Growth and agriculure in bhutan

Economic Growth and Agricultural Transformation

Economic Growth and Agricultural Transformation:
An Exploration with Reference to Bhutan1

Abstract
The agenda of general material growth and nation-wide welfare programmes have
long been ignored in the tiny Himalayan kingdom of Bhutan. A persistent attainment
and consequent systematic measurement of the wealth and income of the nation was
not a part of the lexicon of the state, government and bureaucratic administration
during the pre-modern era. The welfare state and government, whose foundations had
already been laid down in the yesteryears down the line of past centuries, took it
seriously to start pursuing its own autonomous independent national improvement
programme, policy and planning in 1960. A perusal of time-series of
contemporaneous growth performance makes it clear that there had been a fabulously
high growth rate witnessed over the last two and half decades in the country. The
growth rate has been comparatively much higher than other neighboring countries in
the south Asia. The growth rate in agriculture has however been disappointing for the
last one and half decade. This aspect is not hidden behind the smokescreen of
persistent growth in national income aggregates, modest increase in the value-added in
agriculture and observable decline in the share of agricultural sector in the national
income. Combined with the increasing phenomena of diversion of agricultural land to
construction and allied enterprises and substitution of acreage under food crops by
acreage under commercial cops and horticultural plants, the agricultural stagnation
symbolizes the involution. Under the regime of a dirigisme, developmentalist welfare
state orchestrating a paternalistic and protectionist structure of governance, the
multiplying number of the poor and the deprived bespeaks of the failure of the engine
of growth in pulling the masses along. The social and economic differentiation among
the masses attending the non-inclusive and non-diffusing pattern of economic growth
and deepening with the agricultural involution process has further been fuelled by the
phenomenon of rampant corruption among the officialdom.

Key Words:

economic growth, agricultural growth, agricultural stagnation, agricultural involution,
value-added, food crop, commercial crop, regional imbalance, corruption, bureaucracy

Introduction
Bhutan is a least-developed country in south Asia today. It is small in size of population
and geographical space. It is landlocked by boundaries with China and India. The agenda of
general material growth and nation-wide welfare programmes have long been ignored in this
tiny Himalayan kingdom. A welfare state originated from the wreckage of the archaic structure
of governance quite late in the country. It took shape in the sixties in the twentieth century. It
was heavily loaded with preoccupations centered at the enlargement and expansion of
infrastructure related with education, health-care and transport and communication only. The
It is a modified version of the paper published in the SAARC Journal of Human Resource
Development, vol. 5, no.1, 2009
1

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agenda of augmentation of nation-wide value-added in general and agricultural value-added in
particular in measurable terms could not gain primacy till the beginning of eighties. A serious
concern with attainment of economic growth and its measurement were only belatedly chosen
as the express agenda of the state and government.
A welfare state metamorphosing into a developmentalist entity came into formation in the
eighties of twentieth century. The first-ever estimate of gross national and domestic product
could be compiled for the year of 1980 only, and the first-ever series of national income
aggregates could be published in the month of December of 1987 only. Completing two and
half decades of continued public attempts at welfare and development in general and
measurement of economic growth as reflected in the estimates of hardcore categories of the
gross national product and gross domestic product in particular, the project goes on and is
vehemently carried forward with the mediation of a modernized overhauled bureaucratic set up
of civil servants in this tiny kingdom. There is as yet the unfinished task of pulling the engine of
economic growth, however. Mass poverty, chronic food deficit and lack of access to safe
drinking water still dominate the scenario of rural landscape. The agricultural and rural sector
with which the national economy is as yet identified with is relatively stagnant and suffers from
lack of economic vibrancy and viability.
An in-depth critical study of the link between the protectionist welfare planned state and
economic growth in this east Himalayan nation is required urgently. The present paper has but a
modest objective of analyzing the nature, characteristics and composition of economic growth
with a motive to delineate and discover the origin of the features of change and transformation
in the country. In particular, the change and transformation in agriculture is the principal focus
in delineating the path of trajectory of economic life of the masses in the countryside. It is
interesting to study a nation, which suffers as yet from the absence of comprehensive, precise,
reliable and meaningful quantitative data and which is enmeshed in a complex set of a number
of social and economic constraints to be overcome to achieve a decent standard of living for the
masses.

1. Economic Growth
In Bhutan, the hill populations had survived in the past on the strength of being able to
produce not only the necessary means of subsistence but also a meager amount of surplus in the
form of material produce as well as human labour. Whereas production of the necessary means
of subsistence comprising principally of rice, maize, buckwheat, cheese, butter and chilly had
ensured the perpetual reproduction of the households of the tillers of the soil, weavers of the
fabric and nomadic pastoralist in the countryside, the appropriation of commodity and labour
surplus by the custodians of extra-economic coercive power (among whom the state actors were
predominant) had ensured the preservation and swelling ranks of the leisure class of elites.
Though almost entire volume of the necessary produce might have been consumed by the
producer households themselves in the past, the appropriated surplus produce did not all go to
meet the conspicuous consumption of the elite section of the rugged-mountainous society in
the Himalayas. Some considerable part of it used to be put on the channels and network of
trans-Himalayan trade in Bhutan. The mechanism of frontier marketing and trans-Himalayan
barter and exchange did help realization of the surplus produced by the peasantries, livestock
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herders and cottage workers and appropriated by the ruling power and bureaucracy in the past
centuries.
It is however as yet not clear as to what percentage of the aggregate agricultural produce of the
country was entering into the trans-Himalayan and frontier trade and commerce. The present
level of trade historiography is in no position to help in making even a rough hunch about the
probable volume and monetary value of the aggregate produce of the eighteenth and nineteenth
century (contemporaneously called national income in the modern times). In a principally
agrarian and livestock economy that Bhutan was identified with in the olden days, the aggregate
volume of the necessary means of subsistence produced and the surplus appropriated
constituted the national produce (no distinction between the gross and net produce allowed for)
and the aggregate value of these could be taken as an approximation to the category and
measure of the national income of the past. Unfortunately, no precise quantitative estimate of
these yesteryears’ national income and product exist in the literature of Bhutanese
historiography as yet. In other words, the past estimate of national income and produce remain
shrouded in darkness.
The fact of aggregate volume and value of the produce of the yesteryears being not estimated
and the fraction of it being disposed off through trans-Himalayan trade and commerce not
deciphered set apart, a study of the features of trade network brings in clear relief certain noted
specificities. First, there was in existence a specialized barter trade in the form of the gift
exchanges of luxuries among the chieftains and princesses. It abounded in the former times of
the eighteenth century. The spatially and temporally fragmentary evidences of the medieval
historic events did manifest that they were the royals as well as the yesteryear bureaucrats called
the ‘courtiers’ of Bhutan and Cooch Behar of Bengal, who had gift exchange relations with each
other. The pattern and characteristics of Himalayan trade evolved in such a way that the
predominance of the gold, silver, silk and horse being the then principal items of exchange
during the seventeenth century was replaced partially and complemented with the exchange of
mint-coins during the eighteenth century in Bhutan (Pommaret, 2000) 1. The amount and value
of medieval exchange of gifts as well as that of the mint-coins are however as yet again not
known for certain.
Second, the trans-Himalayan as well as the frontier-trade were basically a means of exchanging a
small, quite small surplus. The trade volume was undoubtedly small, and the amount of the
agricultural good traded was rather too small and insignificant. It is as yet not very clear as to
whether the rural economy of Bhutan did produce enough surpluses in excess of that being
appropriated by the rulers or not. The trade literature indicates that the contribution of
Bhutanese marts and traders was primarily confined to orchestrating the transfer of the
agricultural surplus originally produced in Tibet, China and India across the international
borders. Since only a small part of the agricultural surplus produces, which were in the nature of
being forcefully appropriated by the ruling and power elite and the administrative personnel,
was put to the channel and network of exchange sphere of trade and commerce, some part of
the amount of necessary consumption of peasantries, forcefully removed from the farms, might
had also found outlet in the channels of trans-Himalayan trade and commerce. This is a logical
conjecture. Whatever it was (there is not even a minimum concrete material and authentic
English-language documentation available till now); the tradition of frontier-exchange was
continued throughout the nineteenth century. Third, the past history is one composed of the
inalienable and inescapable fact that they were primarily the state-officials and courtiers who
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were grossly involved in eighteenth and nineteenth century commerce and trade of Bhutan, and
therefore, the gains from trade went largely to the King, his nobles and monasteries. This was
certainly the case in Tibet and largely the scenario in Bhutan as well 2.
Fourth, despite the past levels of aggregate amount of produce on the agricultural farms and
pastures and the extent of forced commercialization in this largely and predominantly
agricultural economy being as yet unknown, there were a number of important marts situated
across the locations of foothill and hilly borders of Bhutan3. The chain of network of trade in
luxuries had evolved later into a privatized barter traffic in necessities of grains, livestock
produces and textiles during the eighteenth and nineteenth century (Sarkar and Ray, 2006), and
a number of individual traders and professional trading communities became active out there in
the course of time4. All said, it is not only the aggregate volume and value of agricultural trade
(export) but also the aggregate proceeds from the agricultural household taxation which is as yet
not known, however. All these trade information together with the fragmentary data on the
household taxation are therefore of no help in deriving and estimating the past level of national
income and produce of Bhutan.
In short, a persistent attainment and consequent systematic measurement of the wealth and
income of the nation was not a part of the lexicon of the state, government and bureaucratic
administration during the pre-modern era of 1651-1906 AD in Bhutan; the state machineries
were too preoccupied with the old activities and functions related with the conduct of warfare,
fiscal administration and religious governance. The western notion and concept of economic
growth proper was nowhere so as to stamp upon the day-to-day economic administration of a
unified polity of the past. In that prolonged period of history covering almost two and half
centuries, there was not a single persona of a trained expert-advisor visiting the country. There
were none, who could ever bring forth the growth ideas of Adam Smith and distribution ideas
of David Ricardo to Bhutan. The absence of the phenomenon and processes entailed by the
forces of imperialism and colonialism had a simple implication: it meant an absence of any such
personae advising the native government with regard to the notions of progress and prosperity
in this tiny landlocked Himalayan nation for a long time.
What was true of the period of 1651-1906 AD was equally true of the period of 1907-1979. Not
even a rough measure of the national produce in this predominantly agricultural economy,
which would have amounted to simply being the aggregate amount of agricultural crops,
livestock and forestry products only, did exist till 1979. It was though not the concern of the
state apparatus of this era to frame policies and launch the programmes of material progress and
affluence, there were nonetheless in existence some notions of social welfare and substantial
advancement of the society. Such notions were embraced by the state and the government in
the early decade of the second half of the twentieth century. The welfare state’s concern for
progress were reflected in the protracted attempts to bring forth some piece-meal reforms in the
areas of demarcation of ownership of farmland, rationalization of structure of public taxes and
emancipation of slaves. These were however carried only late in the fifties and early sixties in the
twentieth century. All these were accomplished moreover only in the backdrop of absence of
nation-wide aggregate socio-economic data and information.
The pre-modern epoch of 1907-1959 was characterized by nearly absolute lack of quantitative
estimates of the population and farming household, cropped land, animal feed and livestock
product, and produce of the artisan-craft and cottage industry. In 1969 only, the government of
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Bhutan could organize the first-ever survey of population, livestock, and cropland in the
country (Pre-Investment Survey of Forests, 1980). This was a landmark. It brought forth the
realization that the macro-concept of gross national and domestic products and the nationalist
ideology of fast and rapid growth of national income and per capita income could then not to
be postponed anymore and any longer.
Given the absence of a political tradition of quantifying the economic life of populace and
produce of the territory, the post-1959 and post-1969 state had to simply borrow then the
ideology of systematic measurement of economic growth from elsewhere in the world. It was
duly borrowed, but then it required certain milestones to be crossed before treading on such
irreversible path finally in 1980. The capital township of Thimphu was required to be developed
towards the end of the sixties, and it was to be electrified as well through the first generation of
hydro-electricity in the country5. The construction of modern official complex and the face-lift
of the capital-town were to be completed in the sixties to create a befitting and enabling
environment for systematic planning about the economic growth in Bhutan. Strategically, it also
required sealing the international border of Bhutan with Tibet region of China as well. All these
were duly done before a plan to achieve economic growth and a machinery to measure it could
be put in place.
The welfare state and government, whose foundations had already been laid down in the
yesteryears down the line of past centuries, took it seriously to start pursuing its own
autonomous independent national improvement programme, policy and planning in 1960.
Preoccupied with the transport, communication, education and health-care during the fist phase
of first consecutive three five-year plans6, the unambiguous and explicit verbalization of the
specific objective of economic growth proper had but to wait for a couple of more years further
in the country. In other words, the western concept of gross national product and gross
domestic product, which captures the magnitude of value-added in the economy and which is
the magnitude of the gross value-added at the current-year price and base-year price respectively,
could not then become popular till late in Bhutan. There were further requisites to be fulfilled
before the ambitious programme could start. The think-tank organization called the Planning
Commission could be established only in 1971 7 (the year of beginning of the third five-year
plan), and the effort to establish the Central Statistical Cell could fructify only in 1973 (renamed
later in 1979 as the Central Statistical Organization, and finally further renamed as the National
Statistical Bureau in 2004). The national aspiration centered at quantified growth of the
economy and increased income to improve the material standard of living of the people was
announced only with the onset of the fourth Five-Year Plan. The national goal of ‘economic
self-reliance’ became then the articulated successive preoccupation in the official parlance.

