This document summarizes Bhutan's path toward sustainable economic development through three key areas: organic farming, hydropower production, and ecotourism. Bhutan aims to promote organic farming to reduce chemical usage and preserve soil health. Hydropower is a renewable energy source that allows Bhutan to be a net exporter of electricity. Ecotourism is being developed as a sustainable industry to contribute to the national economy while protecting Bhutan's natural and cultural heritage. Overall, Bhutan follows a philosophy of Gross National Happiness that balances economic, environmental, and social factors to achieve development without compromising future generations.

1. Integrated Intelligent Research(IIR) International Journal of Business Intelligent
Volume: 02 Issue: 01 June 2013,Pages No.15-19
ISSN: 2278-2400
15
Bhutan: On the Path towards Sustainable
Economic Development
Aditya Banerjee1
, W. Jotin Singh2
1
Lecturer Gaeddu College of Business Studies, RUB
2
Lecturer Gaeddu College of Business Studies, RUB,
1
dtybanerjee@gmail.com, 2
jotin23rdoctober@gmail.com
Abstract-The world today is edging towards a precipice of
crisis and disaster, pushed continually by unplanned
development, and myopic vision of nations, and their leaders.
The world requires moving towards sustainable development,
which envisages the idea of meeting the worlds present needs,
without compromising on the resources for future generations.
Bhutan, a small Himalayan kingdom, is aspiring to achieve just
that. This paper strives to highlight the uniqueness of Bhutan
and discusses upon three of the vital tasks undertaken by
Bhutan viz. promoting sustainable agriculture in the form of
organic farming, sustainable energy production in the form of
hydropower, and sustainable ecotourism as an important
industry for the future, and in the process attempts to associate
these factors to Bhutans ideology of ensuring happiness for all
its citizen through a path of sustainable economic
development. This paper attempts at sensitising the audience to
the idea that Bhutan is marching ahead on the right path
towards achieving sustainable economic development.
Keywords: Sustainable Development, Gross National
Happiness, Organic Farming, Hydropower, Tourism, Economy
I. INTRODUCTION
The world of today is marked by large scale crises, which
threaten to overwhelm entire nations and affect many other
nations in the process. The world is also constantly facing the
risk of increasing Global Warming, and other environmental
issues that threaten humans, and other living beings with which
they share this world. This all can be blamed upon unplanned
development, driven, single-mindedly, by predominantly
materialistic requirements. The fact is often ignored that,
human actions have a long-bearing effect on this planet and its
future. Sustainable development is probably the only way out
for the world if humans want to save, the rapidly deteriorating
biosphere of the Earth, and in the process, save
them.Sustainable development is best described in the
Brundtland Commissions Report of 1987, as, “Sustainable
development is development that meets the needs of the
present without compromising the ability of future generations
to meet their own needs1
”. This description talks about two
1
What is Sustainable Development? Environmental, economic
and social well-being for today and tomorrow, International
things, first, is meeting the needs of present, and second, is not
compromising the future generation’s ability to meet their own
needs.This requires balancing conflicting issues, namely,
economic growth, social wellbeing, and preservation of nature.
These three factors are the three pillars of sustainable
development. For example, rapidly developing countries like
India and China have to focus on industrial development, cope
with increasing urbanization and have to worry about feeding
over billions of mouths. Clearly, none of these can be achieved
wholesomely without compromising the natural environment.It
is here that we look upon, the small mountainous kingdom of
Bhutan. Bhutan is one such country that has managed to find a
point of balance, among the three seemingly unbalancing
forces mentioned above. Bhutan is poised to become a unique
nation that will guide the rest of the world in the future, on
sustainable development. The Buddhist philosophy of ‘middle
path’ and focus on Gross National Happiness, adopted by the
government, and the people of Bhutan essentially promotes the
preservation of nature along with fulfilling the basic
requirements of its citizen. This is established by the fact that
Bhutan has about 70.5% of its land area covered in forests
(National Statistics Bureau, RGoB, 2010).In this paper, the
authors strive to understand, a few of the many factors which
lead Bhutan on its path towards sustainable development. The
paper begins with the introduction, followed by a discussion of
Bhutan’s guiding philosophy of GNH and then discusses
organic farming, hydropower, and tourism in Bhutan, ending
with a conclusion. This paper builds upon the works already
done by various authors in this area, and incorporates their
ideas and information already available from various sources to
establish the author’s ideas.
