India-Bhutan relations India-Bhutan relations

India-Bhutan relations

1. Diplomatic relations between India and Bhutan were established in 1968. The basic framework of India- Bhutan relations has been the Treaty of Friendship and Cooperation signed in 1949 between the two countries, which was revised in February 2007.

2.The tradition of regular political and official exchanges is an important hallmark of the special ties of friendship and cooperation between the two countries. Prime Minister Shri Narendra Modi visited Bhutan on his first overseas visit after winning the election in 2014. PM Shri Modi undertook a State visit to Bhutan in August 2019, after assuming office for the second term.

3. His Majesty the King of Bhutan visited India from 14 - 16 September 2022 and met with Prime Minister Shri Narendra Modi and EAM Dr. S. Jaishankar. In April 2023, His Majesty the King visited Delhi and met the President of India, PM and EAM. A Joint Statement titled “A Framework for Expanded India-Bhutan Partnership” was issued, which reaffirmed the strength of the unique ties while outlining concrete areas to advance the India-Bhutan partnership. In November 2023, His Majesty again visited India to hold discussions with PM, EAM and FS. His Majesty made his first official visit to the states of Assam and Maharashtra to expand ties of friendship and cooperation.

4. His Majesty the King of Bhutan conferred the Order of the Druk Gyalpo, Bhutan’s highest civilian decoration, on Prime Minister Shri Narendra Modi during Bhutan’s 114th National Day celebrations on 17 December 2021. The award recognizes PM’s contribution to strengthening India-Bhutan friendship. Prime Minister Shri Narendra Modi is the first foreign national to receive this award by His Majesty.

Developmental Partnership

5. Since Bhutan’s first Five Year Plan in 1971, India has closely partnered with Bhutan in its socio-economic development in line with the priorities of the people and Government of Bhutan. India’s development assistance to Bhutan is coordinated under the overarching mechanism of Bilateral Development Cooperation Talks or Annual Plan Talks wherein the components of development assistance and modalities are decided jointly by the two sides.

6. For the 12th Five Year Plan of the Royal Government of Bhutan, India committed an assistance package of INR 5000 crores. Under the 12th Five Year Plan, India has implemented 82 Project Tied Assistance Projects and 524 High Impact Community Development Projects in Bhutan. India’s commitment includes INR 400 crores towards Transitional Trade Support Facility.

7. The scope of the development projects span across sectors such as infrastructure development, roads, digital connectivity, energy, agriculture, ICT, health, education, human resource development, urban development ad constitutional offices. The High-Impact Community Development Projects include projects with short gestation period, and cover areas like the development of drinking water supply networks, irrigation canals, building of farm roads, basic health units and other rural infrastructure. Our development partnership also includes a Program Grant component is a direct budgetary support to the Royal Government of Bhutan.

8. During His Majesty’s visit to India in April 2023, it was agreed that the Government of India will step up its support for Bhutan’s 13th FYP. Discussions are underway between both governments to finalise the quantum and modalities for India’s development partnership with the Royal Government of Bhutan for the 13th Five Year Plan of Bhutan (February 2024 – January 2029). Towards this end, Bhutan’s Foreign Secretary Aum Pema Choden traveled to Delhi in February 2024 to chair the Plan Talks for the 13th FYP with Foreign Secretary Shri Vinay Kwatra.

Hydro-power cooperation

9. The two countries enjoy longstanding and mutually-beneficial cooperation in the hydropower sector. Till date the Government of India has constructed four major hydro-electric projects (HEPs) in Bhutan totaling 2136 MW, including 336 MW Chukha HEP, 60 MW Kurichhu HEP, 1020 MW Tala HEP and the recently commissioned 720 MW Mangdechhu HEP. Currently, there are two HEPs under construction: 1020 MW Punatsangchhu–I HEP and 1020 MW Punatsangchhu–II HEP. Power Secretary Shri Pankaj Aggarwal visited Bhutan in January 2024 and held talks with his counterpart to comprehensively review different aspects of India-Bhutan energy partnership. The 1020 MW Punatsangchu-II HEP is expected to be commissioned in 2024.

10. The 720 MW Mangdechhu Hydroelectric Power Project was handed over by the Mangdechhu Hydroelectric Project Authority to the Royal Government of Bhutan on 27 December 2022. Inaugurated by the Prime Ministers of both countries in 2019, the Project was awarded the prestigious Brunel Medel for Excellence in Engineering by Institute of Civil Engineers, London in 2020.

