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Being located in the eastern Himalayas and being a mountainous country, Agriculture and Livestock are the mainstay of the economy. They Contribute about 45 % of the GDP. More than 90 % of the people live on subsistence farming. The farms are narrow pieces of land cut into terraces on hilly slopes. Over the past few decades, Bhutan under the Five Year Plan has embarked on several socio-economic development and reforms. As a result, the economy of the country grew rapidly.

Some of the main inputs to the economy are;
Hydro Power
Being located in the Himalayas, Bhutan is blessed with perpetual flow of fast flowing rivers fed with glaciers and monsoon. It is estimated that Bhutan has a combined capacity to produce 30,000 MW. The Royal Government aims to harness 10,000 MW by 2020. Harnessing this potential is seen as engine of growth for agrarian based economy. The first Hydro Power plan was commissioned in 1987 in place called Chukha.It has a generation capacity of 336 MW.

┬áSince then government has started a series of Hydro Power project.In 2002 a 1020 MW Tala Hydro Power project was commissioned and all the surplus energy is sold to India. Several other hydro power project are under construction; these are 1,200 Punatsangchu I, 1,020 Punatshangchu II, 720 Mangdue Chu, 540 MW Sunkosh, 500 MW Amochu, 400 MW Kholongchu, 1,800 MW Kuri-Gongri proect. Under Bhutan’s Five Year development plan, constuction of hydro power plants has been accorded high priority. The building of hydro power plant is jointly undertaken through the generous support of the Government of India.

Bhutan has a fair deposit of mineral resources spread across the country. However, most of the deposit are concentrated in the southern belt of the country. Some of these deposit are Gypsum, Dolmite, Talc, Limestone, etc. Together, the mining sectors contribute 10 % to the GDP.

Bhutan is rated by world travel magazine as one of the top 5 place of destination for travel and as such there has been a steady increase of tourist visiting Bhutan over the past year. Tourism sector is the highest foreign country earner in the country. Bhutan has a policy of low-volume, high impact tourism policy where tourism is regulated by the government.

Tourism accounts for 10 % of GDP. Besides contributing to the economy, the tourism industry also generates employment opportunities for its people and additional income to the farmers. The government has taken a concerted effort towards sustainable tourism industry that is financially viable and to limit the negative cultural and environmental impacts commonly associated with the culture of mass tourism. With the policy of “High Value, Low Impact’ tourism, the kingdom of Bhutan seeks to ensure that it attracts only the most discerning visitors with a deep respect for cultural values, traditions and the natural environment.

The Manufacturing sector is another major contributor to national revenue. Most of the industries are located at the southern area due to its proximity to the Indian border for easy transport of raw material as well as finished products. 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 has one of the highest per capita incomes in South Asia at US$1,321. Though manufacturing industries contributes substantially toward the government revenue, since protection and preservation of environment is one of the pillar of Gross National Happiness, stringent regulations have been enacted in order to protect Bhutan’s natural environment.