Saturday, October 14, 2017

A Very Un-Neighborly Interest Rate?

India recently inaugurated the start of work on their 508 KMs Mumbai-Ahmedabad Bullet Train project that is expected to be completed by 2023. The project was initially estimated at Rs. 63,000 Crores but it now stands at Rs.110,000 Crores (about US$17 billion). This is 8 times Bhutan’s GDP! But that is not the breaking news.

Of this total sum, 81% or Rs. 88,000 Crores is being loaned by Japan. That is still not the big news.

Even more interesting, the loan is repayable over 50 years – starting after 15 years as of 2017. That is very, very interesting – but not entirely earth shattering.

What is THE BREAKING NEWS is this: India is getting the loan from Japan at 0.10% p.a.!!! Yes, what you are seeing is correct – the interest rate is ZERO POINT ONE ZERO PERCENT!

Compare that to what Bhutan is paying to India for our doomed hydro-power projects:

10% p.a.

This is one hundred times more than the rate India will pay Japan!!!

India is our closest friend and ally – through thick and thin, we have been with them ---- so naturally we are very happy that they got such a fantastic deal from Japan.

But what about us? India is an emerging economy with a GDP of US$2,400 billion. Our GDP is a minuscule US$2.4 billion – less than one thousandth of India’s.

How come a poor country like Bhutan is paying an interest rate that is hundred times more than what one of the world’s biggest economies is paying?



  1. It's in part a function of regional disparities. Take a look at the HSBC rates (the HKD is tied to USD):

    And weep for us too...

  2. Can you share any reliable published document supporting your claim. I would like to know more about it.

    1. Dear Aksh,

      The news about the loan and the interest rate about your high speed train project with Japan is all over the Indian newspapers.

      Regarding the rate of interest and loan terms with respect to Hydro-power collaboration between Bhutan and India is available at:

  3. I don't like the fact that what India is trying to do with my country frist, secondly the hydropower that has to be complete within given deadline is problem, delaying hydropower which is causing millions of debth to Bhutan economy, thirdly why Dantak is still station in Bhutan by giving excuses and all of bulding the roads and all. Dear Indian we can do it now? Please leave their are 1000 millions of people in India who still needs roads, food and a lot....
    Now we can takeover anything...

  4. One thing the author missed mentioning (and it could make a substantial difference to the blog piece) is that 40% of GOI's funding in Punatsangchu -I and 30% each in Punatsangchu -II & Mangdechu are grants (grants are non-repayable funds disbursed or gifted to a grantee).

    The second factor we should note while understanding such issues is that each project (and in this case it's not Bhutan as a country who's the actual borrower but the respective power projects in particular) is assessed individually for arriving at interest rates - the same bank has different rates of interest for home loans and personal loans.

    Lastly, whatever the amount of loan or rate of interest, whatever tenure, it's all together a different matter if Japan's loan is good for India at all. Here's a personal example: When I just got my first job, I used to ask/request every credit card sales guy to help me get a credit vain, because my salary was too low to qualify for a credit card. Fast forward 5 years into my career, as I moved to a bigger company with a bigger pay, every sales guy pestered me with a credit card option (with bigger credit limits and waived annual fee). I picked two credit cards and after using them rather enthusiastically for about 4 years, I realized I was better off without them. I had to really fight myself (spending can be an addiction too) and the bank guys who didn't want to lose the profits I contributed, to kick them from my wallet. Now I carry less debt, less burden and more cash.

    I personally mourn this huge Japanese loan to India.

    1. Hi Chrysolyte

      Nice personal anecdotal account.

      So what you are saying is that the Credit Card companies did not give you a Card because they realized that you were a credit risk, given your poor financial capabilities – a good decision in your opinion.

      The insinuation here is that Bhutan is a bad credit risk and yet, India is giving us loan – even if at an interest one hundred times more than what she is paying. So what do you call this? Financial hara-kiri? An act of benevolence?

  5. India buys electricity from Bhutan at Rs 1.50 per unit and sells to its Indian consumers at Rs 7 per unit, thus making a profit of Rs 5.50 from every unit. Whereas, for our own resource, we Bhutanese pay between Nu 3 to 4 per unit at an average for domestic use.

    Economically, with 70 % loan payable back with 10 % interest and 30 % as grant, Bhutan should be getting its share of 70 % of Rs 7 i.e. Nu 4.9 per unit or at least between Nu 4 to 5 per unit. Return profit should be calculated based on financial burden borne by the investors. Besides, price valuation on the usage of our water, our land, social damages, environmental damages and destruction has to be taken into account while fixing the export price.