II. BHUTAN AND ITS UNIQUENESS
When the rest of the world adopts Gross Domestic Product
(GDP) and Gross National Product (GNP) as a measure of
economic performance of a nation, Bhutan opts to follow a
unique path of measuring economic wellbeing through Gross
National Happiness (GNH). Where traditional methods of GDP
Institute for Sustainable Development, from
http://www.iisd.org/sd/

2. Integrated Intelligent Research(IIR) International Journal of Business Intelligent
Volume: 02 Issue: 01 June 2013,Pages No.15-19
ISSN: 2278-2400
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and GNP tend to overleap the factors associated to the overall
wellbeing of a person, focussing only upon materialistic
achievements, GNH talks about happiness as a parameter of
human welfare, and thus it not only includes the materialistic
aspects but goes beyond to include the mental and spiritual
eudemonia of a person. Though, Bhutan is the only country so
far to adopt completely, the philosophy of GNH, the remainder
of the world is fast waking up and taking note of this unique
philosophy and we can expect GNH to become a norm rather
than an exception in the future.Bhutan’s philosophy of GNH
flows from its unique culture and society. A sparsely populated
country, Bhutan, has always focused on the preservation and
promotion of culture. Bhutan’s unique vision of growth and
development is that it stresses more on non-quantifiable
objectives such as spiritual well-being and happiness, in
addition to the conventional concept of development measured
by quantified indicators. In this holistic approach, human
happiness is linked with sustainability of the society. The main
concern given to social sustainability is clear with the inclusion
of "preservation and promotion of cultural and traditional
values" as one of the objectives and strategies of GNH for the
development of Bhutan2
.Article 4 of the draft Constitution of
the Kingdom of Bhutan provides for the state’s responsibility
to preserve, protect and promote the Bhutanese cultural
heritage, and through it, to enrich the cultural life of the
people.3
This illustrates that Bhutan's philosophy of sustainable
development is deep rooted in its culture, and requires that
development must be, economically as well as socially, and
ecologically sustainable. In the coming sections we will
discuss a few of the long term strategies in some of the areas
adopted by Bhutan, and try to understand how they are in
agreement with sustainable economic development.
III. SUSTAINABLE AGRICULTURE IN BHUTAN:
ORGANIC FARMING
The geography of Bhutan is distinguished by steep slopes and
rugged mountains that are separated by valleys. Bhutan is one
of the few countries in the world that has more than two thirds
of its land area under forest cover. However, land under
agricultural use in Bhutan is very limited, at only 2.9% of the
total land area; the agricultural land usage is depicted in
Figure1 (National Statistics Bureau, RGoB, 2010). Organic
farming is adopted by Bhutan officially as of 2007, and Bhutan
plans to be “a country with environmentally clean food
production systems and products” by the year 2020 (Ministry
of Agriculture, RGoB). This policy is also known as National
Framework for Organic Farming in Bhutan (NFOFB).
2
Ensuring Social Sustainability: Can Bhutan's. (n.d.).
Retrieved from
http://www.bhutanstudies.org.bt/pubFiles/4.education.pdf
3
Cultural Maintenance and Promotion: The Print Media’s Role
in Providing Space for Knowledge and Discourse
http://www.bhutanstudies.org.bt/pubFiles/M-6.pdf
The thought behind opting for organic farming, is to cut down
the use of chemicals such as pesticides and fertilizers, and in
the process, ensure a reduction in the contamination of soil by
these harmful chemicals, and also preserve soil fertility in the
long run. Adopting bio-fertilizers and bio-pesticides cut down
effectively, the use of external inputs in farming, maintains
ecological balance, and makes farming sustainable in the long
run. Crop such as Red rice, produced at a high altitude of
Bhutan, is exported to USA and Europe to the extent of 100
tons of milled rice annually earning the producers a good
profit4
. Organic farming has the potential to alleviate poverty
in the long run as the high prices of organic produce can
generate better revenues for the rural households. The Council
for Renewable Natural Resources (RNR) Research of Bhutan
is an agency which exists, with the purpose of carrying out
various researches in the area of organic farming and gather
data on the sustainability of the same. However, looking at the
current scenario, where use of pesticide is on the rise, from 7.9
kg a hectare in 2007 to 26 kg a hectare in 2008 (source: Bhutan
Observer, April 29th
, 2011), Bhutan has a long way to go
before organic farming becomes its principal source of
agricultural income. At the same time, the high price of organic
produce makes them to be unsuitable for large-scale domestic
consumption. With high quantities of imports in vegetables
(about Nu. 286 Million5
in 2011), and rice (about Nu. 1.1
Billion5
in 2011), and an increasing population, the strain on
the agricultural land to produce more, is insistent. Bhutan, in
the coming days, has to find a balance between sustainable
organic farming, and self sufficiency in food production.
