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 Political Scenario in Bhutan during 1774-1906: An Impact
Analysis on Trade and Commerce
Ratna Sarkar* and Indrajit Ray"
The East India Company's relationship with Bhutan may be
traced back to the conflict between the Princely state of Cooch
Behar and Bhutan in 1772 where the Deb Raja of Bhutan
defeated King Khagendra Narayan of Cooch Behar. The
latter's army commander Nazir Deo re-attacked Bhutani Qn
behalf of the Prince and subsequently won the battle with the
help of British soldiers. The relation between Bhutan and
British India became imminent when the Deb Raja solicited
the mediation of Panchen Lama of Tibet and fell back to the
British power. This relationship, however, opened up a new
vista to British imperialism from the last quarter of the
eighteenth century onwards. While the East India Company's
desire to promote its trade in the Himalayan kingdoms,
especially Tibet, was one of the reasons to this end, the other
reason might be its design to consolidate its empire in this
subcontinent against the expansion of the Russian and
Chinese imperialism. Various political events tike wars and
peace-treaties foUowed as the Company administration in
Bengal sought to realise these objectives. In the ultimate
analysis, these political events shaped the trade relation of
Bhutan with its neighbouring countries. The present article
seeks to bring out these causations between various political
events and trade relation of Bhutan during the previous
centuries.
Section I of this article documents various political events
that led to the evolution of Bhutanese trade during the
eighteenth-nineteenth centuries.  Section II, however, traces
*    Senior    Research    Fellow    (UGC),    Department    of   Commerce,
University of North Bengal, India.
**  Reader,  Department of Commerce,  University of North Bengal,
India.
i Deb, Bhutan and India, p.74.
 Journal of Bhutan Studies
out various political events that were intended to obstruct the
expansion of Russian and Chinese imperialism. Section III
contains a brief conclusion.
Section I: Major political events prior to 1900
The East India Company always operated on the motive of
trade and for the promotion of British goods in overseas
markets. These basic objectives of the Company explained its
growing interest on Bhutan from the second half of the
eighteenth century onwards. Moreover, as Bengal's route to
Tibet through Nepal had already been closed by that period2,
the Company was eager to find out an alternative trade route
to Tibet and China via Bhutan. The relationship with Bhutan
could enable the Company to access the markets in the
Himalayan kingdoms for their goods. A letter of Warren
Hastings, the-then Governor General of East India Company,
to the Court of Directors in London, supports this surmise.
He wrote on April 4, 1771 "It ...[has] been presented to us
that the Company may be greatly benefited in the sale of
broadcloth, iron and lead and other European commodities
by sending proper persons to reside at Rungapore to explore
the interest of parts of Bhutan "3 Warren Hastings, indeed,
took various steps in favour of the Bhutanese traders so that
the English trades could get an access to that country. He
also sent four political missions to Bhutan and Tibet, headed
respectively by Bogle in 1774, Hamilton in 1776 and 1777,
and Turner in 1783.
These missions were primarily entrusted with the job to
secure permission for European merchants to trade in
Bhutan and Tibet. The Bhutanese traders had all along been
strongly objecting to any such concession as they
apprehended that the European participation in this business
would curtail their share in it and dampen the rate of return
therefrom. In particular, as a principal trader in that world of
2 Secret Consultations, 24th February 1775, No. 4, referred in Gupta,
British Relations with Bhutan, p. 44.
3 Collister, Bhutan and the British p. 8.
 Political Scenario in Bhutan during 1774-1906
business, the Deb Raja was strictly in opposition. Bogle thus
revealed, 'The Deb Raja made many objections to aUowing
merchants to pass through Bhutan, insisting that it had
never been the custom [for] strangers to come into their
kingdom..."4 The Deb Raja, however, rationalised his
judgement in various ways. Once he pointed out, "[T]he
inhabitants [of Bhutan] were of a hot and violent temper, and
the country woody and mountainous; and in case of
merchants being robbed it might occasion disputes and
misunderstanding between them and the Company's
servants."5 To Bogle such statements simply intended to
camouflage his private interest: "The opposition of the Bhotias
reaUy proceeded from motives which they industrially
concealed."6 Similar statement was put on record by the next
Deb Raja when HamUton visited Bhutan. The ambassador of
the-then Deb Raja carried a message to Bogle against the
entry of the English and other Europeans in Bhutan.7 Bogle
was, however, able to secure the access of non-European
traders from Bengal for the purpose of trade in Bhutan.8 One
of the articles of the agreement between the East India
Company and the Deb Raja of Bhutan that was concluded at
that time proclaimed, "[T]he Deb Raja shaU aUow aU Hindu
and Musalman merchants freely to pass and repass through
his country between Bengal and Tibet."9 The argument also
provided certain benefits to the Bhutanese traders in Bengal.