11. On the request of the Royal Government of Bhutan, Government of India has allowed 64 MW Basochhu HEP to sell electricity in Day Ahead Market of the Indian Energy Exchange (IEX).

Cooperation in New and Emerging Areas

12. Space cooperation is a new area of bilateral cooperation. On 17 August 2019, Prime Minister Narendra Modi and Prime Minister Dr. Lotay Tshering jointly inaugurated the Ground Earth Station of the South Asia Satellite in Thimphu.

13. The two sides collaborated on the India-Bhutan SAT, the first satellite jointly developed by India and Bhutan, which was launched on 26 November 2022 from ISRO’s Satish Dhawan Space Centre at Sriharikota. A high-level delegation from Bhutan led by Minister of Information and Communications Lyonpo Karma Donnen Wangdi visited Sriharikota to witness the launch of the satellite. The Government of India has extended capacity building opportunities to Bhutanese engineers at the UR Rao Satellite Centre, ISRO in Bengaluru for the India-Bhutan SAT project.

14. The India-Bhutan SAT is providing high resolution images of Earth and helping Bhutan in natural resources management. The secondary payload, which was designed and built by Bhutan, will function as a digital repeater from space serving amateur radio user community. Chairman ISRO Shri S. Somanath visited Bhutan in March 2023 to inaugurate the ground earth station for the India-Bhutan Satellite which will receive and process remote sensing data from the satellite.

15. Fin-tech is another domain of collaboration between India and Bhutan. The RuPay Card was launched in Bhutan in two phases – Phase I was launched in 2019, to enable acceptance of payments in Bhutan using RuPay cards issued by Indian banks. Phase II was launched in 2020, to enable acceptance of payments in India using RuPay cards issued by Bhutanese banks, thereby enabling the full inter-operability of the flagship project. This is meant to benefit Indian visitors in Bhutan and Bhutanese citizens who travel and transit to India for education, tourism and work. In 2021, India’s Bharat Interface for Money (BHIM) application was launched in Bhutan with the objective of promoting cashless payments between the two nations.

16. The integration of Bhutan’s Druk Research and Education Network with India’s National Knowledge Network is a key cooperation in the domain of e-Learning. This integration creates an information highway between the universities, research institutions, libraries, health-care and agricultural institutions of the two nations. The 5 Gbps connectivity link is being used by universities, colleges and hospitals in Bhutan.

Commerce and Trade

17. India has consistently been Bhutan’s top trading partner – both as an import source and as an export destination. Since 2014, India’s trade with Bhutan has almost tripled from USD 484 million in 2014-15 to USD 1615 million in 2022-23. Our unique trade relations with Bhutan are governed by the 2007 India-Bhutan Friendship Treaty and the 2016 India-Bhutan Agreement on Trade, Commerce and Transit, which establishes a free trade regime between the two countries and also provides Bhutan duty free transit of goods to/from third countries.

18. About 94% of Bhutan’s overall trade happens through the land route. Ten (10) entry/exit points, i.e. Land Customs Stations (LCS), on the India-Bhutan border have been notified for trade between the two countries. Almost 70% of Bhutan’s total trade takes place through LCS Jaigaon-Phuentsholing.

19. India remains the leading source of investments in Bhutan, comprising 50% of the country’s total FDI. Currently, there are about 30 Indian FDI companies in Bhutan in various sectors – banking, manufacturing, electricity generation, agri/food processing, ITES, pharmaceuticals, hospitality, and education.

RBI financing facilities for Bhutan

20. Currency Swap Facility: Under the SAARC currency swap arrangement, Reserve Bank of India signed US$ 200 million INR equivalent arrangement with the Royal Monetary Authority in November 2022 to assist them in managing INR liquidity, easing of pressure on foreign exchange, and in supporting the use of INR as an important medium of exchange for cross-border trade.

21. Standby Credit Facility: On the request of the Royal Government of Bhutan, the Government of India has agreed to reduce the rate of interest on two Standby Credit Facilities of INR 300 crores and 400 crores from 5% to 2.5% w.e.f 01 July 2022. The Government of India has also extended an additional Standby Credit Facility (upon Royal Government of Bhutan’s request) of Rs. 300 crore to Bhutan, which has been availed by the Royal Monetary Authority since 29 November 2023.

Cross Border Connectivity Projects

22. Discussions are underway between the Royal Government of Bhutan and the Government of India to enhance cross-border connectivity in the broadest form between the two countries.