IV. SUSTAINABLE ENERGY PRODUCTION IN
BHUTAN: HYDROPOWER
4
Duba, Sangay et. al.; Promoting Organic Farming In Bhutan:
A Review Of Policy, Implementation And Constraints, Council
for RNR Research of Bhutan, Ministry of Agriculture, RGoB,
http://www.fao.org/sard/common/ecg/3120/en/BhutanEngNov
08case.pdf
5
Self-sufficiency through commercialisation, Apr 18, 2012,
http://www.kuenselonline.com

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ISSN: 2278-2400
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Bhutan has immense potential when it comes to hydropower.
The aggregate capacity for hydropower generation in Bhutan is
theoretically 26,760 MW (ADB, 2008), of this, approximately
6% is being used. Currently, there are five large hydroelectric
power plants with the installed capacity of over 1500 MW,
along with another 22 mini and micro hydroelectric power
plants in Bhutan. In the year 2010, Bhutan produced a total of
6997.59 million units (MU) of electricity. By the year 2020,
Bhutan plans to have an installed capacity of 10,000 MW
(Press Information Bureau, GoI). The Royal Government of
Bhutan has plans to provide ‘electricity to all’ by the year
20206
. Bhutan is currently a net exporter of electricity with
76.5% of its produce being exported, the bulk of which is
being exported to India. In the year 2010, electricity
contributed to about 17.6% of Bhutan’s GDP making it the
highest contributor so far (National Statistics Bureau, RGoB,
2010).With the development of industry, increasing
urbanisation, and rural electrification, domestic consumption of
electricity is on the rise (see figure 2 for trends in consumption
and exports of electricity). However, with upcoming
hydropower projects (see table 1), Bhutan will continue to be a
major exporter of electricity. Because of the nature of
hydropower projects, they are non-polluting and enduring, and
are among the most sustainable and renewable sources of
energy, thus making them compatible, with the idea of
sustainability.
(Derived From: Statistical Yearbook of Bhutan, 2011)
V. SUSTAINABLE TOURISM IN BHUTAN
6
Hydropower - Key to sustainable, socio-economic
development of Bhutan, by, Mr. Sonam Tshering and Mr.
Bharat Tamang,
http://www.un.org/esa/sustdev/sdissues/energy/op/hydro_tsheri
ngbhutan.pdf
Bhutan is a country blessed with unspoilt natural beauty,
dense, untouched forests and a profusion of wildlife. Bhutan is
yet to tap most of its potential when it comes to tourism;
however, tourism as an industry is on the rise and Bhutan can
develop tourism as a large scale, sustainable industry in the
long run. As of 2010, Bhutan received a total of 27,195 tourists
from across the world generating revenue of US$ 35.98
Million in foreign exchange which is an increase of 12.86%
over 2009 (National Statistics Bureau, RGoB, 2010). The
breakup of tourists from different continents is depicted in
figure 3 below:
Table 1: Upcoming Hydropower Projects in Bhutan7
The 10th
Five Year Plan of Bhutan aims at improving tourism
industry by, promoting Bhutan as an exotic-tourist destination
and improving the quality of services, developing human
resource, increasing community participation in tourism, and
developing infrastructure among various other measures. With
the goal set for the tourism industry to contribute around 9% to
the national income, and provide 40% more employment over
the 2000 people already employed in year 2004 (10th
Five Year
Plan, 2008-13), Bhutan is clearly stressing on the need for
developing tourism as an ecologically sustainable avenue for
economic progress.
VI. BHUTAN: TOWARDS SUSTAINABLE
ECONOMIC DEVELOPMENT
7
Hydropower - Key to sustainable, socio-economic
development of Bhutan, by, Mr. Sonam Tshering and Mr.
Bharat Tamang,
http://www.un.org/esa/sustdev/sdissues/energy/op/hydro_tsheri
ngbhutan.pdf
River Basins Name of the Project Installed Capacity-MW Mean annual Energy-GWH Proposed for construction in
Punatsangchhu Punatsangchhu-I 2 1000 4770 2007-2012
Mangdechu Mangdechu Hydel Project 670 2909 2009-2014
Punatsangchhu Punatsangchhu-II 2 990 4667 2012-2017
Bumthangchhu Zhemgang/Digala 5 670 3207 2015-2020
Bumthangchhu Kheng/Shingkhar 4 570 2713 2017-2022
Drangmechhu Kholongchhu
(Gomkora)
485 2209 2020-2025
TOTAL 4385 20475

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With 60.2% of the projected population of 708,265 of Bhutan
employed in the primary sector, it is the largest provider of
income to the population as of year 2011. However, the
contribution of the agricultural sector in the GDP of Bhutan is
limited to the extent of 16.8% as of 2010. The five largest
contributors to the GDP of Bhutan are depicted in figure 4.
