• Bhutan was one of the first to recognize India’s independence in 1947 and both nations fostered close relations. India shares a 605 kilometers border with Bhutan and is its largest trading partner, accounting for 98 percent of its exports and 90 percent of its imports.

Historical Relations

Bhutan was a protectorate of British India and came under the British suzerainty in 1865. It signed the ‘Treaty of Punakha’ with the British in 1910, allowing the British to “guide” its foreign affairs and defense and alsoset the stage for any future contact between the two countriesafter the British left the subcontinent. Throughout this time, India’s relations with Bhutan were handled by a Political Officer based in Sikkim.

  • When India declared independence in 1947, Bhutan was among the first nations to recognise it. Since then, the relationship between the countries has become stronger, especially because Bhutan also has a historically tense relationship with China.
  • India and Bhutan also share deep religio-cultural links. Guru Padmasambhava, a Buddhist saint played an influential role in spreading Buddhism and cementing traditional ties between people in both nations.


  • The basic framework of India- Bhutan bilateral relations was the Treaty of Friendship and Cooperation signed in 1949 between the two countries which was renegotiated in 2007.
  • Diplomatic relations between India and Bhutan were established in 1968 with the establishment of a special office of India in Thimphu.
  • The Golden Jubilee of the establishment of formal diplomatic relations between India and Bhutan was been celebrated in the year 2018.


Bhutan’s Significance to India

  • Bhutan shares border with four Indian States: Assam, Arunachal Pradesh, West Bengal and Sikkim.
  • The two countries have always shared a unique and organic relationship which is often termed as a ‘sacred bond’, largely sustained by regular high level visits and dialogues between the neighbors
  • Security of Bhutan’s present borders especially its western border is very important for India.
  • Bhutan provides a market for Indian commodities and is a destination for Indian investment.
  • Bhutan is a rich source of hydropower which is instrumental to India’s energy needs
  • A politically stable Bhutan is important to prevent anti-India activities and anti-India militant groups from acting against India from Bhutanese territory.
  • Bhutan serves as a buffer between India and China. Bhutan has never played the China card against India
  • Bhutan has repeatedly turned down Chinese ‘package deal’ offers making bigger territorial concessions to Bhutan in return for the smaller Doklam area (remaining sensitive to India’s security concerns in the area). Bhutan is India’s only neighbor that is yet to express its desire to join China’s OBOR initiative.
  • During the recent Doklam standoff, Bhutan’s dogmatic stand and the ability to assert the status quo in face of Chinese intrusions, speaks volumes about its commitment to India’s security interests in a region that does not hold equal strategic importance for itself.
  • Bhutan’s strategic location has helped India in flushing out militants in the North-East, playing a significant role in maintaining internal stability.Bhutan’s effort to drive out ULFA rebels was of a great significance.
  • Bhutan’s Happiness index which is adopted by India (Madhya Pradesh) also is a great initiative
  • Bhutan has been central to India’s two major policies – the ‘Neighborhood First Policy’ and the ‘Act-East Policy’.

Areas of Cooperation

There are a number of institutional mechanisms between India and Bhutan in areas such as security, border management, trade, transit, economic, hydro-power, development cooperation, water resources.

A) Economic & Trade Ties

  • The trade between the two countries is governed by the India Bhutan Trade and Transit Agreement 1972 which was last renewed in November 2016. Under the agreement, Bhutan also enjoys duty free transit of its exports to third countries.
  • The agreement establishes a free-trade regime between the two countries and also provides for duty-free transit of Bhutanese exports to third countries.
  • India is Bhutan’s largest trading partner. In the period from January- June, 2018, trade between two countries stood at Rs. 4318.59 crore.
  • India is Bhutan’s leading development partner. Since the launch of First Five Year Plan of Bhutan in 1961, India has been extending financial support to Bhutan’s FYPs. India has allotted Rs 4500 crore to Bhutan’s 12th FYP.
  • The first ever rail link between India and Bhutan, connecting Hashimara to Phuentsholing, called the “Golden Jubilee Rail Line” has been started
  • An ICT Project “Chipen Rigphel – Enabling A Society, Empowering A Nation” (Total Solutions Project) is being implemented with the help of Indian Tech Industry to help provide necessary training to local population
  • The major items of exports from Bhutan to India are electricity, base metals and articles, minerals, vegetable fat and oils, alcoholic beverages, chemicals, cement, timber and wood products
  • Major exports from India to Bhutan are petroleum products, mineral products, machinery, automobiles & spares, vegetable, nuts, spices, processed food and animal products
  • The Agreement on Trade and Commerce also provides for duty free transit of Bhutanese merchandise for trade with third countries.
  • Sixteen exit/entry points in India identified in the Protocol for Bhutan’s third country trade are: Jaigaon, Chamurchi, UltaPani, Hathisar (Gelephu), Darranga, Kolkata, Haldia, Dhubri, Raxaul, Panitanki, Changrabandh, Phulbari, Dawki, New Delhi, Chennai and Mumbai.

B) Water Resources:

  • India is playing an important role in development of hydro-power projects. This not only provides Bhutanese with electricity for domestic use but also revenue from surplus electricity exported to India.
  • Under the 2006 Agreement on Cooperation in Hydropower and the Protocol, India has pledged to assist Bhutan in developing at least 10,000 MWs of hydropower and import the surplus electricity to India by 2020
  • Inauguration of the 720 MW Mangdechhu hydropower plant which is of great significance for both the countries
  • A Joint Group of Experts (JGE) on flood management between India and Bhutan has been set up to discuss the probable causes and effects of the recurring floods and erosion in the southern foothills of Bhutan and adjoining plains in India.

