India Bhutan Relations, Areas of Cooperation and Significance

India-Bhutan relationship is a strong and mutually beneficial partnership. Check here Recent Developments and Future Prospects of India Bhutan Relations.

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Bhutanese King Jigme Khesar Namgyel Wangchuck recently visited India.

India Bhutan Relations: An Overview

Evolution of Ties

India and Bhutan share a unique and special relationship that is based on a long history of cultural, economic, and political ties.

Strategic Importance: Despite its small size, Bhutan occupies a strategically important position in South Asia and has been a key partner for India in regional cooperation efforts.
Establishment of Diplomatic ties: Diplomatic relations between India and Bhutan were established in 1968 with the establishment of a special office of India in Thimphu.
1940 treaty of Friendship and cooperation: The basic framework of India-Bhutan bilateral relations is the Treaty of Friendship and Cooperation signed in 1949 between the two countries and revised in February 2007.
- The 1949 Treaty ensured peace and non-interference in each other’s internal affairs.
- The 2007 Treaty replaced the previous requirement for Bhutan to seek India’s advice on foreign policy and highlighted the importance of sovereignty and collaboration rooted in shared interests.
The Golden Jubilee of the establishment of formal diplomatic relations between India and Bhutan was celebrated in the year 2018.

Areas of Cooperation and Significance

Dimension	Details
Strategic	Bhutan is located between India and China, and its strategic location helps protect India’s Siliguri Corridor (also known as Chicken’s Neck- a narrow stretch of land of about 22 kilometres.). The Doklam standoff in 2017 showed how important Bhutan is to India’s security
Economic	In 1972 1st Trade and Transit agreement was signed which has undergone five revisions till date (1983, 1990, 1995, 2006 and 2016). The current Agreement on Trade, Commerce and Transit is valid till 2026.. Credit Facility: India has agreed to consider Bhutan’s request to extend an additional Standby Credit Facility (SCF) for a period of five years. India plans to double its financial assistance to Bhutan, increasing it from the current ₹5,000 crore over the 2019-2024 period to ₹10,000 crore for the period extending to 2029. Financial partnership: The launch of the RuPay card and BHIM app has enhanced financial partnership between India and Bhutan.
Cultural and Educational	India also offers various scholarships for Bhutanese students through Nehru-Wangchuck Scholarships, Ambassador’s Scholarship. The India-Bhutan Foundation, established in 2003, aims to enhance people-to-people exchanges in the cultural field. Bhutan’s Druk Research & Education Network (DrukREN) was integrated with India’s National Knowledge Network, a pivotal step in advancing eLearning initiatives and knowledge exchange.
Energy	India has constructed three Hydroelectric Projects in Bhutan (and exporting surplus power to India)—Chhukha HEP, Kurichhu HEP, and Tala HEP. India is also building Mangdechhu, Punatsangchhu 1 and 2 Hydroelectric Power Projects in Bhutan.
Regional	Both nations cooperate in regional forums such as BIMSTEC and SAARC.
Environmental	India is supporting Bhutan in its efforts to become carbon negative.
Connectivity	Efforts were expedited towards the Kokrajhar (Assam)-Gelephu rail link, promoting enhanced connectivity between regions. Additionally, support was extended for the construction of Gelephu airport, aimed at attracting investment and facilitating economic growth. A new land route was opened to boost trade between India and Bhutan. This route links West Bengal’s Jaigaon with Ahlay, Pasakha in Bhutan Future initiatives between the two nations will focus on connectivity, infrastructure, trade, and energy sectors. Specific projects include establishing new rail links between Barhath-Samtse, as well as strengthening waterway navigation on the Brahmaputra.
Security	The Indian Military Training Team (IMTRAT) is permanently based in western Bhutan and assists and trains the Royal Bhutan Army. The Eastern Air command of the Indian Air force provides Bhutan with Air security, as the country does not have an air force. India’s Border Road Organisation, has built the majority of roads in Bhutan under project ‘DANTAK’

Challenges In India-Bhutan Relations

Chinese Influence: India backs Bhutan’s claim over Doklam as it is strategically important for India’s security.
- Dominance of the region by China could threaten the Siliguri Corridor, a narrow stretch that connects the Indian mainland with its north-eastern states.
Issues in hydropower trade: India’s past changes in power purchasing policy, refusal to admit Bhutan into the National Power Grid, etc has created a rift in the relationship.
Hideout for militants: Militant outfits like United Liberation Front of Assam (ULFA), National Democratic Front of Bodos (NDFB), etc use the dense forests of Southern Bhutan as their hideouts and operate against India.
- Operation All Clear (2003-04) was the first action against these militants by Bhutan.
BBIN initiative: The Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicle Agreement, proposed by India to improve connectivity in the region, is on hold by Bhutan due to environmental concerns.
Access to trade: Bhutan is diversifying its market by reaching out to Bangladesh, with the two countries having signed a preferential trade agreement in 2021.

Way Forward

Initiating Trilogue: Opening such communication channels can minimise uncertainties as questions of peace and conflict cannot be resolved by potential stand-offs (like Doklam) in the future.
Diversifying economic engagements: For now, India’s economic relations with Bhutan continue to be dominated by hydropower projects.
- Strengthening collaboration in fields such as fintech, space tech, and biotech between the two countries can lead to a stronger partnership.
Improving people-to-people ties: Soft power diplomacy can be induced through Buddhism and by encouraging more tourist exchanges between the two countries.
Security measures: Establishment of contact points between countries and mechanisms for real-time sharing of information in criminal matters,
- Capacity building and skill development of law enforcement personnel manning border check-posts,
- Development of a Standard Operating Procedure (SOP) on repatriation for the Indo-Bhutan border.