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Union Cabinet approves new Agreement on Trade, Commerce and Transit between India and Bhutan

The Union Cabinet has approved a new agreement on Trade, Commerce and Transit between India and Bhutan.

The Agreement provides for a free trade regime between two countries. It also provides duty free transit of Bhutanese merchandise for trade with third countries. As per the agreement, bilateral trade between both neighbouring countries will continue to be transacted in Indian Rupees and Bhutanese Ngultrums.

Background

The agreement on Trade, Commerce and Transit between India and Bhutan was renewed on in July 2006 for ten years. The validity of this agreement was extended, with effect from July 2016, for one year or till the new agreement comes into force.

How trade relations between India and Bhutan are governed?

The bilateral trade relations between India and Bhutan are governed by the Agreement on Trade, Commerce and Transit. It facilitates mechanism for a free trade regime between two countries, and duty free transit of Bhutanese merchandise for trade with third countries.

The bilateral trade between both countries had grown by 55% year-on-year in FY 2016 to $750 million. During this period, India’s exports have increased 40.4% to $469 million, while imports from Bhutan rose 87% to $281 million.

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