We may mention in this context that the Bhutanese traders
were given to enjoy trade privtieges at Rangpur in Bengal as
before and they could also proceed, either themselves or by
their gumashtas, to all places in Bengal for the sell of horses,
4 Public Conr.,  19th April 1779, No. 2, containing Bogle's report to
Warren  Hastings  dated  30th  September   1775  referred  in  Gupta,
British Relations with Bhutan, pp. 42-43.
s Ibid.
6 Ibid.
7 Sen, Records in Oriental Languages (Bengali Letters), vol. I, No. 1
referred in Majumdar, Britain and the Himalayan Kingdom of Bhotan,
p.54.
8 Majumdar, Britain and the Himalayan Kingdom of Bhotan, p. 52.
9 Gupta, British Relations with Bhutan, pp. 46-47.
 Journal of Bhutan Studies
free from duty or any other hindrance; that the contemporary
duty levied at Rangpur from the Bhutanese caravan was
abolished; that there had earlier been a ban on the purchase
of oil and dried fish in Rangpur by Bhutanese merchants. On
the complaints received from them, Warren Hastings removed
all those bans. He instructed, "[T]he district official should
issue Perwannahs to the Zemrnders and officers of the
districts in which the Bootias have been accustomed to buy
these articles, to protect and assist them in carrying on their
trade and to allow their oil and dried fish freely to pass the
different chokeys and gauts."i° We may also mention that the
exclusive trade privilege was given to the Bhutanese sellers in
sandal, indigo, otter skins, tobacco, betel-nut and pan; other
merchants were thus prohibited to import these commodities
into Bhutani i g^ that the government extended civic
facilities to the Bhutanese and Tibetan traders who visited
Calcutta every year in winter to seU their wares. A Buddhist
temple was also constructed near Calcutta, which they could
use as a meeting place, a place of night halt as well as for the
purpose of prayer, i2
In addition to promoting trade to Tibet via Bhutan, the British
Government in Bengal sought to enhance the commercial
contact between the hill people and the inhabitants of the
plain. In this connection, Warren Hastings advised Bogle on
May 13, 1774, 'The design of your mission is to open a
mutual and equal communication of trade between the
inhabitants of Bhutan and Bengal...." 13 To this end, the
British Government took initiatives to establish a series of
trade fairs in the plain where the hiU people could
conveniently participate. We may cite in this context the trade
fair at Rangpur (now in Bangladesh) which Bogle initiated in
1780, and also the Titaliya fair in Jalpaiguri districti4 that Dr.
i° Quoted in Firminger (ed.), Bengal District Records, Rangpur, vol. I.,
p.5.
n Ibid. p.47.
12 Deb, Bhutan and India, p. 138.
13 Collister, Bhutan and the British, p. 13.
14 Hunter, A Statistical Account of Bengal, p. 270.
 Political Scenario in Bhutan during 1774-1906
CampbeU, the first Superintendent of Darjeeling, established.
This practice continued in the following century. Among the
fairs that the British government set up for the interaction
with the hiU people, the important ones were the Phalakata
trade fairi5, the Alipur fairi6 and the Kalimpong fair. Large
number of traders from Sikkim, Nepal, Tibet and Bhutan
used to attend these fairs. These annual gatherings not only
promoted British goods to a wider market but also
strengthened the Anglo-Bhutanese relation, and pacified
instability across the border. CoUister thus remarked,
"...Campbell's administration provided an enlightened period
of comparative peace on the frontier during which trade
between Bhutan and Company's land was encouraged." 17
Apart from establishing these fairs, the government
patronaged these fairs every year, and looked after their
securitiesi8 Dy stationing policemen at Phalakata and Alipuri9
and entrusting the job for the Alipur fair to the military
cantonment at Buxa.20
The British move to promote trade with Bhutan through fairs
was due to the contemporary trade practices and rules in
Bhutan. The Bhutanese rules and regulations on the
domestic and foreign trade had been in vogue since the time
of Ngawang Namgyal in the seventeenth century. For
domestic trade, Namgyal had laid down, "[A]U barter or
trading should be carried on at fair and prevailing rates and
not at extortionate and preferential ones. Forced gifts of
butter or salt were also strictly forbidden."21 For export and
import trade he had enforced, "The headman should inspect
the product of the country industries, and see that they are
honest and solid in the make and texture. The merchants
who have the responsibility of the import trade at the different
15 Ibid. p. 297.
ie Ibid. p. 270.
