Thimphu, 17 January 1972
The Government of INDIA
The royal Government of Bhutan,
CONSCIOUS of the age-old ties between India and Bhutan and animated by desire to strengthen them,
RECALLING Article V of the treaty of Perpetual Peace and Friendship between India and Bhutan, 1949, which provides for free trade
and commerce between their territories,
CONVINCED of the benefits which can accrue to their people from the expansion of trade and from collaboration in economic development,
HAVE in furtherance of the said Article of the Treaty,
AGREED as follows :
There shall, as therefore, be free trade and commerce between the territories of the Government of India and of the Royal Government
The two Governments will, in agreement with each other, identify the areas of co-operation and complementarily in their agricultural,
industrial and commercial plans, with a view to further the economic development of Bhutan.
The Government of India agree to provide, as appropriate, technical and financial assistance to the Royal Government of Bhutan for
the development and diversification of Bhutan’s economy.
(1) The king of Bhutan will continue to enjoy freedom from import duties on goods imported from third countries on same basis as heretofore.
(2) The Royal Government of Bhutan will continue to enjoy as heretofore freedom from import duties in respect of goods imported on
official account from third countries for consumption in Bhutan or from export duties in respect of goods of Bhutanese origin exported
on official account to third countries.
Except as provided in Article IV, exports to and imports from third countries shall continue to be regulated in accordance with the
laws, rules and regulations relating to imports, exports and foreign exchange applicable in India.
The Government of India agrees to provide foreign exchange to the extent possible for import into Bhutan of such items as are essential
for the diversification and growth of Bhutan’s economy.
The subjects of Bhutan and the citizens of India will have the right to carry on trade in each other’s country, subject to such exceptions
as may be mutually agreed upon.
To ensure the effective and harmonious implementation of this Agreement, the two Governments undertake to consult each other periodically
so that such difficulties ass may arise in its implementation are resolved satisfactorily and speedily. The Royal Government of Bhutan
also agrees to consult the Government of India in regard to its commercial, economic and trade relations with foreign countries.
The Agreement shall come into force upon signature. It shall remain in force for a period of 10 years. It shall continue to be in
force thereafter for a further period of 10 years unless terminated by either Party by giving notice in writing of not less then
DONE at Thimphu on the Seventeenth day o f January 1972, in two originals in the English language, both texts being equally authentic.
Representative of India
His Royal Highness
in Bhutan,(Ambassador extraordinary
Minister for Trade and Industry
For the Government of India
Royal Government of Bhutan
For the Royal Government of Bhutan
EXCHANGE OF LETTERS
Minister for Trade & Industry.
Thimphu, January 17, 1972
I have received your letter dated January 17, 1972, which reads as follows :
“Article I of the Agreement on Trade and Commerce provides for free trade within the territories of the Government of India and the
Government of Bhutan. In pursuance of this provision, goods imported from India will already have paid the excise duties levied by
the Central Government and will not, therefore, be liable to further taxes on consumption in Bhutan. Having regard to this position
and the development needs of Bhutan, the Governments of India and Bhutan agree that the former shall pay to the letter an annual
sum of Rupees on crore for each year for the duration of the Agreement.
I should be grateful if your Royal Highness will Kindly confirm that the above sets out the understanding reached between us”.
I confirm that the foregoing correctly sets out the understanding reached between us.
Accept Your Excellency the assurances of my highest consideration.
His Excellency Shri B.S. DAS,
Representative of India in Bhutan,