News : Bhutan, rocked by the ripple effect.

Most Bhutanese would be familiar with the saying, “When India sneezes, Bhutan catches a cold” to indicate how closely integrated Bhutan is with its southern neighbour at so many levels.

Consider the sky rocketing price of onions, a big issue India, big enough even to topple governments, because the pungent tear-inducing bulb just about goes with every kind of Indian meal, fried, boiled or consumed raw.

Here too, consumers have been complaining about the price of onions, around Nu 80 a kg in the Thimphu vegetable market over the weekend, and some eateries and canteens have stopped serving chopped onions as an accompaniment during lunch hour.

The only positive aspect about onions getting expensive, as someone pointed out in the past, is that the momos or dumplings will have more meat, instead of onion, in them.

But what happens when America, the world’s largest economy, on the other side of the globe, catches a cold?  Does it even impact Bhutan?

The tourism industry would say yes.  Americans are among the top dollar paying tourists, who visit Bhutan almost every year, and sick Americans would mean fewer high-end tourists to Bhutan.  So even though Bhutan might be a remote country shrouded in mystery, there is no escaping the world is flat syndrome.

And if events of the recent weeks are anything to go by, it clearly shows other ways of how Bhutan can be affected by what happens in another part of the globe.

The United States scaling back its quantitative easing programme has depreciated the Indian rupee to new lows and, in the process, the Bhutanese Ngultrum has also nosed dived since it is pegged at parity with the rupee.

This has caused a major scare for a number of Bhutanese industries that import raw materials from other countries to produce goods for the domestic market and beyond.  Even importing computers has become all the more expensive in a span of few weeks because of falling exchange rates.

When the 2008 U.S. recession hit, it was initially only the tour operators that were worried because it translated to fewer footfalls.  Officials said that Bhutan would not be affected because it was not integrated with the global market and its isolation provided the insulation.

That all turned out to be false.  The new steel and ferro industries at the Pasakha industrial estate had to approach the government to re-adjust their loan repayment since their main market, India, had been affected and business was at rock bottom.

Being remotely located can no longer serve as a shield against global shocks.  As efforts are made to further integrate Bhutan with the global economy, it might be well worth preparing for all kinds of economic shocks.

For now, it is a relief to know that the country has enough foreign currency reserves to cover 12 months of essential imports.