Measurement and Estimate
In the history of quantification and numerical measurement, the beginning of eighties of
twentieth century was important in Bhutan. It was only for the second last year of the fourth
five-year plan that the first-ever quantitative estimate of the national income could be made
available. This reflected that the attainment of increasing volume and value of gross national
product and gross domestic product became the strategy of economic development only since
1980; the statement is not an over-estimation despite the historic fact that the first-ever estimate
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of gross domestic product measured in current and constant (1983) prices (which was called the
‘conventional series’) could be released only in December 1987 (Central Statistical Office, 1989,
P. i). Given the nature of the state and its nationalist ideology being oriented towards the social
welfarism and economic developmentalism in the sixties and eighties onward respectively, the
measurement and enhancement of the gross national product had become since then the
principal function of the state machinery in Bhutan. Under the framework of a dirigisme state,
the state-led and government regulated economic progrmmes and policies were then part and
parcel of the same endeavour and zeal. In short, the concern with overall social conditions of
progress and prosperity via enrichment of network of education, health and transport 8 emerged
historically and temporally almost prior to the specific preoccupation with the attainment of
economic growth via increases in the magnitude of gross national product and gross domestic
product in Bhutan.
It is a historical reality that such a concern with national and domestic product and income kept
on becoming a fixation along with budding and maturing bilateral relations with the
independent post-colonial India. The Central Statistical Office of the Planning Commission in
Bhutan embraced this framework of measurement of the performance of the national economy
in 1980, and since then measured the various aggregates of the national income, produce and
income including the gross national and domestic produce rather regularly without a break
(later in the independent office of National Statistical Bureau). In other words, it is worth
pointing out at this juncture that the progress, prosperity and affluence of society and economy
had been measured, in the past since 1980 and are as yet unfailingly reckoned, in terms of
estimates of gross national product and gross domestic product only, and any possibility of the
internationally acceptable quantitative estimation of the so-called ‘gross national happiness’ is to
wait till uncertain future in Bhutan9.
The economic growth has been quantitatively measured in terms of the value of aggregate
produce and income generated in a year. The accurate measure of national income has been the
estimate of net national product at factor cost (in constant or current price), though it has as
well been accounted by the estimates of various other aggregates of gross and net domestic and
national product and its distribution in the population in a country. It hardly needs clarification
that only material goods and measurable services produced in the economy has been estimated
in the national income accounting framework. In such a materialistic perspective about the
economy, the human being has mattered only as a producing and consuming agent in the
society, and the nation has been conceivable as a sum total of value-adding masses integrated
with each other by the one and only one bond – the culture of consumption, production and
physical/biological survival. Such a framework of measurement of economic growth has
traditionally allowed for counting the material production of aggregate value-added 10 – the
commodity which has a value in the market, and which can be brought in relation to the
measuring rod of money in a nation in a year. In the literature on the national account statistics,
the nomenclature ‘national’ has been distinguished from the categorization ‘domestic’. The
nomenclature ‘national’ has connoted that the net reward earned by citizens from the
productive activities accomplished outside the boundary of the country has been accounted for;
the categorization ‘domestic’ implied that the rewards and income generated by only those
economic activities which has taken place within the geographical boundary of a country has
been estimated for national income accounting purpose. The gross and net value has been
differentiated on the basis of respective inclusion and exclusion of the value of depreciation or
the capital consumption allowances in the economy.
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Table- 1
Gross Domestic Product at Factor Cost in the Current and Constant Prices in Bhutan:
Year-wise, 1980-2006 (In Million Ngultrums)
Years of
Observation

Gross Domestic Product at Factor Cost
Current Prices

1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

Constant 1980 Prices


1012.00
1255.10
1442.20
1722.40
1896.80
2127.80
2574.50
3161.90
3668.50
4127.90
4744.70
5242.00
6020.00
6675.00
7944.00
9193.00
10673.00
12674.00
14600.00
17001.00
19620.30
22344.10
25544.20
28317.60
30927.40
34953.20
39662.30

1095.00
1204.80
1269.20
1370.20
1465.70
1519.80
1674.50
1973.10
1993.90
2087.00
2224.60
2303.40
2388.80
2517.60
2645.40
2914.00
3094.70
3320.70
3490.20
3700.40
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.

