Bhutan is situated between the Tibetan Plateau in the North and Indian plains in the south. The
development philosophy in Bhutan is embedded in the concept of Gross National Happiness
(GNH)1
that, as a public policy strategy, seeks to address a more meaningful purpose of
development that goes beyond the fulfillment of material satisfaction. The concept is grounded in
the four pillars of development; socio-economic, environment, culture, and good governance.
Bhutan’s record on growth and development has made it a top performer in the South Asian
region. The average annual growth rate of GDP over 1980-2010 in country was more than 7.6
percent, one of the highest in the South Asian sub-continent (SAS). Bhutan – with a GDP per
capita of about US$2,000 – is now classified as a lower-middle income country. However, one of
the most notable features about Bhutan’s macro economy is its lack of diversification,
dependence on and exposure to external developments, and the high levels of year-to-year
volatility in its economic growth.
Sustained investment in the social sectors has enabled Bhutan to make remarkable progress. The
country has achieved or is on track to achieve many of the Millennium Development Goals
(MDGs). Continued pressures on aggregate demand, steeper rise in social sector expenditures in
the future, economic constraints associated with debt sustainability, potential overheating of the
economy, resource constraints from uncertain donor support, rising citizen expectations and
implementation capacity constraints are some of the concerns around continued investments in
the social sectors.