7 October 2026
The World Bank's country overview for Bhutan reports that real gross domestic product grew rapidly at 8.1 percent in FY24/25.
It projects growth of 7.1 percent for FY25/26 and 6.4 percent for FY26/27.
Headline inflation softened to 2.6 percent in FY24/25 from 4.3 percent in FY23/24.
Bhutan is classified as a lower-middle income country, with GDP per capita around $3,718.
Revenues from hydropower exports to India are described as central to the economy.
Real GDP growth FY24/25:
8.1 percent
Inflation FY24/25:
2.6 percent
GDP per capita:
around $3,718
Income class:
lower-middle income
Why it matters for exams: A multilateral lender's own figures on a neighbour's growth, inflation and income class are frequently asked.
UPSCBank
7 October 2026
The 1,020 MW Punatsangchhu-II hydroelectric project stands on the Punatsangchhu river in Wangdue Phodrang dzongkhag.
It was inaugurated by Prime Minister Narendra Modi and the King of Bhutan, Jigme Khesar Namgyel Wangchuck.
The project cost Rs 37,778 million, met by India as a 30 per cent grant and a 70 per cent loan.
It is a run-of-the-river plant with six units; unit 6 of 170 MW was connected in August 2025 and the other five were commissioned between December 2024 and July 2025.
The six units have supplied more than 1.3 billion units of electricity to Bhutan's grid, earning about Nu 4.9 billion.
The project raises Bhutan's total power generation capacity by nearly 40 per cent.
Capacity:
1,020 MW
River:
Punatsangchhu
Dzongkhag:
Wangdue Phodrang
Cost:
Rs 37,778 million
Units:
6
Capacity increase:
nearly 40 per cent
Why it matters for exams: Punatsangchhu-II is the single largest addition to Bhutan's hydropower capacity and is funded on the grant-plus-loan pattern India uses in Bhutan.
Kerala PSCUPSCSSC
In plain words
Run-of-the-river Run-of-the-river hydropower — A plant that uses the river's own flow with little or no large storage reservoir.
Dzongkhag Dzongkhag — A district of Bhutan, the country's main unit of local administration.
Background
Thimphu is the capital of Bhutan.
Bhutan's currency is the Bhutanese ngultrum (BTN).
The World Bank records that the ngultrum is pegged to the Indian rupee at par, a peg introduced in 1974.
Monetary policy is anchored by this peg, and the IMF letter hosted by ADB refers to the Royal Monetary Authority's role in aligning money market conditions with the monetary policy stance.
With 85 percent of Bhutan's imports coming from India and the exchange rate pegged to the rupee, the World Bank says Bhutan's inflation rate is closely linked to that of India, albeit with a time lag.
Capital:
Thimphu
Currency:
Ngultrum (BTN)
Peg:
Indian rupee, at par, introduced 1974
Why it matters for exams: Capital, currency and the rupee peg are staple Country Focus questions and explain Bhutan's economic closeness to India.
Kerala PSCUPSC
In plain words
RMA Royal Monetary Authority — The monetary authority named in the IMF letter hosted by ADB.
Peg Fixed exchange rate link — A currency is tied at a fixed rate to another currency, here the Indian rupee.
Background
SAARC was established on 8 December 1985 with the adoption of its Charter in Dhaka by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Afghanistan joined SAARC in April 2007 as the eighth member; the SAARC Secretariat is in Kathmandu.
Bhutan hosted the 16th SAARC Summit in Thimphu in 2010.
BIMSTEC was created by the Bangkok Declaration of 1997; its current name was adopted in 2004 following Bhutan and Nepal's admission.
Bhutan joined the Colombo Plan in 1962.
SAARC established:
8 December 1985, Dhaka
BIMSTEC founding declaration:
Bangkok Declaration, 1997
Bhutan joined Colombo Plan:
1962
Why it matters for exams: Dates and places of regional groupings, and which neighbours belong to which, are recurring Country Focus and international-organisation questions.
Kerala PSCUPSC
In plain words
SAARC South Asian Association for Regional Cooperation — Regional body whose Charter was adopted in Dhaka in 1985.
BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation — Seven-member group of five South Asian and two South-east Asian states.
Background
Bhutan became a member of the IMF in 1981, according to its Ministry of Foreign Affairs and External Trade.
It became a member of the World Bank (IBRD and IDA) in 1981. The ministry notes the IBRD Articles of Agreement require countries to join the IMF to become a member of the World Bank Group.
