The Economic Activity of Bhutan

The economy of Bhutan is one of the world’s smallest but its rapid growth in recent years with an annual growth rate of 22.4% making it also as one of the fastest growing in the world. It is based on agriculture, forestry and tourism but the country’s hydro-electric exports to India boost the overall growth of the country. India is the country’s major trading partner and is the destination market of 90% of its exports, and supplier of about 70% of its imports.

The Bhutanese government still expands its hydro-electric service to India. It has signed four Memorandums of Understanding (MOUs) for the construction of four hydro-electric plants in the country following the implementation of its 10th 5-Year Plan to develop its economy in the rural and regional areas. The plan is a sequel to the 9th 5-Year Plan that had reduced poverty, increased national income and improved social conditions throughout the country. While the Chhukha Hydro-electric Power Corporation already supplies the northern states of India with electricity, two other huge hydro-electric power plants in Tala and Kurichhu are being constructed to generate more electricity and revenues for the country.

The other sources of income are agriculture which provides livelihood for more than 80% of the population; manufacturing sector which contributes 14% to gross domestic product (GDP); and tourism whose further expansion is, however, hampered by government controls that tend to encourage the visits of only environmentally conscientious or careful tourists from other countries in order to protect the country’s cultural traditions and its environment.