17 Collister, Bhutan and the British, p. 78.
18 Deb, Bhutan and India, p. 63.
19 Hunter, A Statistical Account of Bengal, p. 295.
20 Ibid, p.262.
21 Hasrat, The History of Bhutan, pp.57-58.
 Journal of Bhutan Studies
marts also satisfy that they get good things, and all traders
must obey the State merchants in these particulars."22 These
rules were mandatory for aU traders in Bhutan.
WhUe the British government in Bengal had thus been
striving for better trade with Bhutan since the 1770s, a series
of political events in this Himalayan kingdom around the
second half of the nineteenth century further added
momentum to development. In this connection we stress
specifically the annexation of Assam and Bengal duars during
1841-65. It is well established by now that the maintenance
of peace at the Assam-Bhutan frontier was the primary
objective of the British administration in Bengal behind the
annexation of duars.23 But the trade motive was also there.
Around the mid-nineteenth century Assam became
economicaUy important due to her land and climatic
conditions that suited uniquely for the cultivation of tea. The
East India Company turned to Assam for tea plantation in
1833 when the Chinese Government did not renew the
Company's monopoly right over its lucrative trade in tea.
Speculations on tea made duars lucrative to the British since
the clearance of undulating forest in this region was expected
to generate revenue from timber, and to make the place at the
same time ideal for the cultivation of tea. The duar tract was,
indeed, rich in timber, especiaUy for extensive sal forests in
Sidli, Ripu and Chirang duar. To clear these tracts, the forest
tribes tike Meches, Garos, Cacharis and Parbateas24 were
expected to migrate into this region as the labour force.
Immigrants were also expected from surrounding districts
under British administration and Cooch Behar. In addition to
tea and timber, two more considerations were there. First,
cotton was cultivated abundantly on the slopes of the hiUs,
and these so-called 'hiU-cottons' might be exploited for
profitable  ends;   and  second,  the  region had  'an exceUent
22 Ibid.
23 Gupta, British Relations with Bhutan, p. 193.
24 Proceedings of the Lieutenant Governor of Bengal, Oct, referred in
Gupta, British Relations with Bhutan, p. 141.
 Political Scenario in Bhutan during 1774-1906
market for English cloth and brass and copper ware.'25 The
British administration was, therefore, confident about the
duar tract being eventuaUy able to attract entrepreneurs for
tea and cotton plantation as weU as for the exploitation of
timber. A conjecture of more than three times increment in
revenue generation within one and a half decade was the
driving force behind the annexation of this region in the
British dominion. After a number of battles with Bhutan, the
British conquered seven duars in Assam and eleven duars in
Bengal.
