India and Bhutan Relations | UPSC Mains: International Relations PDF Download

Background

Bhutan was under the protection of British India and came under British suzerainty in 1865. In 1910, Bhutan signed the 'Treaty of Punakha' with the British, which laid the groundwork for future interactions between Bhutan and the British after their departure from the Indian subcontinent.

After India gained independence in 1947, standstill agreements were signed with Sikkim, Nepal, and Tibet to maintain existing relations until new agreements could be established. Bhutan's status became clearer following Prime Minister Jawaharlal Nehru's invitation to a Bhutanese delegation to participate in the Asian Regional Conference in 1947.

Diplomatic relations between India and Bhutan were formally established in 1968 with the opening of a special Indian office in Thimphu, Bhutan's capital.

Cultural and Religious Ties

• India and Bhutan share a 699-kilometer border and have deep-rooted religious and cultural connections.
• Guru Padmasambhava, a revered Buddhist saint, played a significant role in spreading Buddhism and strengthening traditional ties between the people of both nations.

Treaty of Friendship and Cooperation

• The foundation of India-Bhutan bilateral relations is the Treaty of Friendship and Cooperation signed in 1949.
• This treaty established a framework for cooperation and mutual support between the two countries.

Golden Jubilee Celebration

• In 2018, the Golden Jubilee of the establishment of formal diplomatic relations between India and Bhutan was celebrated, marking 50 years of close ties between the two nations.

Warm and Friendly Relationship

• India and Bhutan traditionally share a warm and friendly relationship that is relatively trouble-free compared to other South Asian countries.
• Their relationship is unique and organic, often referred to as a 'sacred bond'.

Neighborhood First Policy and Act-East Policy

• Bhutan has been central to India’s 'Neighborhood First Policy' and the 'Act-East Policy', which emphasize strengthening ties with neighboring countries and extending India's engagement with East Asia.

Bhutan’s Significance to India

• Bhutan shares border with four Indian States: Assam, Arunachal Pradesh, West Bengal and Sikkim.
• Bhutan serves as a buffer between India and China.
• Bhutan provides a market for Indian commodities and is a destination for Indian investment along with providing a boost to the trade between two countries.
• Bhutan is a rich source of hydropower. Thus, it can fulfill India’s need for resources.
• Politically stable Bhutan is very important to India, as unstable situations in Bhutan can provide a safe haven to anti-India activities and anti-India militant groups.
• Bhutan has never played the China card against India unlike Nepal which always threatens for the same.
• 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’s effort to drive out ULFA rebels was of great significance.
• Inspired by Bhutan’s Gross National Happiness philosophy, Madhya Pradesh created a ‘Happiness Department’ in 2016 to track and promote well-being. This is often cited as an India–Bhutan soft-power exchange.
  

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.
• There have been regular exchanges at the Ministerial and officials’ level, exchanges of parliamentarian delegations to strengthen partnership in diverse areas of cooperation.
• India and Bhutan have adopted a joint energy vision to expand Bhutan’s hydropower generation, build cross-border transmission, and add new renewable projects (hydro + solar), with Bhutan exporting surplus clean power to India.
• The 720 MW Mangdechhu hydropower plant, commissioned in 2019, remains a flagship India-assisted project and a major source of Bhutanese export power to India
• Open borders, close alignment and consultation on foreign policy, and regular, open communications on all strategic issues are the hallmark of the relationship that has maintained its consistency for the past many decades.
• Bhutan’s unequivocal support to India on strategic issues has meant a lot to India on the international stage and at the United Nations.
• India is Bhutan's largest trading partner. Major exports from India to Bhutan are mineral products, machinery and mechanical appliances, electrical equipments etc. whereas major items of import from Bhutan are electricity, ferrosilicon, Portland cement etc.
• Both of them also share other multilateral forums such as BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC.
• There is a Joint Group of Experts (JGE) on flood management between India and Bhutan to discuss the probable causes and effects of the recurring floods and erosion in the southern foothills of Bhutan and adjoining plains in India.
• Prestigious Nehru-Wangchuk Scholarship is being awarded to deserving and talented Bhutanese nationals to undertake studies in selected and premier Indian educational Institutions.

Challenges in the relation

• Past episodes — for example the 2013 fuel subsidy issue during Bhutan’s elections — created some perception in Bhutan that India was exerting pressure, though ties have since been managed more consultatively.
• Bhutan has at times been frustrated by tariff negotiations and India’s control over regional power trade — especially Bhutan’s wish to sell electricity directly to Bangladesh — but both sides are now discussing broader subregional energy connectivity under BBIN.
• Bhutan’s worry that too much trade, transport and tourism from India could put its environment at risk.
• 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 caused 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.
• 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.

Way forward

• 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.
• With India’s help, Bhutan can become economically competitive, militarily advanced and self-reliant in matters of national security.
• Furthermore, as the 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.
• India should try as much as possible to remain out of Bhutan’s internal matters; it can act as a mentor and make efforts to help them in their internal efforts.
• After the 2007 revision of the India–Bhutan Friendship Treaty, Bhutan is fully sovereign in its foreign policy. Even so, Bhutan has remained sensitive to India’s security concerns (especially around Doklam) while continuing boundary talks with China.
• India is Bhutan’s closest strategic partner, but Bhutan is now also seeking diversified investment and partnerships (for example, for its Gelephu Mindfulness City, aviation, and green infrastructure), so India needs to stay deeply engaged.
• 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.

Recent Developments 

• First Rail Link Taking Shape: India and Bhutan have moved ahead on their first-ever railway link: Kokrajhar (Assam) ↔ Gelephu (Bhutan), ~69 km, estimated ~₹3,500 crore, now treated in India as a Special Railway Project to fast-track clearances. A second link, Banarhat (West Bengal) ↔ Samtse (Bhutan), has also been announced, taking planned investment past ₹4,000 crore.

• More Rail Links in the Pipeline: Another proposed rail link between Bhutan’s Samtse and India’s Banarhat (West Bengal) is under active consideration to further strengthen economic ties. 

• Gelephu Mindfulness City Gains Momentum: Bhutan is progressing with its flagship project—the Gelephu Special Administrative Region (GMC SAR), also known as Mindfulness City—a sustainable, eco‑friendly smart city along the border with India. Development includes an international airport, thematic districts, and infrastructure designed for green and inclusive growth. Funding is supported via a domestic bond offering.  A recent Bhutanese delegation visited Assam to explore collaboration for building synergies between GMC SAR and regional partners. 

• Growing Clean Energy Collaboration: “Both countries are expanding clean energy cooperation beyond hydropower into large-scale solar and other renewables through partnerships between Indian companies and Bhutan’s Druk Holding & Investments, in line with their joint energy vision.

• Enhanced Development Support: Under the 13th Five-Year Plan (2024–29), India committed ₹10,000 crore in development assistance to Bhutan and approved 10 new projects covering infrastructure, healthcare, and urban development. 

• Hydropower Vision Expanded: Building upon shared priorities, India and Bhutan are exploring new hydropower and renewable energy projects, as emphasized in their joint energy vision. 

• Bhutan Graduates from LDC Status: Bhutan graduated from the UN’s Least Developed Country (LDC) category in 2023, and is now positioning itself as a high-value, sustainability-led economy under its 13th Five Year Plan (2024–29).