23. The two sides are working towards establishment of rail-link between Banarhat in West Bengal and Samtse in Bhutan, and between Kokrajhar in Assam and Gelephu in Bhutan. The work on the Final Location Survey of the proposed cross-border rail links is currently underway. The Preliminary Engineering-cum-Traffic (PET) survey of the rail link has already been completed by the Indian Railways. Both governments are also working towards strengthening cross-border trade infrastructure to ease movement of goods.

India-Bhutan Partnership on Gyalsung- National Service Program

25. India has extended grant assistance of INR 2 billion to the Gyalsung Project - an initiative of His Majesty the King of Bhutan, which will enable the youth to equip themselves with critical skills and to contribute in nation-building efforts.

26. On 20 January 2024, the Government of India and the Royal Government of Bhutan signed a concessionary loan of INR/Nu 1500 crores to build the infrastructure for the Gyalsung academies. The financing arrangement is in addition to the Government of India’s Plan Assistance to Bhutan.

Health Partnership

27. India and Bhutan partnership in the healthcare sector is diverse and multi-faceted ranging from construction of hospitals, support to government flagship schemes as well as procurement of medicines and specialized medical equipment.

28. Bhutan was the first country to receive the Made in India Covishield vaccines under Ministry of External Affairs Vaccine Maitri Initiative. A total of 550,000 doses of Covishield were given to Bhutan as a gift. The Government of India also delivered 12 medical consignments to Bhutan containing essential medicines during the pandemic. The 12th medical consignment was handed over by EAM to Bhutan on 29th April 2022 during his visit.

Education and Capacity Building

29. Education is a strong pillar of cooperation between India and Bhutan. Many Bhutanese students benefit from scholarships provided by the Government of India for studying in Indian educational institutions. In addition, many Bhutanese youth also enroll as self-financed students in Indian universities. The Scholarship Schemes include the Ambassador’s Scholarship, prestigious Nehru Wangchuck Scholarship, Five-Year Plan project-tied assistance based Undergraduate Scholarship, Nalanda University Scholarship, ICCR Undergraduate Engineering scholarships. ICCR, AYUSH, BIMSTEC and SAARC scholarships have also provided a strong foundation to the bilateral engagement in education. Bhutanese students have also been availing of seats at IIT-Kanpur under India-Bhutan Friendship Scholarship, IIT Gandhinagar Global Fellowship and the Rashtriya Raksha University Scholarships. Every year, more than 1000 Bhutanese students studying in Indian colleges and institutes benefit from the award of the Ambassador’s Scholarship.

30. Under the Indian Technical and Economic Cooperation program, about 325 slots for trainings, along with unlimited e-ITEC slots, are allotted annually to Bhutan for upgrading administrative and technical skills of government officials and private sector employees in Bhutan. In the last 11-12 years, more than 3,000 Bhutanese nationals have availed of various ITEC training programs in India covering all sectors of governance.

Cultural Connect

31. India-Bhutan Foundation: The India-Bhutan Foundation (IBF) was established pursuant to signing of an MoU between India and Bhutan in New Delhi on 29 August 2003. The Foundation enhances exchanges amongst the people of India and Bhutan through activities in educational, cultural, scientific and technical fields. The management and affairs of the IBF are vested in a Board of Directors comprising ten members in total. While the Ambassador of Bhutan to India and the Ambassador of India to Bhutan are the co-chairpersons of the Board of Directors, the Governments of India and Bhutan can nominate four members each.

32. A number of Bhutanese pilgrims travel to Bodh Gaya, Rajgir, Nalanda, Sikkim, Udayagiri, Sarnath and other Buddhist sites in India. As part of the 50th anniversary celebrations of the establishment of diplomatic relations between India and Bhutan, His Holiness the Je Khenpo presided over the Salang or ground-breaking ceremony to construct a Bhutanese Lhakhang (temple) and for conducting a World Peace Prayer on site.

Indian Diaspora in Bhutan

33. About 50,000 Indians are presently working in Bhutan in the sectors such as infrastructure development, hydropower, education, trade and commerce signifying close people to people ties between the two countries. Their contribution and service in the overall development of Bhutan has been recognized locally and internationally. In January 2023, Mr. Sanjeev Mehta, Professor of Economic at the Royal Thimphu College, Thimphu was awarded the Pravasi Bhartiya Samman Award in recognition of his achievements in the field of education and three decades of service in Bhutan.


7 March 2024