Although the Bengal Government paid a sum of Rs. 50000 to
Bhutan as compensation, the annexation of duars had
serious adverse impacts on the Bhutanese economy in
general and on her trade in particular. Bhutan had earlier
kept trade linkage with Assam and Bengal through these
duars. Her people including the privileged class used to get aU
necessary and luxury items from these places.26 Indeed,
Bhutanese traders faced unprecedented hazards in business
due to the economic blockade that the British enforced during
the duar war. Also, the local people of duars, the Mechis for
example, suffered from scarcity and starvation as they
primarily survived on trade with Bhutan. They were on record
to complain,
"[W]e regret to say that owing to the scarcity of rice our
helpless families are brought to starve. The cause of the
grievances arises from the war, being still continued. The
merchants, who had hitherto supplied us with rice and
cotton seeds, venture not to come to our quarter
nowadays."27
In view of the resentments of the Bhutanese government and
her people, the British administration in Bengal adapted a
number of measures. An annual compensation to the
Government of Bhutan by Rs. 50000 was surely an important
25 Ibid. pp. 140-141.
26 Deb, Bhutan and India, p. 118.
27 Referred in Sen, "The Duar War of 1865", p. 29.
 Journal of Bhutan Studies
step to this end. Moreover, the British provided a series of
facilities to Bhutan's trade and commerce.28 Among other
measures that were targeted to pacify the traders in Bhutan,
the Bengal Government established weekly markets, caUed
Tiats', at suitable places where the Bhutanese traders and
consumers could procure rice, cotton, dried fish, pigs, lac,
tobacco etc. that were produced in plenty in duars. Such hats
were also set up in several places in Darrang and Kamrup
duars.29
The duar war had far-reaching socio-political impacts in this
Himalayan kingdom. Since an early time the Penlops
(governors) were involved in fighting with each other leading
to turmoti in domestic law and order situation. For the first
time, the duar war motivated them to form a pressure group
to initiate peace dialogue with the British. The Deb Raja was
also in favour of such a dialogue. The chief intention of these
Governors was obviously the prosperity of the Bhutanese
trade which they themselves carried out heavily. This effort
culminated to the Sinchula Treaty in 1865. It brought an end
to hostilities, and provided a congenial environment for
mutual peace and friendship between Bhutan and British
India. This Treaty was based on the philosophy of laissez farre
which swept the British society around the mid nineteenth
century. This free trade philosophy was contained mainly in
article IX of the Treaty, which abolished the contemporary
duty on the import and export of the Bhutanese goods in
India and also on the British goods imported in Bhutan or
transported through it.30
The Sinchula Treaty was not very successful for two basic
reasons. First, the free trade doctrine of the Treaty was not
widely acceptable to the Bhutanese society. We have already
pointed out that the Bhutanese were suspicious about the
European traders;   and  they  did  not  allow them  to  trade
28 Gupta, British Relations with Bhutan, p. 115.
29 Ibid.
30 Aitchison, A Collection of Treaties, Engagements and Sanads, Vol.
XIV, Part IV, p. 98.
8
 Political Scenario in Bhutan during 1774-1906
directly in Bhutan for a long time. Possibly this fear-psychosis
developed out of their experience in its neighbour country of
Bengal where the European trading community ultimately
took over the political power. Secondly, some provisions in
the above Treaty were violated by Lord Bentink and this
adversely affected the interest of Bhutanese trade. As for
example, Bentinck discontinued the aUowance that had been
provided to the leaders of trade caravans from Bhutan at
Dinajpur and Rangpur.31 Free accommodation of the
Bhutanese at the market places was also discontinued. These
created serious resentment among the Bhutanese traders.
WhUe the Sinchula Treaty could not much accelerate the
Bhutanese trade for the above reasons, the internal political
chaos that took place during 1866 to 189832 crippled trading
activities in the country. Three civil wars were fought here in
succession. The first one ran for about two years since 1866
in consequence of the conflict between the Wangdiphodrand
Dzongpon (Officer in charge of a district) and the Punakha
Dzongpon; the second civil war broke out in 1877 as the
Punakha Dzongpon revolted against the Deb Raja; and the
third one occurred in 1884 with the Deb Raja, the Thimphu
Dzongpon and the Punakha Dzongpon on the one side, and
the Trongsa Penlop, Paro Penlop and various other local
Dzongpons on the other. Out of these civil wars the Trongsa
Penlop emerged as the undisputed ruler of Bhutan.
For these long-drawn internal disturbances a downward
trend ushered in Bhutan's trade with British India during the
last quarter of the nineteenth century. This is borne in Figure
1 which displays the trends of her imports and exports (along
with the total for 1879-1900). It clearly demonstrates a steady
decline in all these series. Taking import and export together,
the shrinkage is worked out at 7.44 percent annuaUy, from
Rs.675 thousand in 1879-80 to Rs.271 thousand in 1899-
1900. To grasp these trends more precisely, we present below
3i Rennie, Bhotan and the story ofthe Dooar War, pp. 159-160.
32 Singh, Himalayan Triangle, p. 330.
 Journal of Bhutan Studies
the estimated trends of the time-series of total trade (T),
exports (X) and imports (M) for the period of 1878-79 to 1899-
1900. The estimations are made on the basis of the least-
square method.