    Though India is funding the whole cost initially but that is done for its strategic purposes to have full control, dominance and capture Bhutan’s only source of bread and butter for its strategic interest and does not want other countries to invest and compete with it.

    Since long time, several countries and organizations like Japan, Norway, Austria, ADB, World Bank and recently Bangladesh have shown interest to invest in our hydropower projects and even did several feasibility studies and investments but it could not come through as India does not want to buy energy produced by others.

    Recently, with China getting serious with its air pollution control, wants to replace its fossil fuel produced electricity with renewable clean electricity is wanted to fund, help build and import from its southern Himalayan neighbors Nepal and Bhutan where there is huge potential to produce cheap clean electricity due to its steep geographical terrains and perennial water supply.

    With huge shooting debt burden, displacing thousands of people from its ancestor lands by the projects, damaging our environment, drying & disturbing of our rivers ecosystems due to damming, power projects failure, increase in imports, huge influx of outsiders, outdated technologies application, pollution and destruction that comes with the activities is not worth to agree for what we were given by India.

    This is neither a true friendship nor a fair business model where one takes the Pumpkin share and the other given a peanut.

    It is time for Bhutanese people to be No where it has to be No and Yes where it can be Yes.

  6. Chrysolyte, LOL. According to Indians, Chinese company was taking advantage of Sri Lanka when Chinese company give them 6.5% loan while the open market was 11%. Chinese government give Pakistan loan at 3% or less (some private company loan at 6%) while open market was 10%. so Indian charge Bhutan interest rate at 10% while from 2012-2017, Bhutanese bond rate was 6% because Bhutan has bad or no credit? You people are good at painting a high way robbery into a charity event:
    Bhutan interest rate:

    Only in small people with small heart India, what is mine, is mine, and what belong to my neighbors is also mine. Sell me electricity at rock bottom rate, and I give the interest rate 4% above open market.

    Bhutanese need to establish a formal relation with your northern neighbor to stop this brazen, shameless pillage.

    No need to mourn the Japanese loan, you do not pay it, your grandchildren will. With the way that Indian operates any machines, your grand children will be lucky to still able to use it. But what do you care, by then you will have much greater population dividend, and Modi got sound bites in election...

    Here is interest for CPEC, go to Finance section:

    1. I will make a correction here that interest ate and government bond rate are different. I found Pakistan 30-Year Bond Yield is 13.5% today. 13.5% is the rate Pakistan government pay to borrow in open market. I can not find one for Bhutan government.
      Maybe some one can find the rate Bhutanese government pay on open market, and see how much of a discount Indian is given to Bhutan.

      So it look like india was untrustworthy when "Indian financing, which has switched from 70% grant and 30% loan to 30% grant and 70% loan at higher interest rates". If I was going to buy a big ticket item, I will calculate to decide if I can afford it by how much I will pay and interest rate. Charge the rate and the money more than it advertised is unethical and unlawful. Again, I will say Bhutan need make more friends.
      Here is two articles address same issue:
      From Chinese news:
      Who is bullying Bhutan, China or India?

      From Indian news:

      Bhutan Stands By India, But Modi Is Weakening It

    2. FYI, Here is the link for Pakistan government 30 year bond rate:

  7. I guess India can't afford to keep giving money to Bhutan. India is the biggest donor to Bhutan, it funds most of the development projects like building schools, hospitals, supplies to army including food and uniforms. Major contribution for Bhutan come from India, salary of Bhutanese Government employees etc.

    1. I have a easy suggestion for India to save money in Bhutan, remove your occupation troop from Bhutan land. A independent Bhutan can borrow at much lower rate, such as 3%, or 0.01% and return your "fair" interest loan, how about that, dear "brother"?!

    2. China will easily fill in any gaps that India creates,

  8. How come Indian troop is occupying land in Bhutan. When did it happen ???? who allowed it to happen ??? This is what happens when the less visionary political leaders of the country get sold. That's infringing Bhutan's right to stay an independent sovereign nation.

    1. We have a saying in Bhutan “ don’t shit in the plate where you eat food from” . You are indirectly implying our monarchs sold our country to India . When China was invading Tibet , Bhutan had no choice but to turn to India and its military for its power . India 🇮🇳 helped us get into the UN . Our kings vision to stay with India rather than China is the very reason we have a country . If we had turned to China during that time , they would have taken us over as a part of Tibet and rewritten our history . I am glad our kings don’t be have shit heads like you advising on our foreign policies .