Bhutan’s planned economic development efforts – Essay

Being a land-locked country with difficult terrain, Bhutan’s economy, until the advent of planned economic development in the early 1960s, was by and large characterised by an extreme degree of isolation and pastoral self- sufficiency.

Almost the entire population was engaged in subsistence fanning. Infrastructural facilities were totally lacking.

There was n6 pool of skilled labour. There were only 59 primary schools and no middle or higher secondary schools. There were only four hospitals and eleven dispensaries and only two hospitals had qualified doctors. Bhutan did not posses any resources beyond its normal civil revenue and the meagre assistance that was provided by the British Government in Indian and later by the Government of independent India. It had no bank or any other kind of monetary institution.

There were no motorised vehicles or metalled roads, no electricity. There were no telephones or postal system connecting the country with the outside world. A kind of physical isolation from the modern world accounted for Bhutan’s closed economy. UN estimates published in the late 1960s placed Bhutan at the bottom of economic growth ladder, with the lowest levels of per capita income.

Planned Economic Development Efforts the idea of planned economic development of Bhutan was conceived when Jawaharlal Nehru, the Indian Prime Minister, visited that country in 1958. By then the Bhutanese leaders had become aware that their country could not continue indefinitely in isolation, for the countries around it were moving ahead in the growth of communications and social services.

Moreover, Bhutan aspired to take its place as a member of the United Nations and to that end it had to project to the world its image as a progressive country with concern for the welfare of its people.

Jigme Dorji Wangchuck therefore decided to end isolation and initiated the process of change by planned development efforts. The first five year development plan chalked out for 1961-1966 was designed with the help of the Planning Commission of India.

This plan, as well as the second plan was also fully financed by the Government of India. Subsequent plans too were substantially financed by India. In a way, the Bhutanese economy over a period of last forty years has become heavily dependent on Indian assistance. A significant feature of development effort in Bhutan is the prominent presence Indian expertise and resources.

For instance, the hide directorate was set-up with the help of Indian engineers. Similarly, the telecommunication system and highway constructions are done by Indian engineers. The government of Bhutan has set up its own bank, the Bank of Bhutan, in 1968. The use of Indian currency and coins is valid in Bhutan. The Bank of Bhutan has entered into collaboration with the State Bank of India to advice Bhutanese government in monetary and banking affairs.

During the recently concluded Eighth Five-Year Plan (1998-2002), Bhutan’ real GDP (i.e. national income) grew at 6.7 per cent per annum, led mainly by forestry and livestock. The industry sector grew at 7.1 per cent wherein construction activity and electricity generation performed well.

The hydropower development in 1990s has become the principal source of Bhutanese growth. The electricity generated is exported to India, earning revenue to the Bhutanese government. The contribution of services sector in Bhutanese annual national income is 8 per cent. There is gradual improvement in transport and communication system which is helping to attract tourists from outside the country.

The Bhutanese currency is tied up with the Indian rupee and because of this arrangement there is limited scope for flexibility in monetary policy of Bhutan.

The limited existence of private sector restricts generation of domestic investment. There are very few enterprises which can be called as major units. The overall small size of the economy adversely affects the private entrepreneurship.

In the absence of adequate domestic investment the economy has to rely on external loans and debts to meet the needs of the economy. For Bhutan, India is the prime lender at financial assistance. About 90 to 95 per cent of Bhutanese trade is with India. Social Sector

There exists direct correlation between achievements in economic sector and social sector. Since the Beginning of 1980s, there has been a remarkable improvement in Bhutanese social sector. For example, in case of health indicators, life expectancy has risen to 68 years in 2001 from 36 years in 1961. Similarly, between 1986 and 2001 the infant mortality rate has decreased from 143 to 62 per 1000 live births and the maternal mortal rate from 7.8 to 2.7 per 1000 live births

Bhutan also made considerable progress in raising the literacy level in the last four decades. In 1960, less than 500 children in the whole country attended secular primary schools and till 1964 there was no secondary school in the country. Now in 2001, about 75 per cent children (of the total child population) attend primary school and of them 47 per cent are girls.

The overall adult literacy rate in 1998 was 55 per cent and for w omen it was 30 per cent. On employment front, the performance is somewhat modest mainly because private sector is not yet adequately developed and the public sector cannot provide jobs beyond certain limit. In fact, providing jobs to the unemployed youths has become a major challenge in recent times.

Lack of basic infrastructure, such as roads, electricity, telecommunications, etc. is constraining the expansion of medium and small scale industry.

The capital intensive nature of industrial development in Bhutan is also limiting employment generation in the public sector. For instance the major industrial activities in public sector are hydro-power generation, production of cement, ferro-alloys, calcium carbide, processed foods, particle board etc, which provide jobs to limited number of people.

Even here, many jobs, including those involving low skills, are being taken up by Indian migrants (to Bhutan). Since rising unemployment may spurt social uncertainties in future, the government has started focusing on building basic infrastructural facilities and in recent years started to promote private sector.