Bhutan Economic Structure

 The economy of Bhutan is largely dependent on agriculture and other traditional sectors. Bhutan’s economic structure is overly reliant on certain sectors, like hydroelectricity, government services and investments.

 The economy of Bhutan is largely dependent on agriculture and other traditional sectors. Bhutan’s economic structure is overly reliant on certain sectors, like hydroelectricity, government services and investments. Although Bhutan remains one of the poorest nations in the world, a UNDP Human Development Index of .51 ranks the nation in the medium human development category.[br] Agriculture remains the dominant sector, but during the 8^th and 9^th five-year plan periods, mining, electricity, transport and communication, financial services and construction have emerged as profitable sectors.[br]

 

The government of Bhutan remains the principal driving force behind the development of the economy. The state has undertaken considerable initiatives since 1987 to develop the private sector, while maintaining macroeconomic stability. The industrial sector has since been developed in the form of estates and service centers. Cottage and small scale industries have been given special emphasis by the government.

 

The economy of Bhutan has been largely depended on India since the 1960s, when all trade relationships with Tibet were banned. In the early 1980s, aid from India amounted to 50% of Bhutan’s GDP. With subsequent growth, the figure now stands at 20%.

 

Bhutan Economic Structure

Bhutan’s GDP in 2005 was $3 billion. Despite this low GDP, the Bhutanese economy has grown steadily with average growth of 7.5% since 2001. In 2006, the IMF had predicted a growth rate of 13.2% for the Bhutanese economy. In 2005, the construction industry accounted for half the GDP growth. In the same period, the country’s exports grew by 18%.

 

In 2006, the agriculture sector, industry and services contributed 28%, 40% and 32% to the nation’s GDP, respectively. Hydroelectric projects contributed to 12% of the GDP in the same period. Due to the success of hydropower projects, power exports accounted for 32.8% of the country’s total exports. Bhutan’s main trading partners are India, Bangladesh and Germany.[br]

 

Bhutan has always attracted little foreign investments and investments from multinational companies. In the year 2004-2005, Bhutan attracted only $9 million in FDIs. A large portion of the capital inflow came from grants and loans to the government.

 

For Bhutan, 2010 marks the beginning of a major economic transition, thanks to the proliferation of foreign based enterprises and investments from non resident Bhutanese people in India, South Asia, West Europe and North America. However, Bhutan needs to sort out its trouble spots, such as high poverty rate, high unemployment rate and high external debt.