YT =       329097.2
(S.E.=46298.469)
(t= 7.108
Sig=0.000)
- 3070.217 t	
(S.E.=3525.105)
(t= -0.871
Sig=0.394)
(1)
R2=0.037
F=0.759 (Sig=0.394)
DW= 1.738
=     153998.7
(S.E.= 19657.174)
(t= 7.834
Sig=0.000)
526.401 t    	
(S.E.= 1496.672)
(t= -0.352
Sig=0.729)
.(2)
R2=0.006
=0.124 (Sig=0.729)
DW= 1.778
Yx=       178137.5
(S.E.=28762.356)
(t= 6.193
Sig=0.000)
2730.207 t    	
(S.E.=2189.928)
(t= -1.247
Sig=0.227)
.(3)
R2=.072
= 1.554 (Sig=0.227)
DW= 1.592
where t represents year.
800000
700000
600000
Sfi
&    500000
or
400000
■d     300000■
3
200000
100000
IMPORTS
EXPORTS
TOTAL
Year
Fig 1: Bhutan's trade during 1879-1900
10
 Political Scenario in Bhutan during 1774-1906
The above Estimations do not suffer from the problem of
autocorrelation as the observed value of Durbin-Watson (DW)
statistic is above the tabulated value of du in each case.
Against the relevant tabulated value of du at 1.174 at 1%
level, its observed value is 1.738 for Estimation (1), 1.778 for
Estimation (2) and 1.592 for Estimation (3). However, the
most revealing finding of this exercise is that the results
corroborate negative impacts of the political events of the late
nineteenth century Bhutan on her trade. According to our
estimates, the annual rate of decline during 1878-79/ 1899-
1900 was about Rs.526 for import and Rs.2730 for export.
The latter was thus worse hit. Total trade, however, suffered
annually by around Rs.3070. The precisions of these
estimates are, however, doubtful because of their high
standard errors, viz. 1496, 2190 and 3525 respectively.
Moreover, the R2 and F-statistic are found very low for aU the
estimated relations indicating thereby that the relations are
insignificant. Even if we do not accept a strong negative trend
in these series, we may certainly conclude that there was
stagnation in Bhutan's import and export trade during 1878-
99 with a definite ttit to faU. And these ttits were, indeed, due
to her internal political disturbances.
Section II: Political events in the early 1900
The imperial expansion of Russian during the last quarter of
the nineteenth century was a major political event in the
Asian landscape as it caused a threat to the expansion of the
British trade in the Himalayan kingdoms. The British
Government in Bengal sought to politically counter this
potential threat by involving both Tibet and Bhutan in their
favour. Bhutan's trading activities at the debut of the
twentieth century were largely affected by the conflict of these
imperial forces in the Himalayas.
Recorded history informs that during the second half of the
nineteenth century Russia had been extending her empire to
Amur and Vladivostok with a view to setting up a naval base
at the southern end. The objective was evidently to get rid of
the obstacles of ice in her international sea route. By that
11
 Journal of Bhutan Studies
time Russia became powerful in Siberia also as China was
reduced in strength.33 Siberia was connected with her sea
port, the Port Arthur, by a newly constructed trans-Siberian
railway that was extended to China via Manchuria. This great
railway was entirely supervised by the Russians so that they
could have direct influence over a wider geographical milieu.
By the end of the century Russia had also consolidated her
political influence in Asia, particularly in the Mongolian
domain. Her expansion became undoubtedly a real threat to
the central Asia and the Himalayan countries. The British
military officers were worried about the expansion of Russia
towards Chinese Turkestan which was situated in between
Russia and Tibet. To check Russian expansion towards
Turkestan, the Anglo-Russian Pamir Boundary Settlement
took place in 1895. The conflict between the expansion of
Russian and British imperialism was thus imminent. Indeed,
the Anglo-Russian Pamir Boundary Settlement (1895) that
declared status quo across a given corridor in the western
Himalayas resolved the tension in the west.34 But in the
eastern Himalaya, the threat of Russian expansion remained
unresolved as they had already reached at the door of Tibet.