C) Border Management and Military Engagement

  • There is a Secretary-level mechanism on border management and security related matters between the two countries.
  • There is also a Border District Coordination Meeting (BDCM) Mechanism between the bordering States and the Royal Government of Bhutan (RGoB) to facilitate coordination on border management and other related matters.
  • The Royal Bhutanese Army conducted operations against anti-India insurgents of the United Liberation Front of Assam (ULFA) that were operating bases in Bhutan and using its territory to carry out attacks on Indian soil.
  • A 2,000 strong Indian Military Training Team (IMTRAT) is permanently based in western Bhutan to train the Royal Bhutan Army, while other units regularly cooperate with the Royal Bhutan Army

D) Educational and Cultural Cooperation:

  • A large number of college going Bhutanese students study in India. Government of India provides number of scholarships to Bhutanese students.
  • Prestigious Nehru-Wangchuk Scholarship is being awarded to deserving and talented Bhutanese nationals to undertake studies in selected and premier Indian educational Institutions.
  • Regular cultural exchanges take place between the two countries. India-Bhutan Foundation was established in August 2003 with the aim to enhance people to people exchanges in the focus areas i.e. education, cultural exchanges and environment preservation

E) Election Commissions and Election Help

  • The institutional cooperation has been formalised through signing of an MoU between the two Election Commissions during the visit of our Chief Election Commissioner in May 2006
  • Election Commission of Bhutan including Dzongdas (District Collectors) and Dzongkhag (district) officials have visited India to observe various state and local elections. India has extended full assistance to Bhutan in formulating its election laws
  • Specific Election Coverage Training programmes were also organized for journalists from both public and privately owned media in Bhutan with the help of External Publicity Division which was well appreciated in Bhutan.

F) Indian Community:

  • About 60,000 Indian nationals live in Bhutan, employed mostly in the hydro-electric power construction and road industry.
  • In addition, around 8000-10,000 daily workers enter and exit Bhutan every day in border towns.

G) Multilateral Partnership:

  • Both India and Bhutan are founding members of South Asian Association for Regional Cooperation (SAARC) that deals with economic, social and cultural development of South Asian Region.
  • Both of them also share other multilateral forums such as BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation) etc.
  • Bhutan’s unequivocal support to India on strategic issues has meant a lot to India on the international stage and at the United Nations


  • One of the most commonly observed issues is India’s paternalistic attitude towards Bhutan and a tendency to take Bhutan’s loyalty for granted
  • There have been instances when India has meddled in Bhutan’s internal affairs. This has led to negative perception of India in the minds of Bhutanese. E.g. in 2013 India withdrew all subsidies on cooking gas and kerosene being provided to Bhutan creating a huge crisis in Bhutan that strained the bilateral ties.
  • The crisis in Indo-Bhutan  relations  exploded  apparently,  over alleged  attempt by  India at  thwarting  Bhutanese bid  to diversify  its  foreign  policy  especially  the  overtures towards China
  • There is a growing feeling in Bhutan that India’s development of Bhutan’s hydropower production is driven by self-interest as it is getting Bhutan’s surplus power at relatively cheap rates and  these projects have failed to create jobs in Bhutan and are seen as adversely impacting the environment
  • Another issue is Bhutan’s geographically disadvantaged location that has made its economy hugely dependent on India, giving India an undue advantage over Bhutan’s trade and commerce. 60 percent of Bhutan’s expenditure is on imports from India and is often perceived by local people as excessive dependence.
  • Bhutan’s concern regarding profitability of its Hydropower projects in the wake of India’s shift to renewable sources of energy like wind, solar etc.
  • From internal security perspective, illicit establishment of camps by militant outfits in the dense jungles of south-east Bhutan is a cause of concern for both the nations.
  • China’s continuous claims to important border areas such as Chumbi valley and Doklam and its continuous efforts for establishing strong diplomatic and economic relations with Bhutan have been continuous source of concern for India.
  • Bhutan decided to withdraw from the BBIN Motor Vehicle Agreement for the reason that it would adversely affect its environment and sovereignty.
  • India’s plans for a Motor Vehicles Agreement (MVA) in the Bangladesh-Bhutan-India-Nepal grouping have been held up, and a Bhutanese proposal to levy entry charges on Indian tourists has cause differences with India.
  • Earlier generations of Bhutanese students never looked beyond India, but in recent years young Bhutanese have shown a preference for education destinations in Australia, Singapore and Thailand.

Way Forward

  • India continuously needs to explore new areas of cooperation with Bhutan. Decision of setting up of ISRO’s ground station in Bhutan is a welcome step. The station will help Bhutan in providing weather related messages to its far flung areas.
  • India should try as much as possible to remain out of Bhutan’s internal matters, though it can act as a mentor.
  • Safety of Border from China is a concern for both nations. Therefore, both sides need to work together on this issue. Also, it needs to be ensured that border areas remain militants free.
  • Being neighbors, it is necessary that both nations continuously recognize value of each other. For this, regular high level visits from both the sides are necessary.
  • India and Bhutan share a time-tested relationship that is a perfect example of friendship and cordiality in South Asia. For India to bolster this indispensable partnership may not be too difficult, provided India’s assistance to Bhutan is more about making it self-sufficient militarily, politically as well as economically.
  • Furthermore, as world’s largest democracy, India can guide Bhutan in developing requisite democratic infrastructure and a political establishment that can sustain the demands of a democratic society.
  • Bhutan does not rely on powers outside the region for the maintenance of a strategic order in the South Asian region; India should always harness the potential.
  • India will have to remain alert to strategic powers which are courting Bhutan assiduously, as is evident from the high-level visits from China and the U.S. In a world of growing options, it remains in India’s and Bhutan’s best interests to make each other’s concerns a top priority.
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