While injecting a fresh energy and dynamism to India-Bhutan partnership, characterised by utmost trust and robust people-to-people linkages, Prime Minister Modi’s visit to Thimphu has been significant as it has given a push to the tradition of high-level exchanges between the two countries, enjoying formal diplomatic relations since 1968
Prime Minister Narendra Modi on Friday undertook a two-day (March 22-23) visit to Bhutan, India’s immediate neighbour with which New Delhi shares unique and exemplary bilateral relations, which are based on mutual trust, goodwill and understanding.
Posting a text on X (formerly twitter), Prime Minister said, “On the way to Bhutan, where I will be attending various programmes aimed at further cementing India-Bhutan partnership. I look forward to talks with Majesty the King of Bhutan, His Majesty the Fourth Druk Gyalpo and Prime Minister Tshering Tobgay.” PM Modi’s visit took place close on the heels of Bhutanese Prime Minister Tshering Tobgay's recently concluded five-day (March 14-18) trip to India.
Hydropower cooperation
A key pillar of bilateral economic engagement, hydropower cooperation between India and Bhutan has proved to be a vital catalyst for the Himalayan country’s socio-economic development.  
Revenues from hydropower constitute a significant portion of the total revenues of the Himalayan country. The ongoing cooperation between India and Bhutan in the hydro-power sector is covered under the 2006 bilateral agreement for cooperation and its Protocol signed in 2009.
Four hydro-electric projects (HEPs) totalling 2136 MW are already operational in Bhutan and are supplying electricity to India. The 720 MW Mangdechhu was commissioned in August 2019 and handed over to Bhutan in December 2022.
Two HEPs namely, 1200 MW Punatsangchhu-I, 1020 MW Punatsangchhu-II in Inter-Governmental mode are under various stages of implementation. Punatsangchhu-II HEP ready to be commissioned in 2024.
Approximately three-fourths of the electricity generated by Bhutan is exported to India which has committed to assisting Bhutan in achieving a target of generating 10,000 MW of electricity in the future.

In 2023, Bhutan’s 64 MW Basochhu hydropower electric power plant sold power to the Indian Energy Exchange (IEX); the Himalayan country can buy electricity from IEX during the lean generation season.  India’s imports of electricity from Bhutan amounted to INR 2448 crores in 2022, as per the Government of Bhutan’s data.
New and emerging areas of cooperation
Apart from hydro-power cooperation, India’s development partnership has moved into new and emerging areas with full interoperability of the flagship digital project RuPay, which has been successfully completed.
Bhutan became the second country to launch the BHIM app, further deepening the financial linkages between our two countries. India is collaborating with Bhutan on a number of technology initiatives such as ‘Digital Drukyul’ for which, financial support for an optical fibre backbone has been provided till the gewog (village) level across all 20 districts of Bhutan.
Peering arrangement between India’s National Knowledge Network (NKN) and Bhutan’s Druk Research and Education Network (DrukREN) with usages in telemedicine services, research, and education; support for the establishment of the third international internet gateway for Bhutan.
Space cooperation
Space cooperation is a new and promising area of bilateral cooperation. Pursuant to Prime Minister Modi's visit to Bhutan in August 2019, both New Delhi and Thimphu agreed to collaborate on the joint development of a small satellite for the Himalayan country. Both the countries also signed an MoU on cooperation in the peaceful uses of outer space in November 2020.
The India-Bhutan SAT, jointly developed by India and Bhutan was launched into space on November 26, 2022 by ISRO's Polar Satellite Launch Vehicle (PSLV). The PSLV C54 carried the India-Bhutan SAT, along with India's Earth Observation Satellite -06 and other satellites from the Satish Dhawan Space Centre in Sriharikota. The India-Bhutan SAT was launched with an objective to provide high resolution images to Bhutan for its natural resources management.
Last year on March 13, ISRO Chairman S Somanath participated in the inauguration of the S-band ground earth station in Thimphu. The station has the capacity to receive data from the India-Bhutan SAT, launched in 2022.
India and Bhutan have successfully completed the Preliminary Engineering-Cum-Traffic (PET) survey of the rail link between the two countries. India will undertake the Final Location Survey (FLS) of the proposed cross-border rail link connecting Kokrajhar in Assam to Gelephu in Bhutan. During the visit of Bhutanese King Jigme Khesar Namgyel Wangchuck on November 3-10, 2023, the two sides also agreed to consider establishing a rail-link between Banarhat in West Bengal and Samtse in Bhutan.
Development partnership
India has been extending economic assistance to Bhutan’s socio-economic development since the early 1960s when Bhutan launched its Five Year Plan. India continues to be the principal development partner of Bhutan.
For the 12th Five Year Plan, India’s contribution of Rs. 5000 cr. constitutes 73% of Bhutan’s total external grant component. The key areas of focus of the Indian government’s assistance include agriculture and irrigation development, ICT, health, industrial development, road transport, energy, civil aviation, urban development, human resource development, capacity building, scholarship, education, and culture.
More than 83 large and intermediate projects (projects under Project Tied Assistance) and 524 Small Development Projects/ HICDPs are currently at various stages of implementation in Bhutan. The 6th India-Bhutan Development Cooperation Talks under the 12th FYP and the 2nd Talks under the 13th FYP were held in March 2024, during the visit of Bhutan’s Foreign Secretary to India.
Trade and economic ties