5284.00
6054.40
6214.70
6877.50
6994.70
7309.50
8211.00
10298.00
10657.50
11460.00
11731.80
11946.00
12468.00
12834.00
13207.00
14174.00
14997.00
15628.00
16542.00
17824.00
19620.30
20943.90
22991.20
24550.80
26038.80
27833.80
30268.80

Sources: Adapted from the Central Statistical Office of Planning Commission, 1989, pp. 11-13; National
Statistical Bureau of Central Statistical Organization, 2004, pp.33-6 & pp. 8-9; National Statistical Bureau,
2005, pp. 140-41; Central Statistical Office of Planning Commission, 2000, pp. 7-8; National Statistical
Bureau, 2007, pp. 24-7
Notes: 1. N.A. refers to “not available”; 2. The estimates are based on the production method of
accounting the national income statistics; 3. Since the depreciation and net exports are very low and
negative values respectively in the context of Bhutan, the gross and not net and the domestic and not
national measure of aggregate produce are relevant.
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Bhutan started with a meager gross domestic product amounting to Ngultrum 1012=00 millions,
measured at the factor cost in the then current prices in 1980; later, it was evaluated to be
equivalent to Ngultrum 1095=00 millions at the constant 1980 prices and to Ngultrum 5284=00
millions at the constant 2000 prices. Twenty years after towards the turn of the century in 1999,
the gross domestic product at the factor cost in the then current prices was Ngultrum 18327=00
millions; in terms of the constant 1980 prices and the constant 2000 prices, it was Ngultrum
3700=40 millions and Ngultrum 17824=00 millions respectively. In 2006, the gross domestic
product at the factor cost stood at Ngultrum 39662=30 millions in the then current prices; it
was Ngultrum 30268=80 millions at the most recent constant 2000 prices. In terms of the
three-year average figure, Bhutan started with the gross domestic product at the factor cost in
the then current prices at Ngultrum 1236 millions and measured in terms of constant 2000
prices at Ngultrum 5851 millions only in the beginning of eighties. A journey across seventeen
years down the line, its real gross domestic product at the factor cost at the constant 2000 prices
was Ngultrum 14933 millions – almost 2.5 times increase. The three-year average gross
domestic product at the factor cost in the then current prices during 2004-2006 was Ngultrum
35181 millions; in terms of the constant 2000 prices, it was Ngultrum 28061 millions in the
same duration.
Table- 2
Gross Domestic Product at Factor Cost in Bhutan: Three-Year Average Value at Current and
Constant Prices, 1980-2006 (In Million Ngultrums)
Three-years
Period
1980 – 1982
1983 – 1985
1986 – 1988
1989 – 1991
1992 – 1994
1995 – 1997
1998 – 2000
2001 – 2003
2004 – 2006

Three-years’ Average Value of
Gross Domestic Product at Factor Cost
Current Prices
1236.43
1915.66
3134.96
4704.86
6879.66
10846.66
17073.76
25401.96
35180.96

1189.67
1451.90
1880.50
2205.00
2517.27
3109.80
3595.30
N. A.
N. A.

5851.03
7060.57
9722.40
11712.60
12836.33
14933.00
17995.43
22828.63
28060.47

Sources: Adapted from the Central Statistical Office of Planning Commission, 1989, pp. 11-13; National
Statistical Bureau of Central Statistical Organization, 2004, pp.33-6 & pp. 8-9; National Statistical Bureau,
2005, pp. 140-41; Central Statistical Office of Planning Commission, 2000, pp. 7-8; National Statistical
Bureau, 2007, pp. 24-7
Notes: 1. N.A. refers to “not available”; 2. The estimates are based on the production method of
accounting the national income statistics; 3. Since the depreciation and net exports are very low and
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negative values respectively in the context of Bhutan, the gross and domestic measure of aggregate
produce are relevant.

A perusal of time-series of growth performance makes two sharp points sufficiently clear: First,
there had been a fabulously high growth rate witnessed over the last two and half decades in
Bhutan. The growth rate has been comparatively much higher than other neighboring countries
in the south Asia11. The compound growth rate of gross domestic product at factor cost in 1980
prices (the old series) was 6.8 percent during 1981-1986; it was but further higher at 8.7 percent
during 1980-1987. In the perspective of observation in terms of the then current prices, the
compound growth rate of gross domestic product at factor cost for the period of 1980-1986
was 16.6 percent whereas the same for the period of 1980-1987 stood at 18.2 percent. The
average annual growth rate of gross domestic product had been 7.0 percent for the long period
of 1980-2004. The period of 2000-2005 saw the average annual growth rate of gross domestic
product touch the level of 7.8 percent. Second, the pattern of trend of growth was a pointer to
the fact that there had been rather lack of steady and consistent trend of growth in the country.
The irregularities were marked and rather pointed, once the story of growth was periodized into
the cohort size of five years. It was observed that the annual average rate of growth of gross
domestic product peaked to the level of 10.2 percent during the period of 1985-90 but declined
fast and reached to the ditch level of 3.9 percent during the next period of 1990-95. A medium
level of 6.8 percent growth rate was attained during 1980-85 only and the economy had again
returned to the rate of growth standing at 6.6 percent during 1995-2000.
Table – 3
Annual Average Periodic Growth Rate of Gross Domestic Product in Bhutan:
1980-2004 (In Percentage)
Periods of Observation
1980-1985
1985-1990
1990-1995
1995-2000
2000-2004
1980-2004

Per Annum Average Growth Rates of
Gross Domestic Product
6.8
10.2
3.9
6.6
7.8
7.0

Source: Estimated from NSB (2004) and RMAB (2005) quoted in UNDP-APRMPRP, 2006, p.27

A scrutiny of estimates of national income is to be combined with that of the population. Such a
scrutiny is a pointer to the fact that the per capita income has continuously been nonetheless
lower in Bhutan in terms of international comparison. The per capita income was certainly low
in 1981; it was much below even a thousand Ngutrum in a year12. It is as yet comparatively low,
and this is despite a reasonably high rate of growth of gross domestic and national product in
recent years13. It is nonetheless the trend that the gross domestic product has been increasing in
the recent years with its concomitant continuous increase in the per capita income. With regard
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to the reliability of any estimate of the per capita income, there has been an acute problem for a
long time because of the unavailability of reliable and precise data of human population in the
country. There surrounds a political controversy and problem of statistical jugglery on the
estimate of population in this south Asian country. In case of assumption of the population
growth rate standing at 3.0 percent approximately, the average rate of growth of per capita
income would come to stay at a respectable level of 4.0 percent per annum during the period of
1980-2004 in the country. On the additional assumption that nearly twenty-four years intervene
generally between two successive human generations, an average person of the present
generation today would be found to be almost two-and-half times richer than that of the
preceding generation in the country. Such a conclusion however would require the further
unrealistic assumption of highly equitable distribution of income and asset in the country and
also the unrealistic assumption that the economic growth reflected in the high growth rate of
gross domestic product has trickled and percolated down to the level of the masses.

2. Agricultural Success
Bhutanese economy is primarily an agrarian and identifiably a rural economy. The
national accounting framework is very useful in putting forward an aggregative analysis of
agriculture14. In an aggregative analysis of the agricultural sector, it is of paramount importance
to analyze the trend of generation of value-added (contribution of agriculture to gross domestic
product/net domestic product) over the years. The estimate of value-added is the difference
between value of gross produce and the paid-out material cost of production in agriculture; such
an estimate gives us neither the separate estimate of the ‘value of gross produce’ nor the
separate estimate of the ‘paid-out material cost’ of production. The ‘value of gross produce’ is
already netted of the ‘paid-out material cost’ of production to arrive at the estimate of gross and
net value-added in agriculture in the National Account Statistics data. Since such value-added
data is not netted of the ‘imputed value of family labour’ used on the farms, neither the
agricultural gross domestic product nor net domestic product are capable of giving us a clue to
the measure of the economic surplus in agriculture. Such value-added data are still very helpful
in discovering the vital changes in Bhutanese agriculture, for example, the structural transition in
the economy, commercialization of agriculture and input-output relations in renewable natural
resource sector in the process of general economic growth of macroeconomy.
An analysis of time-series data since 1980 down the line of years indicates that agriculture had
accomplished its role in contributing to the gross domestic product over the years in a
significant manner. The gross domestic product in agriculture at factor cost in 1980 prices was
Ngultrum 621 millions in 1980, and a decade later in 1990, it was Ngultrum 993 millions. A
further decade later, it stood at Ngultrum 1278 millions in 1999. There was an increase of 2.06
times in the real magnitude of gross domestic product during 1980-1999. Allowing for the
fluctuating price regimes and increasing prices of vital commodities to have the effect, the gross
domestic product at factor cost in the then current price in agriculture was Ngultrum 477
millions in 1980, which increased to Ngultrum 1873 millions in 1990 and further to Ngultrum
5048 millions in 1999. Reckoned in terms of current price valuation, there was an increase of
10.58 times in the nominal magnitude of gross domestic product during 1980-1999. The
nominal value of the national income aggregate in agriculture increased nearly five times faster
than the real value of it across the two intervening decades in the country. More recently, the
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value of gross domestic product at current prices in agriculture sector was Ngultrum 8256
millions in the year of 2005.
Table – 4
Agricultural Sector Gross Domestic Product at Factor Cost in Bhutan:
Current Prices and Constant 1980 Prices (In Million Ngultrums)
Years of Observation
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Agriculture - Gross Domestic Product at Factor Cost
Current Prices
477.40**
539.10**
615.50**
726.60**
837.10**
949.70**
1099.70**
1229.80**
1482.20**
1629.60**
1872.60**
1943.70
2460.50
2801.90
3427.10
3897.70
3540.00***
4230.00***
4702.00***
5048.00***
5569.00***
6037.00***
6884.00***
7292.00***
7864.00***
8256.00***

621.40*
636.10*
692.20*
742.20*
806.50*
883.90*
881.00*
925.80*
939.70
962.90
992.80
1024.60
1004.00
1040.20
1081.20
1124.20
1196.20
1233.30
1249.20
1277.90
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.

