditure in terms of USD has been compared for
both the countries in the given time period. There is a steady increase on the
consumption expenditure for India and Bhutan.
The average final consumption expenditure for India has been
1,778,742,524,398.26 while Bhutan experiences it at 1,733,004,855.75.
The human development index of India and Bhutan have been very similar
during the given time period. The HDI in 2015 for India was 0.624 while it was
0.628 in Bhutan. The HDI for India and Bhutan in 2019 was 0.645 and 0.654
respectively. The increase in the HDI value has been very slow for both the
countries. While Bhutan experienced an increase in the HDI value, the HDI for
India reduced in 2016 and increased throughout the remnant years. The
average HDI value for India is 0.636 while it is 0.643 for Bhutan.
There was a steady trend in the FDI in in India where the FDI value was
approximately 44 million dollars in 2015 which grew to 50 million dollars in
2019. While the FDI investment experiencea a fluctuation for Bhutan during
the time period, a significant reduction in the the FDI investment value was
experienced in the year 2017. This was the only negative FDI investment value
during the period.
The absolute amount of forest area in India is higher than the forest area in
Bhutan. This is so due to the large territorial expansion of India when
compared to that of Bhutan. The average forest area in India for the period is
712,276 while it is 27,181.5 in Bhutan. As of 2019, the total forest cover in India
is 712,249 Sq km (71.22 million hectares), which is 21.67% of the total
geographical area. The forest area in terms of percentage of the total land area
of Bhutan was 72.48% as of 2016.
The percentage of population growth has been decreasing for India and
Bhutan. The graph of the decrease of percentage of population growth in India
has been steeper than Bhutan, which implies that the Indian population has
been growing at a lesser rate than that in Bhutan. While the population
percentage in India in 2015 was 1.12%, it reduced to 1.02% in 2019. The same
was 1.22% and 1.15% for the years 2015 and 2019 respectively, for the country of
Bhutan. The average population growth has been 1.06% in India and 1.19% in
Bhutan.
The percentage population growth in urban areas in India has been steadier
than that in Bhutan. The Urban population growth in India was 2.323% in 2015
and was 2.306% in 2019. The same was 3.2 % in 2015 for Bhutan and 2.9% in
2019.
Significant progress in the level of real per capita GDP ranging from about
US$400 in 1980 to US$2,800 in 2016 was observed, and now Bhutan is nearing
middle-income status. Over the years, a constant discussion over the Gross
National Happiness has been there in the case of Bhutan, which is referred to
as a major indicator of its development. In 1972, the fourth king of Bhutan,
Jigme Singye Wangchuck declared that “Gross national happiness is more
important than Gross domestic product”. As GDP growth in Bhutan is highly
dependent on investment made by the government, majorly in the
hydropower and construction sector, which is related with the former. It was
noted that India’s GDP was steadily falling from 2015 to 2019, the current
slowdown in India is the third slowdown since 1996 and is noted to be the
longest since the last 23 years.
India’s positive economic outlook can be framed by the fact that the most
recent India Macro Poverty Outlook in October 2016, has estimated that real
GDP growth between the years 2016 and 2018 is estimated to be 7.6% to 7.8%,
almost the similar growth performance in 2014 as well as 2015 provided the
strong economic relationship between Bhutan and India, the positive
economic outlook is quite beneficial for Bhutan. Also, the framework for
continued poverty reduction is noted to be positive. With such an accelerated
growth, the poverty headcount rate is noted to be 1.9% in 2015 and 0.9% in
2018.
Reference links
1. Bhutan indicators
https://databank.worldbank.org/reports.aspx?source=2&country=BTN
2. Indian indicators
https://databank.worldbank.org/reports.aspx?source=2&country=BTN
3. Overview of Bhutan
https://www.worldbank.org/en/country/bhutan/overview
4. Overview of India
https://www.worldbank.org/en/country/india/overview
5. Indicator classification
https://databank.worldbank.org/views/reports/reportwidget.aspx?
Report_Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm=n&co
untry=BTN