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Economy Jul 22, 2013

Moody’s says Bhutan election results credit positive for India. Here’s why

New Delhi: Global rating agency Moody's today said Bhutan election results signal closer economic ties with India and it would be credit positive for India.

On 13 July, Bhutan held its second elections since the country transitioned to a democracy in 2008 from a Monarchy, handing the majority in Parliament to the former opposition People's Democratic Party (PDP).

"The PDP platform emphasises rebuilding Bhutan's ties with India, which were strained by the previous
administration's political overtures to China," Moody's said in a statement.



Maintaining India's robust provision of aid and its consumption of hydropower exports is credit positive for Bhutan, it said.

"The small Himalayan nation is geographically wedged between India and China, which have competing interests in the region", it said, adding, "but Indian foreign policy seeks to keep Bhutan well within its sphere of interest".

Maintaining close ties with India will ensure that Bhutan's neighbour to the southwest continues to import
electricity and fund further hydropower development.

In 2012, India's purchases comprised approximately 90 per cent of total electricity sales from Bhutan's plants. Bhutan's electricity exports generate revenue for the government, as well as Indian rupee inflows, allowing it to finance the large public debt.

In addition to trade flows, it said, India provides significant budgetary support in the form of grants.
Bhutan's USD 1.8 billion economy has been growing quickly, averaging 10 per cent growth in real terms over the past five years, driven by the development of hydropower.


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