The British was seriously concerned about this development
because, as we have already pointed out, they targeted the
Tibetan market as an outlet of British goods, especiaUy
woollen fabrics. As a matter of fact, the steady growth of Indo-
Tibet trade inspired J.C. White, the British political officer in
Sikkim, to send in 1894-95 the specimen of British woollen
fabrics to Tibet to grab that market but 'Lhasa was opposed
to the entry of British and even Sikkimese subjects into
Tibet.' As the direct route to Tibet through Sikkim was
obstructed by the Tibetans, Bhutan gained importance to the
British at the end of the nineteenth century. The Russians
had also immense trading interests at Tibet. By the end of the
nineteenth century she had already had an extensive market
in that country for her products like woollen cloths and glass
33 Parker, A Historical Geography of Russia, pp. 366-367.
34 Lattimore, Studies in Frontier History, p. 168.
12
 Political Scenario in Bhutan during 1774-1906
ware.35 These markets she had occupied by competing with
the Chinese goods.36
In 1899 when Curzon came as Viceroy, the British
administration was suspicious about the coUusion between
the authorities of Russia and Tibet.37 To check Russian
expansion towards Tibet, Curzon decided to send in 1903 an
armed mission under the leadership of Younghusband to
develop relationship with the Dalai Lama, the political
authority of Lhasa. In view of the fact that the British had
previously failed to establish direct contact with him, Curzon
sought for the assistance of Ugyen Wangchuk, the Trongsa
Penlop of Bhutan. Ugyen Wangchuk, indeed, assisted the
Younghusband Mission in all respects. The relationship
between the British administration and Tibet that emerged in
this process culminated to the Anglo-Tibetan Convention of
1904. This mission had an explicit objective to promote trade.
Out of nine articles that were adapted in the convention, as
many as seven were directly or indirectly related to trade
between Tibet and Bengal. Those articles38 were: (1) new trade
markets were to be developed at Gartok and Gyantse, (2) the
questions of tea and tariff were agreed to be discussed later
on, (3) free trade provision for quota-related articles were also
to be settled later on mutual agreement, (4) roads to new
trade marts were to be constructed, (5) a compensation of
Rs.75,00,000 should be given to the Tibetans at the
instaUment of Rs. 100000 per year in seventy five years, (6)
the British were to occupy Chumbi vaUey for the collection of
compensation and the operation of trade marts, and (7) the
Tibetans should destroy all forts along the Indo-Tibet border.
That the Trongsa Penlop was instrumental in forging
relationship between the British and Tibet both the
Younghusband mission and the Viceroy of India sincerely
acknowledged. Thus, Younghusband put on record,
35 Collister, Bhutan and the British, p. 135.
36 Ibid.
37 Singh, Himalayan Triangle, p. 334.
38 Lamb, Britain and Chinese Central Asia, pp. 302-303.
13
 Journal of Bhutan Studies
"The Tongsa Penlop himself, the principal man in Bhutan,
accompanied the mission to Lhasa, put me into
communication with leading men and was highly
instrumental in effecting a settlement. A year ago the
Bhutanese were strangers, today they are our enthusiastic
allies. "39
In a similar tone a contemporary document notes, "His
ExceUency the Viceroy entertains no doubt that the Trongsa
Penlop's sound advice and exhortation to the Tibetan
Government have been promoted by an earnest desire to
establish feelings of friendship and good understanding
between the parties to the recent Agreement."40 In recognition
to the service that Bhutan rendered, the British extended
many facilities to that country under the recommendations of
White who led a mission to Bhutan in 1903-05. Among others
White recommended: (1) that the Government of India should
enhance the subsidy to Bhutan from Rs.50000 to Rs. 100000;
(2) that the Sinchula Treaty of 1865 should be revised in
respect of Bhutan's foreign relation with China and Tibet; (3)
that new roads should be constructed in Bhutan under the
financial assistance from British India; and (4) that the Indo-
Bhutan trade relation should be improved.4! Also, the British
administration provided compliments to the Trongsa Penlop
Ugyen Wangchuk by conferring him the title of Knight
Commander of the Indian Empire. He was invited as a State-
Guest of the Government of India, and given a reception
similar to those provided to the Maharajas of Princely States.
In 1907 when the Bhutan Darbar decided Ugyen as the
hereditary chief, the Indian Government immediately
supported the decision.
China's threat to Bhutan further pushed Bhutan closer to
British India during the first quarter of twentieth century. By
the early twentieth century it was well understood in the
British circle in Great Britain as well as in India that Russia
39 Quoted from Kohli, India and Bhutan, p. 164.
4° Ibid.
4i Collister, Bhutan and the British, p. 155.
