India–Bhutan Trade Relations: Broad Overview (with emphasis on agricultural Trade).

Here is a detailed breakdown of the India–Bhutan trade relationship in the agricultural sector, and the significance of DGFT Notification No. 36/2025-26 (dated 3 October 2025) in that context.

Key features of the bilateral framework

1. Trade, Commerce and Transit Agreement
   India and Bhutan have a longstanding Agreement on Trade, Commerce and Transit (first signed in 1972, most recently revised in 2016). Under this agreement:
   • There is a free trade regime for many goods between the two countries.
   • Bhutan is allowed duty-free transit for its exports to third countries through Indian territory.
   • Bilateral trade is settled in Indian Rupees (INR), and Bhutan’s currency (Ngultrum) is pegged at par with INR.
2. Trade volumes and balance
   • India is Bhutan’s top trading partner, both for imports and exports.
   • In recent years, India’s exports to Bhutan (excluding electricity) have constituted a significant portion of Bhutan’s import basket (over 80 %).
   • The trade balance is consistently in India’s favour. For example, in 2024-25, exports to Bhutan were USD 1,264 million, while imports from Bhutan were USD 513.44 million.
3. Agricultural trade role
   • Agricultural goods and food products comprise a nontrivial share of India’s exports to Bhutan (e.g. rice, edible oils, cereals, etc.).
   • Bhutan relies on imports to meet food demand, especially for those items not produced domestically or where domestic production is insufficient.
4. Trade challenges / constraints
   • India (and many nations) occasionally impose export restrictions or curbs on certain essential agricultural commodities (for domestic food security, price stability, availability) — e.g. restrictions on rice, onions, edible oils.
   • Such restrictions, when broad, may adversely impact neighbouring countries dependent on India for supply (like Bhutan).
   • There is also the need for phytosanitary, quality, and documentary compliance in cross-border agricultural trade (e.g. health certificate, sanitary standards, inspection).
   • Logistics, border infrastructure, customs procedures, and regulatory harmonization are also practical constraints.

In sum, while India–Bhutan trade is governed by a preferential regime and agricultural products are an important component, the presence of export restrictions (applied by India from time to time) can create tensions or uncertainty for Bhutan’s food security and supply continuity.

Notification No. 36/2025-26 (DGFT, 3 October 2025): Key Provisions & Relevance

What the notification stipulates

• Notification No. 36/2025-26, dated 3 October 2025, amends the “General Note to Export Policy, Schedule-II (Export Policy)” under the ITC (HS) 2022 system. (DGFT)
• Under this amendment, exports of specified agricultural commodities to Bhutan are exempted from any restrictions or prohibitions that would otherwise be applicable, effective immediately and “until further orders.”
• The list in the notification covers twenty-three categories (with relevant HS / ITC codes). Some of the key commodities include:

• The legal authority cited is Section 3 read with Section 5 of the Foreign Trade (Development & Regulation) Act, 1992, and relevant paragraphs of the Foreign Trade Policy (FTP) 2023.
• Notably, alongside Notification 36, DGFT also issued Notification 37/2025-26 on the same date (3 October 2025) which amends the export policy for de-oiled rice bran (DORB). (DGFT)
• Before this, India had imposed a ban on exports of DORB (as a cattle feed component). The ban is being lifted, making DORB export “free” (i.e. unrestricted) effective immediately.

Relevance and implications of this notification

1. Assurance of supply to Bhutan / food security support
   • The exemption assures Bhutan of continuous access to essential agricultural goods from India, even when India may impose export restrictions globally for domestic reasons.
   • This helps maintain stability of supply, prices, and mitigates the risk of shortages in Bhutan.
2. Strengthening of bilateral ties and geopolitical goodwill
   • The move signals India’s commitment to Bhutan as a special partner (consistent with the “Neighbourhood First” / “Act East / South Asia First” foreign policy orientation).
   • It reinforces trust, and makes India a reliable supplier during global or domestic stress periods (e.g. inflation, supply shocks).
3. Market certainty for Indian exporters to Bhutan
   • Exporters dealing in the exempted agricultural commodities now have clarity and certainty: they can export to Bhutan without having to deal with export licensing, quotas, or prohibition constraints.
   • This reduces compliance burden and risk for businesses targeting the Bhutan market.
4. Limitation / caveats
   • The exemption is only for exports destined to Bhutan; it does not automatically apply to exports to other countries.
   • The exemption is valid “until further orders” — i.e. not necessarily permanent; the government can revoke or modify it.
   • Even with export permission, other regulatory requirements remain (e.g. phytosanitary / sanitary certifications, quality standards, customs / border rules, documentation).
   • The physical and logistical challenges of cross-border trade (infrastructure, transport, customs delays) may still impose friction.
5. Broader trade policy signal
   • This kind of country-specific export liberalization is an instrument in trade diplomacy — balancing domestic policy constraints with regional/comparative strategic objectives.
   • It highlights that India’s trade restrictions (for domestic protection) can be modulated when foreign policy or neighbourhood solidarity demands it.
6. Impact on DORB trade
   • The simultaneous amendment regarding de-oiled rice bran (Notification 37) indicates the Indian government is relaxing even more restrictive measures to allow DORB exports (which had been prohibited) now to become “free.”
   • This relaxation could benefit rice millers, farmers producing rice bran, and potentially increase India’s feed ingredient exports (if Bhutan or others are markets).

How this fits into the existing India–Bhutan trade framework

• Because India–Bhutan trade is already under a preferential agreement with broad liberal trade among many goods, this notification works as a supplement / override of export controls on agricultural goods, to ensure that even if export bans or restrictions are imposed for other destinations, Bhutan continues to be treated as a special case.
• In effect, this notification acts as a guaranteed carve-out: Indian export curbs will not apply to the specified agricultural items shipped to Bhutan.
• It thus helps reduce trade friction that might otherwise arise due to inconsistent export policy application.

Conclusion & Takeaways

• DGFT Notification No. 36/2025-26 is a significant instrument in India’s trade policy, especially for the India–Bhutan relationship. It ensures that certain essential agricultural commodities are exempt from export restrictions when destined to Bhutan.
• This aligns with India’s broader strategic objective of ensuring food security for a close neighbour, bolstering bilateral goodwill, and providing certainty to exporters.
• However, the exemption is subject to regulatory compliance (phytosanitary, customs, etc.), and its continued validity depends on future government orders.