India is Bhutan’s top trade partner both as an import source and as an export destination. Since 2014, India’s merchandise trade (excluding electricity) with Bhutan has almost tripled from $484 million in 2014-15 to $1606 million in 2022-23, accounting for about 73% of Bhutan’s overall trade, with the balance of trade in India’s favour.

In terms of INR, in 2022 (Jan-Dec), India's bilateral trade with Bhutan was INR 11,178 crores as per data of the Government of Bhutan, of which India's exports to Bhutan amounted to INR 8509 crores and India's imports from Bhutan were INR 2669 crores.

India’s top exports to Bhutan are petrol and diesel, passenger cars, rice, wood charcoal, cellphones, coke and semicoke, soya-bean oil, excavators, electric generators & motors, parts for turbines, transport vehicles, bitumen.

India’s top imports from Bhutan are Ferro-silicon, Ferro-silico-manganese, Portland pozzolana cement, Dolomite chips, Ordinary portland cement, Silicon Carbide,Cardamoms, betel nut, oranges, semi-finished products of iron or non-alloy steel, boulders, etc.

India is the leading source of investments in Bhutan, comprising 50% of the country’s total FDI. There are about 30 Indian companies in Bhutan operating in various sectors - banking, manufacturing, electricity generation, agri/food processing, ITES, pharmaceuticals, hospitality, and education – such as Punjab National Bank, State Bank of India, Tata Power Company Ltd., General Insurance Corporation, Apollo Educational Infrastructure Services, Azista Industries, Meghalaya Oxygen.

India is providing increased market access for Bhutanese products and additional Trade routes for increased bilateral trade and transit access for Bhutan. The India-Bhutan Agreement on Trade, Commerce and Transit – which was first signed in 1972 and revised most recently for the fifth time in 2016 – establishes a free trade regime between the two countries. The Agreement also provides for duty free transit of Bhutanese exports to third countries.

Cultural and Buddhist links
A number of Bhutanese pilgrims travel to Bodh Gaya, Rajgir, Nalanda, Sikkim, Udayagiri, and other Buddhist sites in India. As a part of the 50th anniversary celebration of diplomatic relations, New Delhi sponsored a visit by 18 Lam Netens (Buddhist monks) and representatives of the Central Monastic Body of Bhutan to India.
His Holiness the Je Khenpo (the head monk of Bhutan) visited Rajgir in November 2018 to preside over the Salang. or ground breaking ceremony to construct a Bhutanese Lhakhang (temple) and for World Peace Prayer in Rajgir in Bihar.
The Zhabdrung Statue, currently on exhibition at the Simtokha Dzong in Bhutan, has been loaned by the Asiatic Society, Kolkata to the Royal Government of Bhutan. (Dharma Raja or Zhabdrung, is the title of Ngawang Namgyal, a 16th century Buddhist monk – a revered figure in Bhutan, regarded as the founder of the modern nation state of Bhutan).