14
 Political Scenario in Bhutan during 1774-1906
was no longer interested in Tibet as she was grossly involved
in war with Japan. But since the days of the Younghusband
mission, China had been foUowing a policy to extend the
border towards Tibet as well as other kingdoms in the
Himalayas. In so far as Tibet was concerned, she was
determined to invade the country with the hope to
establishing her suzerainty. In a communication to Bhutan,
China, indeed, explicitly claimed her political sovereignty over
that country. It noted, "The Bhutanese are the subjects of the
Emperor of China who is the Lord of Heavens, and are of the
same religion as the other parts of the Empire. You, Deb Raja,
and the two Penlops think that you are great, but you cannot
continue without paying attention to the orders of your
rulers."42 From such a perception China directed the Deb
Raja to develop China-Bhutan trade. The document
instructed, "The Popon [Paymaster] will inspect your climate,
distance of places, crops etc. Transport of fifteen ponies and
twenty coolies must be supplied. The Deb Raja must try to
improve the trade of the country and the condition of
tenantry."43
Bhutan did not, however, pay any attention to those Chinese
directions and, in fact, restricted the entry of the Popons
inside Paro. Though the Maharaja of Bhutan did not even
meet the Chinese delegation in person the British
administration sought to keep Bhutan under a tighter grip by
providing her further supports such as financial and
engineering supports to the construction of roads, managerial
supports to her tea gardens, etc. These supportive gestures
from the British end went a long way to improve the Indo-
Bhutan political and trade relations in the early twentieth
century. Necessarily, those relations were based on mutual
trust and confidence. This policy was, however, altered during
the period of Lord Minto (1908) who favoured direct military
intervention in the Himalayan kingdoms to check the Chinese
aggression. Therefore, the Punakha Treaty (1910) that was
42 Kohli, India and Bhutan, p. 176.
43 Ibid.
15
 Journal of Bhutan Studies
signed between British India and Bhutan promulgated the
Bhutan government to seek mandatorily the advice of the
British government in her external relation with other
countries.44 This treaty thus enabled the British to trade in
Bhutan through controUing her external affairs with other
countries. In fact, Bhutan's trade with British India showed a
rising trend from the beginning of the twentieth century.
We, thus, find that while the period 1878/79-1899/1900 was
characterised with political instabilities in Bhutan, both
internal and external, the following period of 1900/01-
1905/06 was tranquil in both these front. Since the British
India government was largely instrumental in her emerging
external tranquility and this they did by way of trade-centric
policies, we reasonably expect Bhutan's trade to exhibit rising
trend in this period. Figure 2 confirms this. It shows that the
period witnessed a 60.42 percent annual growth in export.
For export and import together, the growth was from Rs. 271
thousand in 1899-1900 to Rs. 1.27 miUion in 1905-06.
1400000n
1200000
EXPORT
IMPORT
TOTAL
1900-01        1901-02       1902-03       1903-04       1904-05       1905-06
Year
Fig 2: Bhutan's trade during 1900-1906
44 Aitchison, A Collection of Treaties, p. 100.
16
 Political Scenario in Bhutan during 1774-1906
Rising trends in these series are precisely estimated below on
the basis of the least square method. The notations are as
before.
YT=       284683.8       +       128956.2 t     (4)
(S.E.= 166966.4) (S.E.=42873.004)                           R2=0.693
(t= 1.705 (t=3.008             F=9.047 (Sig=0.040)
Sig=0.163) Sig=0.040)                              DW=2.683
135752.7    +  131559.3 t   (5)
(S.E.= 158843.4) (S.E.=40787.219)          R2=0.722
(t= 0.855 (t=3.226   F= 10.404 (Sig=0.032)
Sig=0.440) Sig=0.032)          DW=2.886
YM=       148931.1 -      2603.114 t     (6)
(S.E.=22072.782) (S.E.=5667.767)                          R2=0.050
(t= 6.747 (t= - 0.459               F=0.211 (Sig=0.670)
Sig=0.003) Sig=0.670)                                 DW= 1.042
For the estimated relations (4) and (5), the value of R2 is
found moderately high, viz. 0.693 and 0.722 respectively.
