Bhutan: Encyclopedia II - Bhutan - Economy

Bhutan - Economy

Bhutan's economy is one of the world's smallest and least developed, and is based on agriculture, forestry, and the sale of hydroelectric power to India. Agriculture provides the main livelihood for more than 90% of the population. Agrarian practices consist largely of subsistence farming and animal husbandry. Handicrafts are a small cottage industry and a source of income for many. The sculpting of religious figurines is a popular occupation, and gilded Buddha statues and Buddhist saints are sold to tourists. A landscape that varies from hilly to ruggedly mountainous has made the building of roads, and other infrastructure, difficult and expensive. This, and a lack of access to the sea, has meant that Bhutan has never been able to benefit from significant trading of its produce. Bhutan currently does not have a railway system, though Indian Railways plans to link up southern Bhutan with its vast network under an agreement signed in January 2005.^[1] Historically, there have been well patronised trading routes from the Tibetan plateau to the Indian subcontinent through Bhutan, but haulage has been limited to human porters and livestock. The industrial sector is minimal, production being of the cottage-industry type. Most development projects, such as road construction, rely on Indian contract labour. Agricultural produce includes rice, corn, root crops, citrus, food grains, dairy products and eggs. Industries include cement, wood products, processed fruits, alcoholic beverages and calcium carbide.

Bhutan's currency, the ngultrum, is pegged to the Indian Rupee. The rupee is also accepted as legal tender in the country. Incomes of over Nu 100,000 per annum are taxed, but very few wage and salary earners qualify. Bhutan's inflation rate was estimated at about 3% in 2003. Bhutan has a Gross Domestic Product of around USD 2.913 billion (adjusted to Purchasing Power Parity), making it the 162nd largest economy in the world. Per capita income is around $1,400 (€1,170), ranked 124th. Government revenues total €122 million ($146 million), though expenditures amount to €127 million ($152 million). 60% of the budget expenditure, however, is financed by India's Ministry of External Affairs.^[2] Bhutan's exports, principally electricity, cardamom, gypsum, timber, handicrafts, cement, fruit, precious stones and spices, total €128 million ($154 million) (2000 est.). Imports, however, total €164 million ($196 million), leading to a trade deficit. Main items imported include fuel and lubricants, grain, machinery, vehicles, fabrics and rice. Bhutan's main export partner is India, accounting for 87.9% of its export goods. Bangladesh (4.6%) and the Philippines (2%) are the other two top export partners. As its border with Tibet is closed, trade between Bhutan and China is now almost non-existent. Bhutan's import partners include India (71.3%), Japan (7.8%) and Austria (3%).

In a response to accusations in 1987 by a journalist from UK's Financial Times that the pace of development in Bhutan was slow, the King said that "Gross National Happiness is more important than Gross National Product." ^[3] This statement appears to have presaged recent findings by western economic psychologists, including 2002 Nobel Laureate Daniel Kahneman, that questions the link between levels of income and happiness. It signalled his commitment to building an economy that is appropriate for Bhutan's unique culture, based on Buddhist spiritual values, and has served as a unifying vision for the economy.

Adapted from the Wikipedia article "Economy", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki