India-Bhutan Bilateral Relations

Context:

Bhutan Prime Minister Dasho Tshering Tobgay paid an official visit to India from February 20-21, 2025 to attend the School of Ultimate Leadership (SOUL) conference.

Recent Visits of Prime Minister of Bhutan to India

• Prime Minister Tshering Tobgay’s visit is in keeping with the tradition of regular high-level exchanges between the two countries. During this, Mr. Tobgay held a meeting with Prime Minister Modi.
• According to the Indian Ministry of External Affairs, India and Bhutan enjoy “exemplary ties” of friendship and cooperation based on trust, goodwill and mutual understanding at all levels.

About India-Bhutan bilateral relations

Diplomatic relations:

• Formal diplomatic relations between India and Bhutan were established in 1968.
• The basic foundation of India-Bhutan relations is the Treaty of Friendship and Cooperation signed between the two countries in 1949, which was renewed in February 2007.
• The King of Bhutan conferred the Order of the Druk Gyalpo, Bhutan's highest civilian honour, on Prime Minister Modi in December 2021.

Trade and economic relations:

• India is Bhutan's top trading partner, both as an import source and export destination.
• Bilateral Trade: Since 2014, India's trade with Bhutan (excluding electricity) has almost tripled from $484 million in 2014-15 to $1606 million in 2022-23 which is about 73% of total trade with Bhutan.
• Top Exports to Bhutan by India: Petrol & Diesel, Passenger Cars, Rice, Charcoal, Cellphones, Coke & Semicoke, Soyabean Oil, Electric Generators & Motors, Turbine Parts, Transport Vehicles, Bitumen, etc.
• Top Imports from Bhutan by India: Ferro-silicon, Ferro-silico-manganese, Dolomite Chips, Ordinary Portland Cement, Silicon Carbide, Cardamom, Arecanut, Oranges, Semi-finished products of iron or non-alloy steel, Boulders, etc.
• Top Imports from Bhutan by India: Ferro-silicon, Ferro-silico-manganese, Dolomite Chips, Ordinary Portland Cement, Silicon Carbide, Cardamom, Arecanut, Oranges, Semi-finished products of iron or non-alloy steel, Boulders, etc.
• Investment: India is the major source of investment in Bhutan, accounting for 50% of the country's total foreign direct investment.
• Free Trade: The India-Bhutan Trade, Commerce and Transit Agreement, 1972 establishes a free trade regime between the two countries.
  • The agreement also provides for duty-free transit of exports from Bhutan to third countries.

Development Partnership

• India has been assisting Bhutan in its socio-economic development since the early 1960s.
• For the 12th Five Year Plan, India's contribution of Rs 4500 crore is 73% of Bhutan's total external grant component.
• The major areas of Government of India's assistance include agriculture and irrigation development, ICT, health, industrial development, road transport, energy, civil aviation, urban development, human resource development, capacity building, scholarships, education and culture.
• Currently, Bhutan has more than 83 large and medium projects (projects under Project Linked Assistance) and 524 Small Development Projects/HICDPs at various stages of implementation.

Hydropower Cooperation:

• Cooperation between India and Bhutan in the hydropower sector is covered under the Bilateral Cooperation Agreement of 2006 and the Protocol to the Agreement signed in 2009. 
• Bhutan has four hydropower projects (HEPs) with a total capacity of 2136 MW already operational and supplying power to India-
  • Chukha Hydroelectric Project (336 MW)
  • Kurichhu Hydroelectric Project (60 MW)
  • Tala Hydroelectric Project (1020 MW)
  • Mangdechhu Hydroelectric Project (720 MW)
• As per Bhutan government data, India imported electricity worth Rs 2448 crore from Bhutan in 2022.

Educational, cultural cooperation and people to people exchange

• More than 1000 scholarships are being provided annually to Bhutanese students for studying in India in various subjects including medicine, engineering etc.
• About 4,000 Bhutanese students are pursuing undergraduate courses in Indian universities on a self-financing basis.
• The India-Bhutan Foundation was set up in 2003 with the objective of enhancing people-to-people exchanges in areas such as education, arts and culture and environmental protection.

Cultural and Buddhist Relations:

• Many Bhutanese pilgrims visit Bodh Gaya, Rajgir, Nalanda, Sikkim, Udayagiri and other Buddhist sites in India.
• As part of the 50th anniversary celebrations of diplomatic relations, the Indian government sponsored the visit of 18 Lam Neten (Buddhist monks) and representatives of the central monastic body of Bhutan to India.

Science and Technology Cooperation:

• Bhutan became the second country to launch the BHIM app, deepening financial ties between the two countries.
• India is collaborating with Bhutan on several technology initiatives, such as financial assistance for optical fibre backbone up to gewog (village) level in all 20 districts of Bhutan for Digital Drukyul and support for setting up the third international internet gateway for Bhutan.

 Space cooperation:

• In August 2019, the two countries agreed to cooperate on the joint development of a small satellite for Bhutan.
• Memorandum of Understanding between India and Bhutan on cooperation in the peaceful uses of outer space in November 2020.
• Indo-Bhutan SAT, a satellite jointly developed by ISRO and Department of Information and Technology, was launched on November 26, 2022 by ISRO's Polar Satellite Launch Vehicle (PSLV). 

Indian diaspora in Bhutan:

• About 50,000 Indian nationals are employed in Bhutan. These are mainly in the construction sector, education and technical consultancy sector involved in infrastructure projects.
• Some Indians also travel to and from Bhutan daily from border towns for daily labour, indicating close economic interdependence between the two countries.