India and Bhutan reiterated their commitment to achieving the 10,000 MW target in hydropower cooperation and not to allow their territories to be used for interests "inimical" to each other.
In a joint statement at the end of Prime Minister Narendra Modi's two-day visit to the Himalayan kingdom, the two countries also decided to strengthen cooperation in a host of fields including information technology and education.
They also decided to cooperate on multilateral and regional forums as well as promote trade and investment between them.
Prime Minister Narendra Modi, who chose Bhutan as his first port of call after assuming office, met Bhutan King Jigme Khesar Namgyel Wangchuck and addressed a joint session of the Bhutan parliament on Monday.
The joint statement said that the countries expressed satisfaction with the cooperation between them related to mutual security.
"They agreed to continue with their close coordination and cooperation with each other on issues relating to their national interests, and not allow each other's territory to be used for interests inimical to the other," it said.
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Bhutan in 2003 had been the first neighbouring country to quietly help India by tackling militants working from its territory. Bhutan had conducted 'Operation All Clear' against India specific insurgents, something that no neighbour had ever done for India.
The statement said: "The two sides exchanged views and held discussions on bilateral relations and economic cooperation as well as cooperation in regional and multilateral forums".
Modi assured Bhutan Prime Minister Tshering Tobgay of India's continued commitment to capacity building especially in the education and information technology sectors in Bhutan.
India also conveyed its decision to exempt Bhutan from any ban or quantitative restrictions on export of items like milk powder, wheat, edible oil, pulses and non-basmati rice.
The two sides also agreed to further promote trade and investments between the two countries.
They acknowledged the importance of cooperation and mutual benefit arising from the hydro-power sector between the two countries and expressed satisfaction on the progress being made and reiterated their commitment to achieving the 10,000 MW target, it said.
India is involved in a big way in hydropower projects in Bhutan, which it has described as a "win-win" situation for both. It has three projects, of 1,416 MW, already in operation in Bhutan. It has three more under construction - which would be commissioned in 2017-18. Earlier this year, both countries inked an agreement for four more joint venture model hydroelectric projects totalling 2,120 MW. The 600 MW Kholongchu hydropower project, of which Modi laid the foundation here Monday, is part of this. It is joint venture model between Satluj Jal Vidyut Nigam and Druk Green Power Corporation.
According to the statement, both leaders recalled the strong historical ties of friendship and understanding that exist between the governments and peoples of the two countries.
Tobgay conveyed his appreciation to the government and people of India for the generous development assistance given to Bhutan since 1961.
In keeping with the emphasis on capacity building and education, Modi announced the doubling of the amount of the Nehru-Wangchuck scholarship given to students in Bhutan every year.
He also inaugurated a new building of the country's Supreme Court that has been built with Indian funding.