A new agreement on trade, commerce and transit between India and Bhutan came into force on 29 July amidst a border stand-off between Indian and Chinese forces on the Sikkim-Bhutan-India tri junction after China started building a road into Bhutanese territory.
Bilateral trade relations between India and Bhutan are governed by the Agreement on Trade, Commerce and Transit between the governments of the two countries, which allows a free flow of goods and services between the two countries, effectively allowing a free-trade regime.
The agreement also provides for duty free transit of Bhutanese merchandise for trade with third countries.
The agreement was last renewed on 29 July 2006 for a period of ten years. The validity of this agreement was extended with effect from 29 July 2016, for a period of one year or till the new agreement comes into force, through exchange of diplomatic notes.
The new Agreement on Trade, Commerce and Transit Agreement was signed on 12 November 2016 by the minister of state for commerce and industry Nirmala Sitaraman during her visit to Bhutan on 1113 November 2016.
As per its provisions, the new agreement was to come into force on a mutually decided date. As agreed to by both India and Bhutan, the new Agreement on Trade, Commerce and Transit between India and Bhutan has come into force with effect from 29 July 2017.
The new agreement will further strengthen the bilateral trade relations between India and Bhutan, an commerce ministry release stated.