Bhutan's economy: selling river water to India as electricity

How the rivers became Bhutan's main export

The four river systems described in the geography article drop from the glaciers to the Indian plains in a few hundred kilometres, and putting that drop to work has been the main focus of the country's five-year plans. Britannica records that by the early 21st century electricity had become the country's top export, most of it sold to India.

Small plants came first. Wikipedia's energy article dates the first mini-hydroelectric station, in Thimphu, to 1967, while Britannica's entry on the capital has a hydroelectric plant there operating from 1966. The first large plant set the pattern. Work on the Chukha project began in 1975 on the Wang Chhu between Thimphu and Phuntsholing. It came on line in 1986 with 336 megawatts, was synchronised with the Indian grid the same year, and passed fully into Bhutanese hands in 1991. India paid for all of it, 60% as grants and 40% as a loan, and the sale of surplus power to India repaid it. In 2005 and 2006 Chukha alone provided more than 30% of the government's total revenue.

Tala, a few kilometres downstream, followed in 2007 with 1,020 megawatts, fed by about 40 kilometres of tunnel and a drop of 860 metres. Its commissioning is the reason Wikipedia's article on Bhutan gives growth of 22.4% for 2007. Later plants were also wholly financed by India, but on harder terms, 40% grant and 60% loan. In 2008 the state's three hydropower companies were merged into Druk Green Power Corporation, which took over Tala in 2009.

Installed capacity reached 1,623 megawatts in 2018, of which 1,614 were hydropower. Wikipedia's article on Bhutan puts the potential at 30,000 megawatts. The supply is seasonal. In summer the plants produce far more than the country needs, but in the dry winter, with demand for fuel rising, Bhutan becomes a marginal net importer of energy from India. It has no oil or gas of its own and imports about 1,000 barrels of oil a day.

The World Bank's report on the 2024/25 fiscal year shows the dependence plainly. Industrial growth jumped to 12.0% from 3.1% the year before, which the Bank attributes to the commissioning of Punatsangchhu II and the construction of two more large plants, and it signed financing agreements for another, Dorjilung.

What farming still employs

Hydropower makes the money; farming employs the people. Wikipedia's account of the economy says agriculture and forestry provide the main livelihood for more than 60% of the population, without giving a year, and its article on Bhutan gives 55.4%. Most farms are small subsistence holdings, terraced into the hillsides. Britannica lists maize, potatoes, rice, citrus, apples and spices such as cardamom as the chief crops, and cattle, pigs and horses as the main livestock.

The sector's share of output has fallen faster than its share of workers. Agriculture made up about 55% of GDP in 1985 and 33% in 2003, while Britannica describes it in the early 21st century as still a leading contributor to GDP and a top employer. Red rice is the best-known farm export, sold in North America and Europe, and Bangladesh buys most of the country's apples and oranges.

Some aims have not been met. In 2013 the government announced that Bhutan would become the first country with entirely organic farming; a decade later about 1% of agricultural land had organic status. The caterpillar fungus Ophiocordyceps sinensis, collected in the wild at high altitude, fetches prices high enough that its harvest has proved hard to regulate. Forestry is held back by design: about two-thirds of the country is forest, and the law that protects it also limits the timber trade.

Where Bhutan's factories stand

Manufacturing began around 1970, and Britannica identifies four pillars by the early 21st century: cement, chemicals, wood products and processed food. Ferroalloys, steel products, copper conductors and calcium carbide, the main mineral export, came with cheap power. Almost all of it sits in the south near the Indian border, and Phuntsholing accounts for nearly half of all manufacturing activity.

Exports follow the same line. After electricity, Britannica lists copper wire and cable, calcium carbide, metal alloys, cement and polyester yarn, then cardamom, gypsum, timber and handicrafts. Mining produces limestone, dolomite, gypsum, coal, marble, quartzite and talc; other deposits, including copper, lead, tin and zinc, are mostly left in the ground, which Wikipedia's article on Bhutan attributes to a preference for conserving the environment.

Construction depends on labour from outside. Most development projects, road building especially, rely on contract workers from India, and Britannica's account of the labour market describes a mismatch: rural areas short of hands while educated young people struggle to find work in the towns.

How the ngultrum is tied to the rupee

Until the 1960s, in Britannica's account, Bhutan had no currency and people bartered. The ngultrum, issued by the Royal Monetary Authority, has its value fixed to the Indian rupee, and the rupee is also legal tender inside Bhutan. A development bank for industry and farming was founded in 1988 and a stock exchange, open only to Bhutanese citizens, in Thimphu in 1993.

Trade is overwhelmingly with India. Free trade between the two prevails, India supplies the great majority of imports (machinery, vehicles, metals, fuel, food and textiles) and buys most exports, and a 2008 accord let goods from third countries cross India without tariffs. Wikipedia records that trade with China has been almost non-existent since Bhutan closed its Tibetan border in 1960. Bhutan belongs to the South Asian Free Trade Area and BIMSTEC; it applied to join the World Trade Organization in 1999 and its government approved accession in April 2023.