Their observed F-statistics are also found significant at more
than 0.5 percent level. We thus infer that these estimated
relationships are significant. Moreover, the Durbrn-Watson
(DW) statistics are found above the tabulated du level for both
the cases so that they do not suffer from the problem of
autocorrelation. These estimations, however, indicate that
Bhutan's export trade and total trade experienced steep
upward trends during this period. Annual rates of absolute
growth are Rs. 132 thousand and Rs. 129 thousand
respectively. These estimates are significant at 0.04 percent
and 0.03 percent respectively from the viewpoint of Student's
t-statistic.
Estimation (6) that relates to the trend of import is, however,
found insignificant from the viewpoints of R2 and F statistics.
While R2 is as low as 0.211, the observed F-statistic is
insignificant at 0.1 percent level. Moreover, the observed DW
17
 Journal of Bhutan Studies
statistic belongs to the inconclusive range of tabulated dL-dU.
Hence, the goodness of fit is very poor for Bhutan's import
trend in this period of study. In fact, the flat segment of
import series in Figure 2 presumes such results. Juxtapose to
this absence of any upward trend in import, the upshot of
Bhutan's export in the early twentieth century bears a
significant indication. It signifies that British India sought to
get political relationship with Bhutan by greater rn-take of
Bhutanese goods although Bhutan did not much enhance the
import of goods from British India in this period. This prima
facie contradicts the widely accepted doctrine that the
economic interest always prevails over the course of political
actions by the 'core' capitalist countries. But we should note
that British India's trade interest with Bhutan might have
been sacrificed for political gains. But those political gains
were expected to promote further trade in the long-run with
Bhutan and also with Tibet and China.
Section III: Conclusion
Various political events concerning Bhutan in the eighteenth-
nineteenth centuries had thus far-reaching bearings on her
foreign trade. When the Tibetan trade route via Nepal was
closed to the British in the late eighteenth century, the East
India Company sought for a route to Tibet and China through
Bhutan. But since Bhutan was stubborn not to aUow transit
trade or trade in Bhutan by the European, the Company's
administration in Bengal sent several political missions to
Bhutan and Tibet. Many trade concessions were also granted
to the Bhutanese. The Company could obtain at the end trade
permissions for non-European traders, especiaUy Indians.
But the Duar War (1865) that the British indulged in for tea
and related industries in and around Assam vitiated the
mutual trust between British India and Bhutan. A series of
trade-related concessions including an annual compensation
was sanctioned to Bhutan on that occasion through the
Sinchula Treaty (1865). But the laissez faire phtiosophy that
the Treaty enshrined was not appreciated at large in the
Bhutanese society. Moreover, the Bengal administration
disobeyed some of its clauses. The Treaty could not, therefore,
18
 Political Scenario in Bhutan during 1774-1906
bring any break-through in trading activities between these
countries. Three successive civil wars in Bhutan during 1866-
84 further vitiated the prosperity of trade. Our trend analysis
during 1878/79-1899/1900 has, in fact, shown that there
was a secular decline in her imports and exports during this
period.
The foUowing period of 1900/01-1905/06 brought trade
prosperity to Bhutan based on the privtieges that British
India granted to her. The British sanctioned those
concessions with a view to checking the expansion of the
Russian imperialism in the Eastern Himalayas, especially the
kingdoms of Tibet, Bhutan and Nepal. In fact, with the help of
the Trongsa Penlop of Bhutan, the British mission could
establish a liaison with Tibet. The Chinese threat to Bhutan
also induced the British to keep her under a tight grip.
Because of benevolent British policies, however, Bhutan's
trade grew rapidly during this period. Our trend analysis
suggests that her export trade took a steep upward turn
during 1900/01-1905/06 although her import trade
remained largely stagnant.
There is no doubt that the British and the Bhutanese worked
together for their mutual interests. The Trongsa Penlop
assisted the British during the Younghusband mission for
several reasons. He knew that Bhutan depended on the
annual subsidy given by the British Government, and its
withdrawal might be dangerous for the Bhutanese economy.45
Moreover, he was very much concerned about trade, and
strongly believed that the occupation of Chumbi vaUey by the
British might help them move forward in trade-related issues.
After becoming the hereditary monarch of Bhutan in 1907,
Ugyen Wangchuk focused on improving the country's
economic conditions through various schemes. Those
initiatives and efforts established a firm relation between
Bhutan and British India during his reign.
45 Kohli, India and Bhutan, p. 160.
19
 Journal of Bhutan Studies
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