Sources: Adapted from * Central Statistical Office of Planning Commission, 1989, p. 11; ** National
Statistical Bureau of Central Statistical Organization, 2004, P.33; National Statistical Bureau, 2005, pp.
140-41; *** Royal Monetary Authority of Bhutan, 2006, p. 17
Note: ‘Agricultural Sector’ includes agriculture proper, livestock, fishing and forestry

In the course of decade of 1980-1989, the average amount of gross value-added produced at the
factor cost was Ngultrum 959 millions reckoned in terms of the then current price and
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Ngultrum 809 millions reckoned at the constant 1980 price. In the period of 1990-1999, these
value-added in agriculture were Ngultrum 3392 millions and Ngultrum 1122 millions
respectively. In comparison with the former period, there was in the latter duration almost 3.5
times increase in the gross value-added in agriculture at the current price but only 1.4 times
increase in the same when reckoned in terms of the base-year price of 1980. Over the long
period of twenty years at a stretch, the average per annum gross domestic product in the
agriculture at the current price was Ngultrum 2176 millions and at the constant base year price
Ngultrum 966 millions i.e. 1980-1999.
Such an improvement in the growth profile of agriculture has been a reminder that either the
value of gross produce had continuously been increasing on the assumption of a more or less
stable level of the paid-out cost of production over the years or that the paid-out material cost
of production had continuously been declining on the assumption of a fairly stable level of the
gross value of produce in agriculture or both phenomena had been happening simultaneously. It
seems in retrospect that it was the former which had been happening in Bhutan. This is a valid
conjecture since the input cost of production whereby major modern inputs are imported from
India and neighbouring countries had increased rather than decreased in this duration. We will
find later in our discussion that those were the sector of economic activities connected with the
hydro-electric generation and construction of structures where the value-addition had been
augmenting very rapidly in the recent past.
Table – 5
Relative Contributions of Agricultural Subsectors and Production Systems
to Gross Domestic Product at Market Price in Bhutan: Current Prices, 1991
(In Million Ngultrums)
Production Systems/
Subsectors
Wetland
Dry land
Forest
Plantation/ Orchard
Tsheri-land
Pastoral land
All Subsectors

Agricultural Subsectors
Livestock
Forestry
Agriculture
245.8
195.0
166.1
237.3
196.9
212.6
190.1
199.0
1.4
65.0
34.9
217.7
111.6
101.6
34.1
126.6
70.6
14.0
976.4
798.0
645.9
(40.3)
(33.0)
(26.7)

All Subsectors
606.9 (28.1)
646.8 (26.7)
390.5 (16.1)
317.6 (13.1)
247.3 (10.2)
211.2 (8.7)
2420.3
(100.0)

Source: Pradhan, et al, 1994 quoted in Dorjee, 1995, p. 14
Note: The figures in parentheses in bold font in the last column represent row percentages and in the
last row the column percentages

It is quite interesting then to look at the relation among the subsectors of agricultural economy,
which is another way of looking at some tentative input–output relations among the subsectors
in Bhutan. It is only with onset of the concept of renewable natural resource system that the
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quantitative information about contribution of agricultural subsectors and production systems
became available for the early nineties. The problem is this that data available relates to the
gross domestic product at market price in the subsectors of agriculture. The value-added data at
the base-year price is not available. The market value analysis has the deficiency that the
heterogeneity of price regimes operating in different subsectors and agro-ecological niche zones
would necessarily make a fictitious difference in monetary terms, though the real magnitude
might not have differed by such wide margin in reality.
Be that as it may. In 1991, the gross value added by all the subsectors of agriculture, livestock
and forestry together was 2420.3 million ngultrums; this was also the figure of gross value
added in all the agro-ecological niche based production systems on dryland, wetland, tsheriland,
pastoral land, plantation-orchard land and forestland together. The highest magnitude of value
added was contributed by the livestock subsector, followed by the forestry and then the
agriculture proper. Alternatively speaking in terms of agro-ecological niche of production
system, the highest magnitude of value added was contributed by the wetland and dryland
together, followed by forestland, plantation-orchard, tsheriland and pastoral land in decreasing
order. There is a further constraint of analysis: the comparisons across decades and decadal
profile of growth in various subsectors are difficult to carry out since the proper decade-wise
information is lacking.
It is in the backdrop of a fast sustained increase in the national income and produce, slow
improvement in the contribution of agricultural sector to pace of general economic growth and
major share of livestock and forestry subsector in the value-addition process within agriculture
that a specific welcome phenomenon within the crop producing farm subsector has of late been
perceptibly visible. This relates with the commercial crops on the farm and plants in the orchard.
Recently, there has been an increasing tendency to substitute acreages for the commercial crops.
This has been one of the indicators of budding process of commercialization of agriculture 15. In
the saga of a historical narrative about the turning point in economic growth in recent times, the
importance of products of horticulture within agricultural sector has also been increasing. In
particular, the value-added contribution of the farms of commercial crops of apple, oranges,
areca nut and cardamom has been growing in the recent decades. Whereas the production of
apple has mostly been confined to the orchards of alpine northern region, the plantation of
oranges, areca nut and cardamom have flourished in the subtropical plains of the southern
region in the country. It is nonetheless the scenario that a time-series data on the value-addition
by these crops and plants are difficult to obtain at present.

Structural Transition and Stagnation
A brief history of non-steady but fast economic growth and relatively slow imbalanced
agricultural improvement has already unfolded and the phenomenon of structural transition has
set in the Bhutanese economy since the mid nineties, whereby the contribution of agriculture in
the national economy has been declining fast. The aggregative analysis of agricultural sector of
activity, which includes agriculture proper, livestock, fishing and forestry brings to light this
significant phenomenon of “structural transformation” of the economy in clear relief. The petty
subsistence agriculture, which had encompassed the symbiotic whole of crop farming, animal
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husbandry and forestry together, was the dominant sector of economic activities, labouremployment and material livelihood of populace in the semi-temperate and sub-tropical regions
within the country. In particular, the pastoral economy was symbiotically linked with the arable
agriculture, and therefore, crop farming including livestock rearing was the only principal source
of income for more than three-fourth of the population.
In this subsistence agricultural niche, the collection of forest products was a major source of the
household earnings-in-kind. In other words, the major pattern of rural livelihood was
underpinned and reinforced by the exploitation of mountainous renewable natural resources of
the arable valley land and pastures, milch livestock and draught animals, the Himalayan forest
and plant cover, and a limited amount of man-made capital asset and tangible household wealth.
The simple commodity producing peasantries, livestock herders, forest-product-gatherers,
weavers, cottage workers and agricultural labourers constituted the majority of population. The
country harboured a sector of economic activities, which was simultaneously facilitated and
constrained by the fertile valleys of arable land and pastures that are separated from one another
by a series of high and complex interconnecting ridges from north to south across the country.
The agricultural technology matrix was formed by the combination of the use of traditional
skills on the major portions of arable land and pastures with the application of improved seeds
and inputs on a minority of rice farms and the simple machineries in the logging operations in
the forest. The capital base of agriculture was composed of traditional tools and equipments,
and the use of modern machines in agriculture was acutely limited. With such a narrow base of
land, labour, capital and technology devoted to the subsistence agricultural production, the
prospect of generation of surplus was constrained and limited. The rural economic life was not
able to completely break away from the structures of medieval economy and society of the
yesteryears, which was then also primarily rural and agricultural-pastoral in nature. Such a
historical continuity without any significant agri-technological and agri-institutional rupture
constituted a considerable barrier in the progress of agriculture in the seventies and eighties in
twentieth century.
Table – 6
Share of Agriculture Sector in Output in Bhutan:
Constant Price, 1980-2004 (in Percentage)
1980
1985
1990
1995
2000
2004

Share of Agriculture Sector in Output at Constant
Prices
52.3
49.4
40.3
34.1
28.5
24.0

Source: Estimated from NSB (2004) and RMAB (2005) quoted in UNDP-APRMPRP, 2006, p.28

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In the early eighties, the economic activity of forestry alone contributed 15 percent to the gross
domestic product, and the rest 48 percent of the domestically produced gross value added was
contributed by the combined subsectors of the agriculture proper and animal husbandry. The
agriculture sector as a whole accounted for over 63 percent of the Gross Domestic Product.
These were the then current price based valuation. In terms of constant prices, the share of
agricultural sector in gross output was 52.3 percent in 1980. The high contribution of these rural
activities to the gross value-added produced domestically in the country was indicative of the
high dependence of the majority of the population on traditional activities associated with the
subsistence agriculture. A journey of over fifteen years from the early nineteen eighties and the
event of structural transition were clearly visible in the declining share of agriculture in the
national economy. In terms of constant prices, the share of agricultural sector in gross output
declined to stay at only 34.1 percent in 1995. Reckoned in terms of current prices, however
agriculture and allied activities had accounted for 38.6 percent of the gross domestic product in
1996. In terms of constant prices, the share of agricultural sector in national output was further
down to 24.0 percent in 2004.
Table – 7
Gross Domestic Product at factor Cost in Agriculture Sector in Bhutan:
Growth Rate over the Preceding Year, 1980-2006 (in Percentage)

Growth Rates of Gross Domestic Product at Factor Cost
in Agricultural Sector
Current Prices
Constant 1980 Price
Constant 2000 Price

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

8.9
10.1
6.7
13.9
22.3
13.7
16.4
16.3
9.7
8.9
10.3
8.4
14.0
5.9
7.8
5.0
7.3

3.1
3.2
(-)2.0
3.6
3.9
4.0
6.4
3.1
1.3
3.0
2.4
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.

