The two major sources of income for the country are hydroelectricity and tourism. A substantial amount of development activities are funded by aids and grants from the development partners abroad. Bhutan is seriously thinking of integrating its economy into the regional and global economies. The country is member to a host of regional economic organizations and is contemplating joining the World Trade Organization. Bhutan launched its first ever Economic Development Policy in 2010. The document is a road map to the country’s economy. The government also revised its Foreign Direct Investment policy in 2010. The revised policy aims to attract foreign investments to develop businesses. Further, the policy is under review by the current government.
Given a small population with limited natural resources, Bhutan seriously considers making its economy a knowledge-based one. That is why unprecedented efforts are directed toward building world class educational, health and medical centers in the country. Bhutan strongly believes in a holistic approach to economic development. Thus it has been very cautious in liberalizing its economy. The country considers rapid economic growth at the expense of its cultural and traditional values bad. The country rejects the one-time profiting by exploiting its natural resources. In most five-year plans the allocation of budget both in terms of current and capital expenditure is the highest in the social sectors – health and education.
Bhutan’s financial system is small which bears a strong correlation with its economic development level. The country has just four commercial banks and a dormant stock exchange. This means the country has not fully moved into a monetary economy. In some pockets of the country trade in goods for goods still exists.
The manufacturing base is small and the country’s major export includes electricity, vegetable oil, fruits and minerals. The export destinations are mainly the South Asian economies with India being the largest. And the country’s currency (Ngultrum) is pegged at par with that of Indian currency (Rupee). Most consumer products and construction materials come from India. However, Bhutan trades with about 52 other countries including some in Europe and America.
Economy
Bhutan’s economy started to look beyond its borders only in the early 1960s. It was the time when Bhutan began planned development process with the launch of the first five-year plan. For a long time the country’s economy remained small and traditional. Even today the economy is more or less agrarian. About half of the country’s population depends on agriculture. It was only in the late 1980s that the government started to emphasize on the need to develop its private sector. The private sector was then recognized as the engine of economic growth. Until then the economy was almost wholly state-run. Today, a substantial percentage of labor force is being absorbed by the private sector.
Bhutan’s economy started to look beyond its borders only in the early 1960s. It was the time when Bhutan began planned development process with the launch of the first five-year plan. For a long time the country’s economy remained small and traditional. Even today the economy is more or less agrarian. About half of the country’s population depends on agriculture. It was only in the late 1980s that the government started to emphasize on the need to develop its private sector. The private sector was then recognized as the engine of economic growth. Until then the economy was almost wholly state-run. Today, a substantial percentage of labor force is being absorbed by the private sector.
Bhutan economy for the last several years has grown on an average of 7.5% annually. Bhutan’s latest GDP stands at meager US$ 1.2 billion. Indicating a steady transition from a traditional to a modern economy, the percentage contribution of the primary sector to the country’s Gross Domestic Product has been falling continuously. On the other hand, the secondary and tertiary sectors have been expanding quite fast. Among the three sectors, the services sector has been a leading contributor to the overall economic growth.
