The correct answer is option 3 - India and China. The ‘Panchsheel Agreement’ for peaceful coexistence was signed between India and China. Panchsheel, also known as the Five Principles of Peaceful Coexistence, is a set of principles that were agreed upon by India and China in 1954. These principles include mutual respect for each other`s territorial integrity and sovereignty, non-aggression, non-interference in each other`s internal affairs, equality, and peaceful coexistence.

The Panchsheel Agreement was considered a significant step towards improving relations between India and China. It aimed to promote peaceful coexistence and prevent conflicts between the two countries. The agreement emphasized the importance of respecting each other`s sovereignty and territorial integrity, and avoiding interference in domestic matters.

While options 1, 2, and 4 are incorrect as the Panchsheel Agreement was not signed with Bhutan, Nepal, or Pakistan, option 3 correctly identifies China as the country with whom the agreement was signed.