N.A.
(-)0.7
0.6
(-)0.3
0.9
1.5
2.0
3.9
2.3
1.5
4.6
5.0
2.7
2.1
1.8
0.4
1.7

Sources: Adapted from the data of the Central Statistical Office of Planning Commission, 1989;
National Statistical Bureau of Central Statistical Organization, 2004; National Statistical Bureau, 2005;
National Statistical Bureau, 2006; National Statistical Bureau, 2007
Note: N.A. refers to not available
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There was a slower decline in terms of current price valuation. In 2005, the contribution of
agriculture proper alone stood at 22.4 percent of gross value-added at the current price . In
other words, agriculture proper signifying the vital land and staple crop farm in this
predominantly rural society produced only approximately one-fifth of the over-all value of
material goods and services produced in the national economy.
A causation study into the phenomenon of structural transition leads one to the discovery of the
phenomenon of “agricultural involution” characterizing the Bhutanese agricultural economy of
late. The growth rate in agriculture had been disappointing for the last one and half decade. This
aspect is not hidden behind the smokescreen of persistent growth in national income aggregates,
modest increase in the value-added in agriculture and observable decline in the share of
agricultural sector in the national income. Combined with the increasing phenomena of
diversion of agricultural land to construction and allied enterprises and substitution of acreage
under food crops by acreage under commercial cops and horticultural plants, the agricultural
stagnation symbolizes the involution. The average annual growth rate of gross value-added in
agricultural sector had been 3.6 percent during the period of 1980-2004. It had however been
pretty low, almost below 3.0 percent per annum in most of the years since 1991. It was as low as
0.4 percent per annum during 1990-1995. In the preceding period of 1985-1990, it was but
surprisingly as high as 5.6 percent per annum. The decade-wise comparison establish it that it
hovered around 5.5 to 5.6 percent during 1980-1990 but fluctuated at a lower level of 2.9 to 3.2
percent during 1995-2004. There was exceptional growth rate beyond the benchmark of 3.0
percent in real terms (at constant 2000 prices) in only two years. It had but again slowed down,
and since 2003 it had been hovering around below 2.0 percent per annum at the constant 2000
prices. In 2005, the real growth rate at constant 2000 prices over the preceding year was merely
0.4 percent.
Table - 8
Periodic Annual Average Growth Rate in Agriculture in Bhutan:
Sub-sector-wise, 1980-2004 (In Percentage)
Periods of
Observation

Annual Average Growth Rate
Crop Subsector

1980-1985
1985-1990
1990-1995
1995-2000
2000-2004
1980-2004

Livestock Subsector

Forestry Subsector

6.7
4.6
1.9
3.0
2.7
3.8

6.0
5.6
(-) 0.5
3.6
4.1
3.7

3.1
7.4
(-) 0.8
2.0
3.3
3.0

Source: Estimated from NSB (2004) and RMAB (2005) quoted in UNDP-APRMPRP, 2006, pp.28-29

Agriculture while being subjected to the essential phenomenon of structural transition attending
the path of augmenting rate and level of economic growth of the nation has done very poorly in
the recent years, and the recovery if at all there was any has been pretty slow and imperceptible
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in the first decade of the new century. Whatever be the other set of complex forces and factors
accounting for such a phenomenon, it is no less contributed by the fact that the growth rate of
real magnitude of gross domestic product improved from 6.8 percent in 2001 to 10.9 percent in
2002 whereas the growth rate in the primary sector declined from 5.37 percent in 2001 to 3.2
percent in 2002.
The real growth ate of GDP at constant 2000 prices have fluctuated from 7.2 percent in 2003
to 6.8 percent in 2004 to 7.1 percent in 2005 to finally 8.5 percent in 2006. In the primary sector,
the component of real GDP growth rate continued to decline in a sustained manner from 2.2
percent in 2003, 1.6 percent in 2004, and 1.2 percent in 2005.
There had been fluctuations in the growth rate attained by all the three subsectors of agriculture
during the long period of 1980-2004. The livestock and forestry subsectors had even witnessed
negative annual average growth rate during 1990-95. While much of the fluctuations in the
growth rate in agriculture and allied activities had followed simply the pattern and trend of
fluctuations in the overall growth of the economy, the pretty low and very slowly improving
productivity in the crop sector had been the main devil behind the low growth rate in
agriculture in terms of domestic product component in Bhutan. While the livestock subsector
witnessed a decline in the average per annum growth rate from 6.0 percent during 1980-1985 to
4.1 percent during 2000-2004, the forestry subsector had seen its per annum growth rate
improve from 3.1 percent during 1980-1985 to 3.3 percent during 2000-2004. The annual
average growth rate of agriculture proper declined sharply from 6.7 percent during 1980-1985 to
2.7 percent during 2000-2004. The major crop yields had hardly improved in any significant
manner in the last decade. The most remarkable point is this that the labour absorption of
agriculture had not declined over the years at the rate at which the contribution of agriculture
sector in the overall value-added in the economy had been declining over the decades.
Table – 9
Share of Agriculture in Annual Average Growth Rate of Gross Domestic Product in Bhutan:
Constant Prices, 1980-2004 (in Percentage)
Periods of
Observation

Agriculture Sector Contribution to
Gross Domestic Product Growth at Constant Prices
Crop Subsector

1980-1985
1985-1990
1990-1995
1995-2000
2000-2004
1980-2004

21.58
9.01
7.83
6.42
4.07
7.8

Livestock
Subsector
14.31
8.71
(-) 1.59
5.18
4.43
5.7

Forestry
Subsector
5.98
8.24
(-) 2.17
2.15
2.68
3.5

Agriculture
Sector
41.87
25.96
4.07
13.75
11.18
17.0

Source: Estimated from NSB (2004) and RMAB (2005) quoted in UNDP-APRMPRP, 2006, pp.27-30

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The conclusion of the continuing process of structural transition in the national economy and
agricultural involution has been as such that the share of agricultural sector in the average
growth rate of real gross domestic product has declined from being close to 42 percent during
the early five years of 1980s to just 11 percent during the early four tears of the turnaround of
the century. In the average growth rate of real gross domestic product, the share of agricultural
crop subsector had declined quite faster from 22 percent during 1980-1985 to stay at merely 4
percent during 2000-2004. The contribution of agricultural crop as well as livestock subsectors
in the average growth rate of real magnitude of value-added in the economy has been almost at
par with each other in recent years.

