Economy of Bhutan

The Ngultrum is the currency of Bhutan and its value is pegged to the Indian rupee. The rupee is also accepted as legal tender in the country.

Though Bhutan's economy is one of the world's smallest, it has grown rapidly in recent years, by eight percent in 2005 and 14 percent in 2006. In 2007, Bhutan had the second fastest growing economy in the world, with an annual economic growth rate of 22.4 percent. This was mainly due to the commissioning of the gigantic Tala Hydroelectricity project. As of March 2006, Bhutan's per capita income was US$1,321.

Bhutan's economy is based on agriculture, forestry, tourism and the sale of hydroelectric power to India. Agriculture provides the main livelihood for more than 80 percent of the population. Agrarian practices consist largely of subsistence farming and animal husbandry. Handicrafts, particularly weaving and the manufacture of religious art for home altars, are a small cottage industry. 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 not been able to benefit from significant trading of its produce. Bhutan does not have any railways, though Indian Railways plans to link southern Bhutan to its vast network under an agreement signed in January 2005.[26] Bhutan and India signed a 'free trade' accord in 2008, which additionally allowed Bhutanese imports and exports from third markets to transit India without tariffs.[27] Bhutan had trade relations with the Tibet region until 1960, when it closed its border with China after an influx of refugees.[28]

The industrial sector is in a nascent stage, and though most production comes from cottage industry, larger industries are being encouraged and some industries such as cement, steel, and ferroalloy have been set up. Most development projects, such as road construction, rely on Indian contract labour. Agricultural produce includes rice, chilies, dairy (some yak, mostly cow) products, buckwheat, barley, root crops, apples, and citrus and maize at lower elevations. Industries include cement, wood products, processed fruits, alcoholic beverages and calcium carbide.

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 three percent 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.

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