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Chapter 11 ECONOMY

Though the Bhutanese economy is one of the world’s smallest, it has undergone significant changes since the inception of planned development from the 1960s. Within a short span of four decades, the country has been transformed from a predominantly subsistence agrarian economy to a modern trading economy with expanding regional and global economic ties. Bhutan’s economy is based on agriculture, forestry, tourism and sale of hydroelectric power to India. In 2006, Bhutan’s GDP per capita was USD 1,414 making it one of the fastest growing economies in South Asia.


Renewable Natural Resources Renewable Natural Resources (RNR) which include agriculture, livestock and forestry play a vital role in the national economy. The contribution from the agriculture sector, including horticulture and livestock rearing to GDP was 21.4 percent in 2006 while its contribution towards employment activity was 64.2 percent in 2007. Exports of primary products from this sector accounted for around one-tenth of total exports in 2004 and contributes significantly in enhancing rural household food security, consumption and income. The forestry sector contributes substantially to the national revenue through its wood and non-wood forest products. Forest wood is not only used for domestic consumption of fuel,fodder and timber but also for exports through various

products such as furniture and handicraft items. Among the nonwood forest products such as medicinal plants,mushrooms,bamboos and spices, the products which fetch high value in the international market are cordyceps and masutake. Forests have always played an important role in Bhutan’s socio-economic development. Protection of watersheds and river catchments has contributed greatly to the development of hydropower. In addition, forests form an integral part of farming systems and is linked to agriculture and livestock development. RNR will continue to be one of the largest contributors to national income and employment, particularly among the rural population.



Tourism Since the opening of tourism in 1974, the country has witnessed significant expansion in the tourism industry. Today, it has become a major service industry that provides employment and generates valuable foreign exchange. In 2007, the total tourist arrivals touched 21,094 as compared to 287 visitors in 1974 and earned USD 29 million. The industry also figures consistently among the largest generators of convertible currency and is normally among the top three revenue earners. The tourism sector has also contributed towards growth of small and micro enterprises and strengthened Bhutan’s image and identity around the world.

Tourism is projected to constitute 25 percent of the GDP by 2012 and it is anticipated that its revenues will have increased by 100 percent by 2012 and 150 percent by 2017. This means that the number of international arrivals will continue to grow. Despite the potential for higher foreign exchange earnings, Bhutan has followed a policy of regulating the number of tourists with its policy of ‘high value low volume’ tourism to avoid the possible adverse impacts of uncontrolled mass tourism on the country’s fragile culture, heritage and environment.

Tourist in national costume with local Bhutanese


The forestry sector contributes sub- stantially to the national revenue through its wood and non-wood forest products. Forest wood is not on...

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