Bhutan’s is perhaps the smallest economy in the world.

Its GDP is $3.789 billion (2008 est.), GDP growth is 6.6% (2008 est.), and GDP per capita is $5,600 (2008 est.)

Having largely functioned as a barter economy, trading for Salt and goods with India or Tibet in the past- The first currency was issued in Bhutan in 1974, and the value of the Bhutanese Ngultrum was pegged at par with the Indian Rupee.

Bhutan is largely dependent on India economically- 70 percent of its imports are from India, and 60 percent of its exports are to India as well.

A majority of the Bhutanese practice farming, but this is not a major source of revenue because the farmers mostly practice subsistence farming, and do not produce a great deal of export produce.

The main source of revenue in Bhutan is from Hydropower, which was first set up with the help of India in 1986. There are now two major Hydropower plants in Bhutan, and several minor ones.The country has made major plans to tap this energy source, and is in the process of building 10 major and medium hydropower plants with assistance from India. All of the hydropower that is produced in Bhutan is exported to India after a minimal amount is used locally.

The second largest revenue generating sector in Bhutan is tourism. While Bhutan still regulates the number of tourists it can take in annually, it is a much sought after destination because of its governance policy, scenic beauty, rich culture and heritage, and unpolluted environment.

In recent times, the government has taken steps to allow the local communities to benefit directly from the Tourism Sector by introducing community tourism and helping souvenir cottage industries.

Bhutan also has a small mining, cement and iron bar production industry, as well as a processed food industry, popular in neighboring India.

The government introduced a Foreign Direct Investment Policy and an Economic Development policy in 2009. The FDI policy aims to encourage investors to set up businesses in Bhutan, and offers tax holidays and other attractive rewards. However, Bhutan is selective in choosing investors as a result of the national governance policy of Gross National Happiness.

In keeping with this policy, international fast food chains and industries that may pollute, or is not in line with the policy, will not be allowed to set up in Bhutan. So you will not find Mc Donald’s or KFC in Bhutan, although there are many local fast food joints that serve western food.

Bhutan imports goods from China, Bangkok and Bangladesh as well, but most of the goods including major food products are from India.