3. An Appraisal
In a least developed country, which is primarily agricultural in economic structure and
dominantly rural in social structure, populaces survive by reproducing the necessary means of
material subsistence but often fail to keep the record of the produce of the process of labour
and production. It is then contingent of necessity upon the supreme power, almost resembling
with the power of the state, to maintain the record of the aggregate produce of the populace in
a territory. It is then a tragedy that the medieval coercive power over and above the society of
toiling masses has historically been notorious and ever failed to keep any such record. The
Bhutanese state power of medieval time, which extended till sixties or probably eighties in the
twentieth century, was no exception in this regard. A perusal of history is a testimony that there
exists no record of the past aggregate produce of the country. The recent accounts of the
national income and produce since 1980 are then a solace. Under the paternalistic regulatory
framework of the machineries of a modern state-in-transition, a modern government-intransition and a modern bureaucracy-in-transition, such accounts have become available. Such
documentation shows that the engine of economic growth has been pulled for the continuous
last two and half decades. The monetized value of the aggregate produce has kept on increasing
uninterruptedly over the years, and is presently quite high.
In the framework of economic governance under the umbrella of a paternalistic, protectionist,
welfarist, developmentalist and dirigisme state, a major part of the achievements in the field of
increasing national income and its various aggregates are not that much a result of the initiatives
taken on the part of the private individual entrepreneurs and their private investment as much
as these are primarily the outcome of the public allocations and investments in the production
enterprises and sectors of activities in the economy. The public investment and planned
allocations of monetary resources (financed through mobilization of comparatively small
domestic resources and large international aids) to the sectors of economic activities has a major
role. A comparison with private investment is not possible because reliable quantitative
information on the bifurcation between the private and public investment and capital formation
is not available. The joint efforts of private individuals in a lesser measure and the government
to a comparatively much greater extent have been as such that the country started with a meager
planned government outlay of Ngultrum 107 millions in the early sixties to develop the national
economy. In the early seventies, it was however able to allocate the public monetary resource
equivalent to Ngultrum 475 millions to maintain the already developed assets, institutions and
the economic structure of the sectors of the economy and venture into additional desired areas
of development. Within a decade, the planned public allocation increased by ten-folds, and thus,
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stood at Ngultrum 4711 millions in the early eighties in the twentieth century. Approximately
twenty years after, say, towards the beginning of the turn of the century, the country was able to
devote almost Ngultrum 70000 millions for the sake of maintaining and sustaining the national
income growth initiatives in the country (i.e. the ninth five-year plan allocation). It is to be noted
with concern then that the annul average planned public allocation of the government was
Ngultrum 942 millions approximately during the five-year plan period of 1981-86, but the
annual average gross domestic product at factor cost in current prices for the five year period of
1981-85 (inclusive of both end-years) stood at Ngultrum 1688 millions approximately – less
than double return. Most recently during the five-year plan period of 2002-2007, the annual
average planned public allocation was however almost Ngultrum 14000 millions approximately,
but the average annual gross domestic product at factor cost in current prices for the five year
period of 2002-2006 (inclusive of both end-years) stood at Ngultrum 31881 millions
approximately – more than double return.
The growth rate of gross domestic product at factor cost in the current prices, which was
standing at 15.4 percent in the year of 2002 over the preceding year and which got maintained at
13.3 percent in the year of 2006 over the preceding year, might be able to explain the
phenomenon cited above. In terms of constant prices, there was however a slight decline.
Deflating against the price rise, the growth rate of gross domestic product at factor cost in the
constant 2000 prices in the year of 2002 was 10.9 percent over the preceding year, and it was
maintained in the year of 2006 at 8.5 percent over the preceding year. A major explanation is
however to be found in the changing composition and dominance of public actors –
bureaucrats versus technocrats. The macroeconomy as conceived in terms of the structure of
goods producing sector of agriculture and manufacture in general and the sectoral economy as
conceived principally in terms of food sector of crops on farms and livestock products on
pastures could not perform satisfactorily. The agriculture and rural development being the
principal area of operation of the erstwhile status-bound bureaucrats could not become vibrant
and dynamic sectors in Bhutan. They were the bureaucrats who were planning about the
agriculture and rural development programmes for long, and onus of stagnant rural sector must
go to them. The theater of recent value-addition and growth lies there in the sectors of activities
connected with hydroelectricity generation and construction. They are rather primarily the
artisans and technocrats, who are active in the hydroelectricity projects and the construction
sector. These artisans and technocrats have been pulling the national economy faster in recent
years and their contribution has undoubtedly surpassed that of the bureaucrats.
There has been huge contribution of hydroelectric power generation projects called the Chukha
and Tala hydroelectric projects. In a small-sized land-locked rural economy which has over the
years been heavily assisted, both financially as well as technically, by the international aid-donors,
the credible attainment has therefore been concentrated and never widespread. It has been
conducive to create dynamism which is but unambiguously confined to a definite class of
economic activities that are related with production of a particular industrial good –
construction – and a specific service – hydroelectricity. Since the pattern of economic growth
had been underpinned mainly and solely by the pattern of activities related to “hydropower’ and
the export of electricity to India, the non-steady wild pattern of fluctuations in the economic
growth had followed the rhythm of economic activities predominantly influenced by the single
sector of energy and energy-related construction activity in the country. Since the Bhutanese
economy had been driven principally on the strength of the large hydropower projects in the
last two decades, a high level of construction and related activities immediately preceding the
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commissioning of the Chhukha hydroelectric project in the mid-1980s and the boom in the
earnings following the commissioning of the project had pushed the growth rate of gross
domestic product rather to the pretty high level. This happened again in the preceding and
succeeding period of the commissioning of the Tala hydroelectric project as well.
Table – 10
Public Allocation to Agriculture under Plans in Bhutan:
Five-year Plan-wise (In Million Ngultrums)
Plan Period

First Five-year
Plan (1961-66)
Second Five-year
Plan (1966-71)
Third
Five-year
Plan (1971-76)
Fourth Five-year
Plan (1976-81)
Fifth
Five-year
Plan (1981-86)
Sixth
Five-year
Plan(1987-92)
Seventh Five-year
Plan (1992-97)
Eighth Five-year
Plan(1997-2002)
Ninth Five-year
Plan(2002-2007)
Tenth Five-year
Plan(2008-2013)

Public Allocation to Sectors of Activities
(for Five Years)
Agriculture Livestock
F. C. B.
Forestry
AgriculSubsector Subsector Subsector Subsector
tural
Sector
1.90
1.50
0.00
3.20
6.60

All Sectors
Together
107.20

21.60

5.80

0.00

6.90

34.30

202.20

58.30

24.20

0.00

28.40

110.90

475.20

259.00

61.50

0.00

110.30

430.80

1106.20

331.50

105.60

99.50

200.20

736.80

4711.20

880.40

331.00

106.50

418.20

1736.10

9559.20

709.01

327.89

N.A.

479.02

2433.64

15590.00

N.A.

N.A.

N.A.

N.A.

3528.64

30000.00

N.A.

N.A.

N.A.

N.A.

4548.36

70000.00

N.A.

N.A.

N.A.

N.A.

14140.88

141692.21

Sources: Planning Commission, 1989, pp. 10-2; GNH Commission, 2008, p. 64
Notes: The abbreviation F.C.B. stands for the institution of the Food Corporation of Bhutan; the Plan
document was printed for the first time only during the third five year plan in 1972; it seems that the five
year planning process was suspended, and there was an ‘Annual Plan’ in the year of 1986-87 and again
2007-08

The downswing of growth rate had equally been conditioned, caused and determined by the
respite and interval underpinning the long gestation period involved with such mega projects
and the intervening period between such large hydropower projects. The growth rate of gross
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domestic product in Bhutan had been low and lull in these periods. In other words, the discrete
and lumpy nature of the hydropower projects had conditioned and caused the irregularities in
the pattern of gross domestic product growth. In the early two decades between 1980 and 2000,
the hydropower energy had been the most dynamic and dominant sector of economic activity in
Bhutan. It was but the energy-related construction which had been the dynamic and dominant
sector over the last decade in the country. The growth of the national economy in the recent
years of the new century has been driven solely by the upcoming Tala project related
construction and boom in the housing sector. In short, the nature and pattern of growth of
gross domestic product in the country had been highly dependent upon, and therefore,
influenced by the economic outcome of the dominance, dynamism and high growth of the
energy and construction sector alone.
Table – 11
Annual Average Public Allocation to Agriculture under Plans in Bhutan:
Five-year Plan-wise (In Million Ngultrums)
Plan Period

First Five-year Plan (1961-66)
Second Five-year Plan (1966-71)
Third Five-year Plan (1971-76)
Fourth Five-year Plan (1976-81)
Fifth Five-year Plan (1981-86)
Sixth Five-year Plan (1987-92)
Seventh Five-year Plan (1992-97)
Eighth Five-year Plan (1997-2002)
Ninth Five-year Plan (2002-2007)
Tenth Five-year Plan (2008-2013)
Average for Early Four Plans (1961-81)
Average for Middle Two Plans (1981-92)
Average for Recent Four Plans (1992-2013)

Annual Average Public
Allocation to Sectors of
Activities in Million
Ngultrums
Agricultural
Sector
1.32
6.86
22.18
86.16
147.36
347.22
486.73
705.73
909.67
2828.17
29.13
247.29
1232.57

All Sectors
Together
21.44
40.44
95.04
221.24
942.24
1911.80
3118.00
6000.00
14000.00
28338.44
94.54
1427.04
12864.11

Percentage of
Outlays in
Agricultural
Sector

6.15
16.96
23.33
38.94
15.64
18.16
15.61
11.76
6.50
9.98
30.81
17.33
9.58

Sources: Planning Commission, 1989, pp. 10-2; GNH Commission, 2008, p. 64
Notes: Plan document was printed for the first time only during the third five year plan in 1972; It
seems that the five year planning process was suspended, an there was an ‘Annual Plan’ in the year of
1986-87 and again 2007-08

