Nearly 95 percent of Phuentsholing residents rely on Jaigaon for at least some of their shopping, with lower prices, wider product choices and greater convenience emerging as the key reasons why Bhutanese consumers continue to cross the border, according to Bhutan’s first comprehensive Cross-Border Retail Competitiveness Study.
The study, conducted by the Competition and Consumer Affairs Authority (CCAA) paints a stark picture of a retail sector under mounting structural pressure. Based on a survey of 91 products across 10 categories, interviews with 312 residents, and a focus group discussion involving 20 retailers, the report concludes that Phuentsholing’s retailers are at a significant disadvantage due to higher operating costs, fragmented supply chains, multiple taxes and limited access to wholesale markets.
According to the findings, 94.9 percent of respondents said they shop in Jaigaon for at least some of their purchases, while 75.9 percent identified the Indian border town as their primary shopping destination. Only 5.1 percent said they shop exclusively in Phuentsholing.
The survey also found that 70.5 percent of respondents visit Jaigaon at least once every week, with nearly one in five crossing the border daily, highlighting how deeply cross-border shopping has become embedded in everyday life.
An overwhelming 90.1 percent of respondents cited lower prices as the primary factor influencing their decision to shop in Jaigaon, making affordability by far the most significant driver of consumer behavior. Wider product variety followed as the second most important reason, mentioned by 62.2 percent of respondents, while better customer service (39.7 percent) and shopping convenience (30.4 percent) also influenced purchasing decisions.
Interestingly, only 15.4 percent believed products in Jaigaon were of better quality, suggesting that Bhutanese consumers are crossing the border primarily because goods are cheaper and more readily available rather than because they perceive Indian products to be superior.
Supporting these findings, the study mentions that among the 10 product categories examined, fresh fruits and vegetables recorded the largest price gap, costing an average of 155.5 percent more in Phuentsholing than in Jaigaon. Individual products showed even steeper differences. Tomatoes were priced 237 percent higher, potatoes 232 percent higher, cabbage 223 percent higher, and onions 132 percent higher in Phuentsholing.
The report attributes these extraordinary price differences to Bhutan’s dependence on imported produce during winter and spring, combined with multi-layered supply chains that require retailers to source goods through several intermediaries before they reach consumers.
Household appliances were the second most expensive category, averaging 19.7 percent higher in Phuentsholing. Some products carried particularly large premiums, with refrigerators costing 44.6 percent more, electric kettles 32.9 percent more, and induction cookers 29 percent more than comparable products in Jaigaon.
School supplies also emerged as a major concern for families. The study found that school items cost an average of 10.9 percent more in Phuentsholing, with notebooks, stationery and school socks ranging between 18 and 41 percent higher than across the border.
Hardware products and Mahindra vehicle spare parts were similarly more expensive by 12.3 percent and 10.4 percent, respectively.
By contrast, packaged food items, sanitary products and personal care products were found to be priced close to parity, indicating that not all categories suffer from major price disadvantages.
Consumer electronics stood out as the sole exception. The study found that electronic goods were 6.3 percent cheaper in Phuentsholing than in Jaigaon, largely due to favourable import tariffs and the presence of authorized distributors in Bhutan.
This finding proved particularly significant because electronics did not appear among the most frequently purchased items in Jaigaon.
So what actually is the problem?
Retailers who participated in the focus group discussion identified several structural barriers preventing them from matching Jaigaon’s prices.
Among the biggest challenges are multiple layers of taxation, customs clearance fees, MDP charges, transportation costs, high commercial rents and staff salaries. Unlike their counterparts in Jaigaon, Bhutanese retailers cannot directly access Indian wholesale markets and are often forced to purchase goods through multiple intermediaries, each adding an additional markup.
The absence of authorized distributors for many brands within Bhutan further increases costs.
Retailers also pointed to informal cross-border trade as a growing concern. Goods transported through private vehicles, unlicensed door-to-door vendors and informal online sellers often operate outside the regulatory framework without paying taxes or compliance costs, creating what businesses described as an uneven playing field for licensed retailers.
The study also highlighted broader issues affecting consumer preferences. Jaigaon’s organized retail layout, concentration of shops by product category, wider merchandise selection and more developed retail environment make shopping quicker and more convenient, encouraging consumers to purchase several categories of goods during a single trip.
The report warns that the implications extend well beyond the retail sector. For households with limited incomes, paying more than double for staple vegetables or significantly higher prices for school supplies represents a recurring strain on family budgets. The study argues that retail competitiveness should therefore be viewed not only as a commercial issue but also as a cost-of-living challenge affecting household welfare.
Is there a solution ultimately?
To reverse the trend, the CCAA recommends a comprehensive review of goods taxes, customs-related charges and import fees to reduce the financial burden on retailers. It also calls for stronger monitoring of informal commercial imports, improved access to Indian wholesale markets for Bhutanese businesses, incentives to attract authorized distributors, and investment in retail skills, customer service and access to finance.
The report further recommends conducting annual retail competitiveness surveys to monitor price movements and assess whether policy interventions are helping narrow the gap between Phuentsholing and Jaigaon.
While the findings underscore the significant challenges facing Bhutan’s border-town retailers, the study also offers a measure of optimism.
The success of the electronics sector demonstrates that when Bhutanese retailers have direct supply chains and favourable import conditions, they can outperform competitors across the border. The report concludes that with coordinated reforms spanning taxation, trade, customs and market regulation, Phuentsholing can strengthen its competitiveness and gradually win back consumers who currently shop in Jaigaon.
Tashi Namgyal, Thimphu