From the above, it is clear that agriculture and industry
contributed to more than one third of Bhutan’s GDP of Nu.
72,477.6 million in 2010. Bhutan has vast untapped potential in
mining with deposits of limestone, coal, graphite, gypsum,
slate and dolomite. However, mining industry is still at a
nascent stage, contributing to about 2.2% of GDP in 2010.
Bhutan, however, has many small scale and cottage industries
making up for the largest number of industrial licenseholders
(National Statistics Bureau, RGoB, 2010).For a country which
arrived in the global arena much late, Bhutan should take the
approach of careful planning and formulation of economic
policies. Being an economy in its growth phase, Bhutan faces
many challenges, the ongoing foreign exchange crisis (of
Indian Rupees) can be stated as one of them. The crisis has its
roots in increased lending by commercial banks in the country,
which, ensued a strong surge in consumption and imports that
amounted to about Nu. 39.084 Billion, of which Nu. 29.33
Billion came from its neighbouring country India in 2010
(National Statistics Bureau, RGoB, 2010). The total imports in
2010 rose to the extent of 52.37% over imports in 2009. Such
crisis can be controlled by achieving self reliance in the
production of necessary commodities, like rice and other
foodgrains, further improving public transportation system,
limiting imports, and controlling the availability of
credit8
.Bhutan still has many other challenges, 23.2% of the
population was below the national poverty line in 2007 which
is expected to fall to 20% or less by 2015 (UNDP, 2010).
Bhutan has to centre upon alleviating rural poverty the most,
which, is around 30.9%, and in some areas as high as 52.9% as
per a UNDP report in 2009-10. No wonder, the 10th
Five Year
Plan (2008-2013), of Bhutan states its main objective as
8
Bhutaneconomy feels the rupee pinch, By, Pushkar Chhetri,
March 10, 2012, The Bhutan Observer, extracted from
http://www.bhutanobserver.bt/bhutan-economy-feels-rupee-
pinch/
poverty reduction (Preface, 10th
Five Year Plan, 2008-13).
Bhutan however, has been progressing remarkably, in
achievement of the Millennium Development Goals (MDGs),
with its GDP growth rate of 6% and per capita income of
$1,800 in 2008 (UNDP, 2010). Following a path of sustainable
development in the field of agriculture, hydropower, and
tourism, the country is rightfully moving toward a direction of
achieving economic growth and happiness for its citizen.
VII. CONCLUSION
This paper limits itself to the study of only a few of the
domains where Bhutan endeavors to adopt sustainable
development, namely agriculture, power, and tourism. What
this paper could not reflect upon, are many other areas where
Bhutan has adequate opportunities of developing, while staying
on the path to sustainable development. On his visit to Gaeddu
College of Business Studies, the Prime Minister of Bhutan,
Honorable, Jigme Y. Thinley, hinted at the possibility that
Bhutan can cater to the world in many other ways in the future,
with possibilities ranging from, IT and IT enabled services
(ITES) which is now a reality with the upcoming IT hub at
Thimphu, providing quality healthcare services and, becoming
a centre for providing quality education in the future, among
others. All of these can garner significant revenues for the
country while also being ecologically sustainable. Bhutan also
has the potential to develop other industries and mining in the
future, though, it should be cautious, so that it doesn’t upset its
natural environment in the process. As for the domains
discussed in this paper, Bhutan still has the potential to grow
much more. What remains to be seen is how Bhutan contrives
to balance between development and sustainability. Bhutan’s
foresightful leaders have already set the nation on the right
path, though, roadblocks are inevitable for any nation trying to
achieve a goal of sustainable development. However, with its
citizen being harmonic with, and supportive towards the idea
of GNH and sustainable development, it will not be long
before Bhutan comes to realize the fruits of its efforts.
VIII. ABBREVIATIONS
RGoB: Royal Government of Bhutan
UNDP: United Nations Development Programme
ADB: Asian Development Bank
GoI: Government of India
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ISSN: 2278-2400
19
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