It is to be appreciated that it is the amount of public allocation for the maintenance and
improvements in the rural economy that is comparatively much more imperative than the
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aggregate plan allocation for the economy. A reading of the public plan allocation documents
leads to the following crucial disturbing observations: first, there existed in the past and
continues as yet a marked strategy of devolution of planning to the sectoral level only . In other
words, the system of regional level allocations does not exist in the present despite being
attempted at a point of time in the past. Second, there was a crucial positive trend in
observation in the past. The planned public allocation to the agricultural sector in particular was
kept on increasing in percentage term till the fourth plan period. Surprisingly, it dived thereafter
and the low percentage allocation in course of the ninth plan approximated the original first
plan low percentage level. For example, the first plan devoted 6.2 percent of total outlay to the
agricultural sector; the outlay devoted to the agricultural sector out of the total outlay of the
ninth plan stood at 6.5 percent only. The agricultural sector outlay was as low as 3.06 percent
during the eighth plan. In a primarily rural and agricultural country, such a trend of government
expenditure is not only astonishing but also creates a sense of despair. It has a sharp implication.
The gains from growth might have been unequally distributed across the sectors of the
economy.
It was only recently that the trend was reversed. The tenth plan did devote almost ten percent of
total outlay to the agricultural sector only. Probably, the realization that the trend of low growth
in agriculture could not be reversed unless the public investment and expenditures in this sector
was increased had led to such a trend-reversal decision on the part of the planners in the nation.
Third, the percentage contribution of the agricultural sector in the national income have
witnessed of late a declining trend in the manner of declining percentage of outlay devoted to
this sector. This was despite it that the contribution of agricultural sector in absolute money
terms had kept on increasing over the years in the last two and half decades in the country. The
phenomenon of declining percentage share of agriculture in the national income has been
treated in the official literature as the arrival of the phenomenon called the “structural transition
in the economy” in Bhutan. It is then to be guarded that there are not much to be read as
positive and irreversibly beneficial, since this latter phenomenon is to be read with the fact of
stagnant productivity and yield of major crops in agriculture, rural to urban migration of labour,
and high level of rural inequality and poverty16 in the countryside (which is out of the scope of
analysis in the present paper). The fact of high economic growth in the backdrop of the food
insecurity and poverty for a sizeable size of population of human beings make only little and
limited practical sense.
Under the protectionist umbrella of a dirigisme state, the pattern of planned economic
governance with the mediation of a tightly bureaucratized set-up has led to a pattern of
economic growth that has been rather non-“inclusive”. A distorted growth has set in. There has
been a distributional failure. This distributional failure is a telling narrative of the failure of the
erstwhile ministerial-departmental and district bureaucracy in facilitating the gains from growth
to percolate down to the level of village and household in the countryside. It is the failure of the
bureaucratized and publicly administered distributional framework of the government which
account for the failure of “trickle-down effect” of the mainstream economic growth in the
country. It is not to deny that an agro-bureaucracy has certainly come of age in Bhutan. The
public (ministerial) Department of Agriculture with its body of extension staffs and the Council
of Renewable Natural Resources with its multiple research centres and sub-centres has provided
a platform for the agro-bureaucracy to consolidate its position as a visible, organized, cohesive
and credible organ of the government in the country. Despite it being quite difficult to assess
the exact magnitude of the “trickle-down effect” of the development and growth, it is clear that
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the productivity and output in the agricultural sector have not improved in any considerable
extent. Since the food and commodity component of the national income have lagged much
behind than that of the sector of activities associated with the generation of services, the
consequence has been simple and visible: the prevalence of escalating food deficits and income
poverty. The engine of growth has not pulled the bogey of agricultural sector any forward to a
level whereby the food insecurity and insufficiency could have been overcome. The gains from
growth have not only failed to diffuse sectorally, it has also failed to distribute regionally in the
country. There has not only been an overall regional bias in the pattern of growth but also that
the international financial and technical aid assisted growth has produced an urban bias.
The public and private resources have centered at Thimphu and Phuentsholing only. It has been
the township of Thimphu in particular and Chhukha district of the western region in particular
which have been the main beneficiary of growth in the country. All is not bleak, however; the
growth has brought a certain level of convenience and comfort for a certain class of people as
well. There has come to stay a considerable measure of a phenomenon of “demonstration
effect” at work in Bhutan, which has led over the years a certain middle class of people to aspire
for a certain brand of westernized life pattern and materially struggle to attain the same17. The
unaccounted phenomenon of migration to cities of the United States of America to earn more
and catch up with the neighbors has also started to strike roots in Thimphu. This creates a hope
for the future potentialities and possibilities of diffusion of the same material spirit up to the
grass-root level.

Conclusion
Under the regime of a dirigisme, developmentalist welfare state orchestrating a
paternalistic and protectionist structure of governance, the multiplying number of the poor and
the deprived bespeaks of the failure of the engine of growth in pulling the masses along. The
Food Corporation of Bhutan was created in 1974 under duress and compulsion of food deficit
in the country. The Corporation was supposed to complement the already existing efforts of the
private trader-importer of food grains in Bhutan. The early seventies rather necessitated heavy
reliance on the food imports through the branches of the Food Corporation of India at Siliguri
(West Bengal) and Guwahati (Assam) to the stores of Food Corporation of Bhutan at
Phuentsholing. In 1976, a Country Office of the World Food Program of the United Nations
Organization was established in Bhutan. The uneven and imbalanced growth pattern with its
attending characteristics has produced pointed implication: a process of social and economic
differentiation in the society-in-transition in Bhutan. In the yesteryears, the class perspective of
the Bhutanese society was as such that there was division of non-royal and non-monk
population into a minority of a powerful class of the courtiers, retainers and provincial
bureaucrats on the one hand and a majority of subordinate class of the peasantries, herdsmen,
cottage weavers and forest produce gatherers on the other. Contemporaneously, there are
multiple classes of people claiming a share in the material base created by the process of
sustained economic growth and development. A middle class of both permanent and temporary
residents, consisting both of the middle level civil and military official servants as well as the
newly rich traders and shopkeepers, is noticeable in the townships as well as the countryside.
The income and rewards of the town centered bureaucrats and traders in particular seem to
have improved much faster than their counterparts in the countryside. An upper layer of big
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business houses, who have consolidated the ownership and control of branches of trading
companies all around the country, is also visible and traceable. Such business magnates, in
collaboration with the top-positioned heads of bureaucratic organizations, are probably in one
way or the other influencing and directing the rule and governance pattern in the country. The
part of the gains from the process of sustained economic growth, which is pocketed by these
dominant classes, is not as yet accurately known; however, the share of the subordinate classes
of deficit farmers, migrant workers and landless petty hawkers and itinerant vendors in the gains
from economic growth are certainly low enough to protect these groups from their vulnerability
to fall into the traps of disguised unemployment, consumption poverty and resource deprivation
in the country.
The social and economic differentiation among the masses attending the non-inclusive and nondiffusing pattern of economic growth and deepening with the agricultural involution process
has further been fuelled by the phenomenon of rampant corruption among the officialdom. The
corruption has increased in the corridors of bureaucracy. With the mushrooming of
international-assistance aided projects and government programmes, the chances of
involvement in the activities of rent-seeking, leisure pursuits and aid-syndrome have increased
rather irreversibly. These have resulted in instituting the vices of administrative centralism and
distributional inefficiency deep into the system of governance. The policy implication is then
simple: the new technocrats and the associated modern bureaucracy outside the system of royal
civil service commission may be allowed to be at the centre of orchestration of the stage show
of growth and the official regulated distribution system as handled by the erstwhile semi-feudal
bureaucratic arrangements need to be revamped and improved further on an urgent basis
without fail, so as to make a move towards inclusive growth and development. The political
economy of growth in the age of parliamentary democracy with the political promises of equity
and justice needs it.

Notes:
1

It was this international gift exchange between the royals of two countries which was instrumental
in allowing the Bhutanese King to be able to oblige the bureaucracy with the inland gifts. To
quote:
“However, it is not yet known when the Bhutanese started having their coins minted in Cooch
Bihar by sending silver ingots there. This practice, which existed in 1785, continued till 1789,
when the British closed the Cooch Bihar mint. In 1783 S. Turner mentioned the
"commodiousness of this small piece (the narainee, a base silver coin), the profits the people of
Bhutan derive from their commerce with Cooch Bihar". The coins minted in Cooch Bihar didn’t
have a true monetary value in an economy based essentially on barter, but they were among the
objects gifted by the Bhutanese rulers during the distribution of gifts (man ‘gyed) to lay persons and
monks. One such example is the distribution of 47,000 silver coins to all Bhutanese who paid
taxes, officials, monks and soldiers during the enthronement of the Zhabs drung Jigme Dragpa in
1747” (Pommaret, 2000, pp. unpaged).

2

To quote an authoritative remark about the growth of marts:
“Both in Bhutan and Tibet, the state was grossly involved in the country’s external trade so that
the benefit of trade went largely to the king, his nobles and other associates including the

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monasteries ……….……… First, since the big merchants like the king or his nobles did not
participate in the detailed execution of trade, they used to employ trade agents and professional
persons to accompany the caravans ……………….. Secondly, both countries allowed small
merchants to carry out trade on their own. They traded mostly with their counterparts in the
neighbour countries, but sometimes with their big merchants as well ….…………….. The
prevailing custom was that a particular group of merchants dominated a given stretch of the route.
Thus, for example, the Bumthang merchants controlled the trade route from Bumthang to Lhasa
while the merchants of Punakha controlled trade in between Gyantse and Shingatse, and
monopolised trade up the valley of the river Mo Chu to Lingshi La. Lastly, although the major
trade was carried out by the state in both countries, production was left entirely to private
enterprises. ……………. Traders had no large stake in production. Purchasing goods from local
markets, they “fit out large caravans to carry it to places at several months” march” (Sarkar and
Ray, 2006, pp. 59-61).
3

To quote another remark:
“Rangpur, which is in present day Bangladesh. In the 18 th century Rangpur was the destination of
the grand annual caravan, which came from western Bhutan. The most used entry point to Bhutan
was Buxa Duar (Pasakha). During the time of the 13th Temporal Ruler Sherab Wangchuk cloth
formed a large part of the imports (Benaras silk, cotton, English flannel) and exports (Tibetan
wool, Chinese silk, Bhutanese cloth). Horses, lac (Laccifer lacca), madder used for dyeing, ivory,
musk, gold dust, silver, amber, spices and tobacco (even though it was theoretically prohibited by
the Law Code of 1729) were also traded” (Pommaret, 2000, p. unpaged).

