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Economy of Bhutan agriculture, hydropower, forestry and tourism

Economy of Bhutan

Bhutan’s economy is largely based on agriculture, hydropower, forestry and tourism which provides livelihood to majority of the population. 56% of the population depend on agriculture, 22% on industry and remaining 22% on services. About 69% of the population dwell in villages, depending upon farms and cattle for livelihood. Because of its rugged mountainous terrain, development of roads and other infrastructure is difficult, time consuming and expensive and so the industrial production is primarily of cottage industry type. Bhutan’s economy is also economy-of-bhutan closely aligned with India through strong trade and monetary links and dependent on India for financial assistance and migrant labourers for major infrastructural development projects such as road construction and hydro power.

Hydro Power is the backbone of the Bhutanese economy. By virtue of its geographical location on the southern slope of Eastern Himalayas, Bhutan is blessed by nature with altitudinal varying land mass with excellent vegetation cover, perennial flow of water in the swift flowing rivers and fair climatic conditions. Its ability to harness the hydropower resources has been made possible due to close and friendly ties with neighbour India who has been the lead donor in providing both technical and financial assistance to develop the numerous hydro power projects in Bhutan. The relationship to develop hydro power sector has been a win-win situation for both the countries as India has huge power demand while Bhutan having tremendous hydro power potential. Most of Bhutan’s hydropower plants are mainly run-of-the river schemes with no impact or minimal impact to the environment and all the plans and polices in the hydropower sector are geared towards contributing to achieve economic self-reliance and overall socio-economic development of the country.

Bhutan’s 69% of the population living in the rural areas engaged in economic activities that are based on the natural resources. Typically, rural livelihood in the country is supported by farming which is characterized by inherent inter-dependence among forests, livestock and agricultural enterprises. The country is endowed with diverse ecosystems owing to natural occurrence of complex physiographic and climatic settings. These diverse ecosystems provide a basis to social, economic and cultural developments of the country. Agrarian practices consist largely of subsistence farming and animal husbandry. Agricultural produce includes rice, chilies, dairy (some yak, mostly cow) products, buckwheat, barley, root crops, apples, citrus and maize.

economy-of-bhutanInternational Tourism began in Bhutan, in 1974 and since then it has consistently grown to play major role to Bhutanese economy and second highest contributor to the national exchequer. The Royal Government of Bhutan recognizes that tourism is a world-wide phenomenon and an important means of achieving socio-economic development particularly for developing countries like Bhutan. It also recognizes that tourism, in affording the opportunity to travel, can help in promoting understanding among peoples and building closer ties of friendship based on appreciation and respect for different cultures and lifestyles.

Towards achieving this objective, the Royal Government, since inception of tourism in the year 1974, has adopted a very cautious approach to growth and development of the tourism. The Bhutanese tourism industry is based on principle of sustainability that is ‘tourism must be environmentally and ecologically friendly, socially and culturally acceptable and economically viable’. Since inception tourism industry in Bhutan has continued to grow with a significant contribution to the socio-economic development through revenue and foreign currency generation and employment creation. In 2019, tourism industry generated a total gross receipt of USD 88.63 million through international and regional tourists.

95% percent the industry in Bhutan are of small and cottage scale (CSI). 79 percent of CSI is dominated by service sector while Production and Manufacturing sector accounts for only 10 percent and the remaining about 10 percent is comprised of contract sector. CSI sector has been identified as one the flagship programme in view of its greater socio-economic roles. Cottage and Small Industries help drives innovation and investment, diversify economic base, create employment opportunities, curb rural-urban migration, reduce poverty, and has the potential to contribute towards Bhutan’s economic self-reliance. Small cottage industries manufacturing food products, handicrafts and handloom are found in several regions.

The Manufacturing sector is another major economy-of-bhutancontributor to national revenue. With the industrial sector established in Pasakha, small scale industries such as cement plants, calcium and carbide, steel and Ferro silicon, Coca Cola and also wood based industries have started developing. 

Bhutan’s major imports are petroleum products, mineral products, base metals, machinery & electrical appliances, automobiles & spares, wood, plastic, rubber, spices, and processed food. 80% of all imports are from India while the remaining is sourced from South Korea, Thailand, Singapore, Japan, China and Nepal. Bhutan’s main export partner is India which accounts for around 90% of the total. Export of electricity to India constitutes around 50% and other exports include metals, minerals, chemical products, timber, raw silk, fruit products and rubber products. Other exports partners include Hong Kong, Bangladesh, Japan, Nepal and Singapore.





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