The visit is a signal that the neighbourhood is a foreign policy priority of the new government. (Agencies)
Modi will hold talks with his Bhutanese counterpart, Tshering Tobgay, and also call on the Bhutanese royal family.
He is also likely to address the Bhutanese Parliament. Former Indian prime minister Manmohan Singh had earlier addressed the Bhutanese parliament.
Modi is expected to hold talks on key bilateral and regional issues with the Bhutanese leadership.
The visit comes days after the invite to Prime Minister Tshering Tobgay to attend the swearing-in of Modi on May 26.
Leaders of several South Asian countries had been invited to the swearing-in.
Modi had also held a short bilateral meeting with the Bhutanese leader on May 27.
At a press conference a few days ago, Tobgay expressed happiness at Modi's choice to visit Bhutan.
"The entire world is watching, not just the SAARC region. We are extremely happy and proud of the fact that PM Modi has chosen Bhutan, as his first country (for official visit), which speaks volumes for the importance he attaches to the region, but more importantly he attaches to the friendship between the two great countries," Togbay said.
The Bhutanese prime minister said the two countries have enjoyed an extremely cordial relationship and the friendship between the two countries is considered as an exemplary model. With the Indian PM's visit to Bhutan, the two countries can strengthen the ties of friendship even more.
The visit is a signal that the neighbourhood is a foreign policy priority of the new government.