Free trade is the term given to trade between nations that takes place without the imposition of barriers in the form of tariffs, quotas or other measures by governments or international organizations. Free trade is generally considered by economists to be beneficial to international trade by encouraging competition, innovation, efficient production and consumer choice (Just $ Antle, 1990). Free trade brings positive impacts to the particular country like international community by enabling countries to specialize in certain goods and services and increase their productivity. Free trade also brings problems or negative impacts like domestic industries by increasing competition and increasing business risk. Thus free trade is Trade is an essential part of the economy with high benefits as well as negative impact to the nation. With this I will be analyzing the impact of free trade with India on Bhutan describing free trades impact on agriculture.

Agriculture has been realized as a source of livelihood of vast majority of people in developing countries, despite its declining share in many national economies during the past decades. For farmers and their families, agriculture is a source of food, medicines, housing, saving, etc. in which they can also convert farm outputs into income for their children’s education and to meet other needs (Bhandari, 2004). In social terms, agriculture can also be a source of freedom, knowledge, and social network and relationships. Therefore, unlike other sectors, agriculture is multifunctional. It is a source of income, self-employment and social safety net for rural population. It is fundamental to food security although it can be argued that not all people in food abundant countries were secured food access. In addition, the way agriculture is developed is closely linked to biodiversity, natural resources, local knowledge and cultures. The primary goals of agriculture in Bhutan are to raise the per capita income of the people living in rural areas, to enhance self-sufficiency in staple crops, and to increase the productivity per unit of farm labor and agricultural land.

For countries that have a competitive agricultural sector, the expansion of international trade in agricultural commodities can have a growth-enhancing effect and improve their trade balance. These benefits should be balanced against other potential impacts on the right to food. As Bhutan being developing country, people depends more on agricultures sectors rather than manufacturing sectors. However, free trade with India has a great advantage for Bhutan. As India [SD1]is not only Bhutan’s main development partner but also its leading trade partner. A free trade regime exists between India and Bhutan enables Bhutan to specialize in the production of those commodities in which they have a comparative advantage (Wangyal, 2000). For example, Production of cash crops such as apple, orange and cardamom have increased and have become profitable. This helps country to take advantage of efficiencies generated from economies of scale and increased output. International trade increases the size of a firm’s market, resulting in lower average costs and increased productivity, ultimately leading to increased production. It also benefits the consumers in the domestic economy as they can now obtain a greater variety of goods and services. The increased competitions ensure goods and services, as well as inputs, are supplied at the lowest prices. By concentrating on agricultures sectors, it may be possible for countries and the firms operating in their territory to build up economies of scale that