Bhutan, a strategically located landlocked country nestled between India and China, enjoys a unique historical distinction—having never been colonised by any major foreign power. A notable characteristic of Bhutan, distinguishing it from many other ancient states, is its abundant natural resources, particularly its rivers, which hold immense potential for hydroelectric power generation. Over the years, this sector has become the cornerstone of Bhutan’s economic development. In parallel, India, with its growing energy demands, has become increasingly dependent on importing hydroelectricity from Bhutan. This paper aims to explore the evolution and impact of the economic and hydro-energy cooperation between India and Bhutan from 1997 to 2010