• India-Bhutan Agreement on Trade, Commerce and Transit was signed in 1972 and was revised in 2016. 
  • It establishes a free trade regime between the two countries.

• It also provides Bhutan duty free transit of goods to/from third countries.

• India’s trade with Bhutan accounts for about 80% of Bhutan’s overall trade.
• India is the leading source of investments in Bhutan, comprising 50% of the country’s total FDI. 
• RBI has a Currency Swap Agreement with the Royal Monetary Authority (RMA) of Bhutan.

• The Indian Military Training Team (IMTRAT), established in 1961-62, provides training to Bhutanese forces.
• Both the countries also conduct bilateral military exercise i.e. EX Shakti.
• Both countries also participated in the multilateral exercise called Shantir Ogroshena (front runner of peace).

• About 50,000 Indians are presently working in Bhutan in various sectors.

• The two countries have signed the Agreement on Cooperation in the Field of HEP in 2006 and its Protocol in 2009.
• Indo-Bhutan hydropower cooperation began in 1961 with the signing of the Jaldhaka agreement. 

• The Jaldhaka project is situated on the Indian side of Indo-Bhutan border in West Bengal. 

• Till now India has constructed four Hydroelectric Projects (HEPs) in Bhutan:

• Chukha HEP
• Kurichhu HEP
• Tala HEP 
• Mangdechhu HEP. 

• The 1200 MW Punatsangchhu-I, 1020 MW Punatsangchhu-II  HEPs in Inter-Governmental mode are under various stages of implementation.

People to people ties

• Both countries share strong cultural ties as a result of Buddhism. 
• India-Bhutan Foundation was established in 2003 with the aim of enhancing people to people exchanges.
• The Nehru Wangchuck Cultural Centre in Thimphu holds regular classes for Indian classical music, tabla and yoga.

• Assam’s significant border with Bhutan positions it as a key point of contact for cross-border interactions.
• India’s first multimodal logistics park, being developed at Jogighopa, aims to utilize Assam’s riverine networks to facilitate trade with Bhutan and Bangladesh.

• B3 Corridor Proposal (Bhutan–Bodoland–Bay of Bengal): Announced in Assam Budget 2025, it aims to connect Bhutan with the Bay of Bengal through Bodoland, turning Assam into a transit hub for international trade with Bangladesh and Southeast Asia.
• Border Trade Volume: In FY 2022–23, Indo–Bhutan trade was worth ₹12,702 crore, with Assam handling a sizable portion of the exports of coal, boulders, and agricultural goods.
• Formalisation of the Assam trade routes is expected to channel 60–70% of Bhutan’s border trade through Assam.

• Hydropower Cooperation: Bhutan generates about 2,300 MW of hydropower, much of which is exported to India. Assam benefits directly via the Kurichu Hydropower Project, which supplies power to the northeastern grid.
• In 2023, Assam imported nearly 300 MW of renewable electricity from Bhutan, reducing its reliance on coal-based plants.

• Ethnic ties: The Bodo community lives on both sides of the border. Shared festivals like Bwisagu (Bodo New Year) and cultural exchanges reinforce people-to-people ties.
• Religious links: The Royal Bhutanese Consulate General in Guwahati (opened in 2018) facilitates cultural, educational, and business interactions.
• Tourism: Thousands of Bhutanese visit Assam annually for healthcare in Guwahati, while Assamese pilgrims visit Bhutan’s Buddhist monasteries.

• Assam’s proximity to Bhutan has, at times, led to cross-border insurgent activity, posing security challenges.
• Past insurgency: Assam’s militant groups like ULFA and NDFB had bases in Bhutan.
• In 2003, Operation All Clear, a joint operation by the Royal Bhutan Army, dismantled over 30 insurgent camps, expelling ULFA, NDFB, and KLO militants.
• Current cooperation: Assam Police and Bhutanese authorities maintain joint border patrols in districts like Baksa and Udalguri to check smuggling, narcotics, and illegal migration.
• Regular intelligence sharing ensures stability along the Assam–Bhutan border.