Bhutan economy: India centric.

One of the smallest countries in the world, and a landlocked one at that, Bhutan is tied to India in a fundamental way, for its survival and sustenance. The country’s foreign policy and defence is under India’s control, and it is India’s technology and economic assitance that keep the country going, practically speaking.

Agriculture and forestry, hydroelectricity, tourism, etc are the major economic activities of the country, and the major components of its economy. Rice, corn, citrus, etc., are the major agricultural produce. Cement, processed fruits, wood products, etc., are the major industries. Electricity is the major export of Bhutan. Other exports include timber, handicrafts, cement, fruit, spices, precious stones, etc. Among the imports are machinery, equipment, vehicles, textiles, rice, fuels, lubricants, etc. India is Bhutan’s leading trade partner. Others include Japan, Sweden, Bangladesh, etc.

Bhutan’s GDP growth rate is around 6% for fiscal 2009, and services accounts for the major share of the GDP at 40%, followed by industry at 38%, and agriculture at 22%. Whereas 63% of the labor force is engaged in agriculture, 315 in services, and 6% in industry. The unemployment rate is around 2.5%, and inflation is around 5%. A major problem is the public debt that stands at 80% of the GDP. A good part of Bhutan’s budgeted expenditure is financed by India, which is like a Big Brother to Bhutan.

The Government of Bhutan is making efforts to develop responsible tourism that is eco-friendly, and trying to attract upper end tourists who would contribute more to the economy, while causing little damage to the environment.

Bhutan has a long way to go before it puts a sound industrial and services infrastructure in place. And in the forseeable future, it does not seem to have a way around India, that will continue to call the economic shots in Bhutan.