Bhutan’s economy is based on agriculture, forestry, tourism and the sale of hydroelectric power to India. Almost 85% of the population still live in rural areas depending on agriculture for livelihood. Though Bhutan’s economy is one of the world’s smallest, it has grown rapidly in recent years, mainly due to the commissioning of the gigantic Tala Hydroelectric Power Station. Due to its fast flowing, glacier-fed rivers, Bhutan has enormous potential to produce hydroelectricity. The tourism industry was first opened in 1974, and since then it has grown to become a major contributing factor to the Bhutanese economy. While 72% of the country is covered by forest, the area suitable for cultivation is limited, mainly by the very steep terrain and by altitude. Crops grown are rice, maize, millet, wheat, buckwheat and barley. Most rural families also own livestock. Bhutan exports red rice, timbers, cement, Ferro alloys, calcium carbide, coal and gypsum. Orange is the highest exported cash crop beside apples, potatoes, cardamom and mustard. Lemon grass oil, matsutake mushroom and cordyceps sinensis are also exported by Bhutan.
Imports include mainly fuel and lubricants, grain, machinery, vehicles, fabrics and rice. Bhutan’s main export partner are India, accounting for almost 60 percent of its export goods, HongKong (30 percent) and Bangladesh (7 percent) . As its border with Tibet is closed, trade between Bhutan and China is now almost non-existent. Bhutan’s main imports are made from India (75 percent), Japan (7percent) and Sweden (3 percent).
As of 2012, Bhutan’s per capita income in current dollars was US$2,420.