Prices track India's as well. The World Bank records headline inflation falling to 2.6% in fiscal 2024/25 from 4.3% the year before, which it puts down to lower food inflation in India.

What Gross National Happiness was meant to measure

The fourth king, Jigme Singye Wangchuck, declared in 1972 that Gross National Happiness was more important than gross domestic product. The idea rests on four pillars named by the government: sustainable and equitable development, environmental conservation, the preservation of culture, and good governance. It is measured across nine domains, among them psychological wellbeing, time use, community vitality and living standards, each mixing survey answers with objective indicators.

The Centre for Bhutan Studies built an index with researchers from Oxford, and nationwide surveys were held in 2008, 2010 and 2015, covering all twenty districts. The early questionnaires took hours to complete and asked, among other things, how many times a day a person prayed. The constitution of 2008 directs the state to promote conditions for the pursuit of Gross National Happiness, and in 2011 the UN General Assembly adopted resolution 65/309 urging others to measure happiness.

The institution built to apply it did not last. The Gross National Happiness Commission, chaired by the prime minister, drew up the five-year plans and screened policies and projects against the index. It was dissolved in 2022. Wikipedia's article on Bhutan records that businesses had found its criteria too constraining and lobbied for GDP to return as the national measure of success.

Why Bhutan mines bitcoin

The state investment company, Druk Holding and Investments, began mining bitcoin in 2019 with surplus hydropower, running the machines in the high-flow summer months. A World Bank report cited by Wikipedia found US$539 million invested in mining over the fiscal years from July 2021 to June 2023. The holdings were valued at more than US$1 billion on 15 November 2024, about 12,206 bitcoin, and blockchain analysts put them at more than US$600 million in April 2025. Wikipedia's economy article records that US$100 million of cryptocurrency had been sold by 2023 to double civil servants' salaries, after which resignations fell.

The mines show up in the trade accounts. The World Bank attributes part of the narrowing of the current account deficit, from 20.4% of GDP in fiscal 2023/24 to 17.4% in 2024/25, to lower imports for cryptocurrency mining.

What tourism and the state pay in services

Services are the largest part of output and a smaller part of employment. Britannica puts the sector, mainly public administration and defence, finance, trade and restaurants, and public utilities, at more than two-fifths of GDP, and attributes its growth since the late 20th century to spending on education and social services and to higher allowances for civil servants.

Tourism is the one service sold to foreigners. It began in the mid-1970s, closely controlled by the government, and was privatised in the early 1990s, after which Britannica describes visitor numbers and income as increasing enormously. The state kept a daily charge on visitors to make sure a large share of what they spent reached the economy. Wikipedia's article on Bhutan records 133,480 foreign visitors in 2014 and a sustainable development fee of US$100 a day for all but Indian, Maldivian and Bangladeshi nationals, a figure the travel article sets beside the older tariff.

The pandemic showed how much rode on it. When the border closed, the tourism industry collapsed and the economy contracted by 10%. The country reopened to tourists in September 2022, and Wikipedia's article on Bhutan records that arrivals had not regained their earlier level by 2025, which matches the World Bank's description of tourism in fiscal 2024/25 as reviving but still below its level before the pandemic.

How the economy has fared since graduation

The United Nations removed Bhutan from its list of least developed countries in December 2023; Wikipedia's economy article dates it to the 8th and its article on Bhutan to the 13th. The World Bank classifies it as lower-middle income. Britannica records economic growth in the decade after 2008 as among the most rapid anywhere and extreme poverty as nearly eradicated. Per capita income is given in several forms without agreement: US$3,491 in 2022 in Wikipedia's economy article, and US$4,347.1 in 2024 in a Ministry of Finance budget report of 2026 that Wikipedia's article on Bhutan cites.

The World Bank's figures for fiscal 2024/25 put growth at 8.1%, the services sector at 6.7% on a revival in tourism still below its level before the pandemic, the fiscal deficit at 2.6% of GDP against 0.2% the year before, and remittances at US$242 million. Reserves reached US$1.1 billion in January 2026, enough for 7.3 months of imports. The Bank projected growth of 7.1% for 2025/26 and 6.4% for 2026/27.

What the totals hide is uneven. In 2022, 12.4% of people were below the national poverty line, from 1.5% in Thimphu to 41.4% in Zhemgang. Unemployment stood at 3.8% in the last quarter of 2025, but youth unemployment at 20.6%, and at least 50,000 people, more than 6% of the population, emigrated after the pandemic. The government's answer has been to plan a special economic zone at Gelephu, the Gelephu Mindfulness City, announced on 17 December 2023, with a planned international airport and an Indian rail link.