4

To quote a remark:
“Hajo was from the 17th century a thriving pilgrimage and trading place in Assam.
…………………. The Muslims practiced metal casting and the nearby town of Sualkuchi became
an important centre of silk trade. Trade, linked among others, to pilgrimage, was active because in
the 19th century "a person called the Wazir Barua, of the Kalita family, had a hereditary charge of
the intercourse with Bhutan ……………….. All the messengers and traders of Bhutan, all
servants of the Deva Raja (Temporal ruler of Bhutan), must first go to Siliambari. The Barua there
levied no duties, but received presents in order to prevent his throwing impediments in the way of
business, and no one was allowed to purchase at Siliambari without employing him as a broker
…..………….. The east Bhutan-Assam axis was particularly important for the trade of cloth, with
exchanges based on cotton, silk and dyes. It is known that at a fair in Assam in 1875, the
Bhutanese exchanged woollen blankets, madder, bags and more than four tonnes of lac for cotton
and raw Assamese silk textiles” (Pommaret, 2000, p. unpaged).

5

Even till the late sixties, the capital town was itself not fully equipped to carry out the
development programmes. To quote some memoirs:
“On October 29, 1967, ………….…….. Thimphu, the capital, was smaller than even the smallest
of villages of my native place. The only prominent building was the Dzong (the Secretariat,
literally meaning a fortress). The only guest house had three rickety rooms ……………… At
night, I counted just about thirty lights in the capital of Bhutan ……………… On January15,
1968, I was appointed as the special officer of India in Bhutan (Das, 1995, pp.4-5).

A further remarks brings it to notice that:

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“The first hydroelectric project in Bhutan was constructed on the Samteling Chhu in Thimphu.
This mini-hydel, commissioned in 1967, catered to the newly established capital gradually
emerging from paddy fields around the extended Thimphu dzong (Zurcher and Choden, 2004,
p.129).
6

Bhutan has been a planned economy since 1961; this was the year when the first five-year plan
(1961-1966) was launched under the guidance of technical expertise and with financial assistance
from the neighbouring country, India. The Plan document in Bhutan was however printed for the
first time only during the launching of the third Five Year Plan in 1972. To quote the Third Five
Year Plan document of Bhutan:
“The two Five Year Plans, formulated in consultation with the Planning Commission, India, were
launched in 1961 and 1966 respectively. These Plans were aimed at creating the basic
infrastructural facilities like roads, power, communication system, transport and suitable
administrative set-up, besides developing agriculture and animal husbandry” (Third Plan
Document, 1972, p. unpaged).

7

To quote:
“The trade route to Tibet in the north having been closed, greater economic relations with India
became inevitable. Nehru offered economic assistance which was gratefully accepted. Men and
money from India poured in and a crash programme of economic development started. An
integrated development plan was prepared by India’s Planning Commission in 1960, which
became the first Five Year Plan of Bhutan” (Das, 1995, P.13).

8

To quote a recent assessment:
“The introduction of Western medicine and Western education appears to have made a great
impact on society. I would like to introduce a few examples of people’s interactions with it. A lady
in her late twenties working in a tour agency described how when one becomes sick in the village
people first go to see an astrologer to find out the cause and do the relevant puja [religious
worship] (depending on the cause), and then, if they are not cured, they go to a Basic Health Unit
(BHU) or a hospital ……………….. An education officer confessed that in the modern
education sector it is becoming difficult to teach indigenous beliefs, such as belief in spirits, since
they can not be probed scientifically. One old gentleman told me, “With the introduction of
Western medicine and Western education, many aspects of Bhutanese life started to be
questioned” (Ueda, 2003, pp. 50-51).

9

Karma Ura (Undated) attempts to capture the historical path of progress in terms of stages of
transformation leading to the emergence of explicit goal of “development” in the following way:
“Looking briefly at investment patterns since 1961, it is possible to delineate some key features of
transformation. The years between 1961 and 1973 can be characterized as the first phase, which
concentrated on road construction and internationalization of relations ………………. After the
problems of inaccessibility were partly overcome and the delivery of goods and services made
more cost-effective, the establishment of health, education and agricultural extension services
expanded rapidly between 1973 and 1983. This second phase is marked by drastic expansion of
services ……………….. The need to augment revenue naturally led to the third phase of
development - from 1983 to 1987 - concentrating on revenue-generating investment in hydroelectric and mineral based projects ……………. The fourth phase, roughly stretching from 1988
to 1998, is characterized by expansion of air-links and digital telecommunications networks in

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what was once an isolated, hidden and unapproachable land …………..…… The dominant
features of the period after 1998 appear to be democratization and globalization (Ura, undated, p.
4; bold letters added).
10

The National Accounts Statistics of Bhutan asserts that while discussing the economic growth via
the measurement of magnitude of Gross Domestic Product, along with the estimation of per
capita income, one must be clear about the following:
“In economics, production means addition to the utility which can be valued ……………..
Addition to utility which is scarce in relation to demand is known as value added. So production
means addition to value. Product is nothing else but ‘value added’……………….. Value-added is
the measure of the difference between the value of total output of the sector and the value of
intermediate consumption(IC). In other words, if from the gross value of output of the sector, we
deduct the value of the goods and services purchased from the producers of other industrial
sectors used up in the process of production, what is left is the gross value added …………….. If
the value of IC is exclusive of the value of the consumption of fixed capital (CFC) (loss of capital
assets in terms of wears and tears - also known as depreciation of capital stocks), the value added
would be termed as ‘gross’. If IC includes CFC, the value added would be termed as
‘net’………………. ” (CSO-NAS, 1989, p. 29).

11

12

It is to be underlined that the first three plans and four years of the fourth plan consecutively were
executed and implemented without any data of Gross National Product/Gross Domestic Product
of the country, despite it that the Central Statistical Cell was established way back in 1973 only,
which was renamed as the Central Statistical Organization in 1979, and then renamed finally as an
autonomous body called the National Statistics Bureau; second, the Planning Commission in
Bhutan was involved in the work of planning the national and sectoral economy without any
macroeconomic data of GNP/GDP throughout the period of 1971 to 1979; third, there has been
three-times changes in the choice of the base year. The first-ever conventional time-series on
GDP covering period of 1981 to 1984 in current and constant (1983) prices was made available in
November 1985, and the second conventional series of estimates of GNP/GDP measured in
current and constant (1983) prices was made available in December 1987. There was revision of
the base year thereafter. The first-ever revised series of GNP/GDP measured in current and
constant (1980) prices covering the period of 1980 to 1987 was made available in May 1989, and
the latest revised series of GNP/GDP measured in current and constant (2000) prices covering
the period of 1980 to 2003 was made available in 2004.
To quote:
“The estimated GDP amounts to Nu. 1020.5 millions, and with a mid year population of 1.165
million, the per capita GDP comes to Nu. 876 …………….…. This would indicate that Bhutan
has one of the lowest per capita incomes in the world” (Planning Commission, 1981-86, p.
unpaged).

13

In 2003, after passing of more than twenty years, the National Statistical Bureau was however
confident to inform:
“The revised nominal GDP at market prices is estimated at Nu. 28,542 million. Therefore, with
the estimated population of 0.734340 million, the estimated per-capita GDP is Nu. 38,868, which
is equivalent to US $834. The GNP per-capita is estimate(d) at Nu. 35,411 or equivalent to US
$760” (National Statistics Bureau, 2004, p.1).

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14

Bhutan is attempting to emerge as a GNH-state (Gross National Happiness-state). Whatever this
nomenclature stands for, the outline of both traditional social progress as well as the modern
economic growth has ever been first and foremost a saga of material improvements and advances
in agriculture. The progress of the nation and improvements in agriculture is as yet measured in
terms of the level of gross material output of plants and crops, livestock products and forest
produces, and the national accounting measure of the contribution of agriculture to the constant
and current market value of gross national and domestic products is yet a continuing serious
enterprise.

15

The official data publication agency in 2003 concluded that
“The agriculture products when bifurcated, the share of cereal products are declining, where the
value added share of horticulture products are increasing gradually” (National Statistical Bureau,
2004, P.2).

16

In January 2008, the annual report of Royal Monetary Authority of Bhutan added a new
dimension and concern, which was apart from and exclusive of the category of the per capita
income:
“Within the Bhutanese economy, real GDP growth increased to 8.5 percent in 2006 from 7.1
percent in 2005 ………………. Despite impressive GDP growth and increase in nominal per
capita GDP, the incidence of poverty still remains high at 32 percent ………………… The
increase in the unemployment rate has been marginal from 3.1 percent in 2005 to 3.2 percent in
2006” (RMAB, 2008, pp. 7-9).

17

To quote a similar recent assessment that did rely on multiple authorities of Bhutan:
“Four decades of development activities appear to have brought many economic and social
changes to Bhutan. Although the majority of people in Bhutan live at least half a day’s walking
distance from a road (Planning Commission 1991: p.114), the impact of development activities, as
Karma Ura writes, are felt even in the remote mountains (1997: p.239). People know through
various means about life in towns and this inflow of information makes some people aspire to a
certain degree to a “colourful” town life” (Ueda, 2003, p. 49).

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