Bhutan became a member of the ADB, UNESCO and the WHO in 1982.
Bhutan is not a WTO member: the WTO lists it among ongoing accessions, and its accession Working Party was established on 6 October 1999.
IMF membership:
1981
World Bank membership:
1981
WTO accession Working Party established:
6 October 1999
Why it matters for exams: Memberships of international financial bodies and the WTO accession status of South Asian states are common questions.
Kerala PSCUPSC
In plain words
IBRD International Bank for Reconstruction and Development — The World Bank institution whose Articles of Agreement require IMF membership.
Accession Working Party WTO accession working party — The WTO body that examines an applicant's trade regime before it can join.
Background
Diplomatic relations between Bhutan and India were established in January 1968; the Golden Jubilee was celebrated in 2018.
Bhutan's foreign ministry calls cooperation in hydropower the centrepiece of the economic cooperation between the two countries.
India is Bhutan's largest development and most important trading partner, both as a source and a market.
As a landlocked country, all of Bhutan's third-country imports and exports transit through India.
India is the biggest market for several Bhutanese exports, including electricity, dolomite and ferrosilicon.
India's assistance has grown substantially since 1961, when Bhutan launched its first Five Year Plan.
Diplomatic relations established:
January 1968
Centrepiece of economic cooperation:
Hydropower
Bhutan's first Five Year Plan:
1961
Why it matters for exams: India's neighbourhood relations are a core UPSC and PSC area; hydropower and transit trade are the usual hooks.
Kerala PSCUPSC
In plain words
Landlocked Having no sea coast — Bhutan has no coastline, so its third-country trade passes through India.
Background
Jigme Dorji National Park (JDNP) was gazetted in 1974 as a wildlife sanctuary and upgraded to a national park in 1993.
Its revised area is 4,319 km2; until the Wangchuck Centennial Park was established, JDNP was the largest national park.
It covers five dzongkhags: Gasa (entirely), Paro, Punakha, Thimphu and Wangduephodrang, and 15 geogs.
Four major rivers originate in the park: Pachhu, Wangchhu, Pochhu and Mochhu, and major hydropower dams are built on them.
The park holds all four national symbols: blue poppy, takin, raven and cypress.
Gazetted as wildlife sanctuary:
1974
Upgraded to national park:
1993
Revised area:
4,319 km2
Why it matters for exams: National symbols, protected areas and administrative units of Bhutan are standard fact-recall material.
Kerala PSCUPSC
In plain words
Dzongkhag District — The first-level administrative unit of Bhutan, made up of geogs.
Geog Block of villages — A sub-district unit within a dzongkhag.
Background
Royal Manas National Park spans 1057 km2 in the south-central foothills of Bhutan, in the dzongkhags of Zhemgang, Sarpang and Pemagatshel.
It began as a game sanctuary and was notified as Manas Wildlife Sanctuary in 1964.
In 1993 it was upgraded to Royal Manas National Park through the merger of Namgyel Wangchuck Reserve and Manas Wildlife Sanctuary.
It abuts the Indian Manas National Park in the south, forming part of the Transboundary Manas Conservation Area (TraMCA), and can be accessed from Bhutan and the Indian state of Assam.
UNESCO lists Royal Manas National Park and Jigme Dorji National Park on Bhutan's Tentative List (2012); Bhutan ratified the World Heritage Convention on 22 October 2001.
Area:
1057 km2
Notified as Manas Wildlife Sanctuary:
1964
Upgraded to national park:
1993
Why it matters for exams: Protected areas, their shared landscapes with India, and the UNESCO Tentative List are routine geography and environment questions.
Kerala PSCUPSC
In plain words
TraMCA Transboundary Manas Conservation Area — A landscape-level conservation area formed with the adjoining Indian Manas National Park.
Background
The World Bank's country overview records that Bhutan graduated from the United Nations' list of Least Developed Countries in December 2023.
Bhutan is now classified as a lower-middle income country, with GDP per capita around $3,718.
The overview describes revenues from hydropower exports to India as central to Bhutan's growth and investment.
Graduation from the LDC category means a country has crossed the UN thresholds on income, human assets and economic vulnerability and gives up the special treatment reserved for LDCs.
LDC graduation:
December 2023
Income class:
lower-middle income
GDP per capita:
around $3,718
Why it matters for exams: The LDC category and which countries have graduated from it is a recurring objective question.
Kerala PSCUPSCBank
In plain words
LDC Least Developed Country — A UN category of low-income countries facing severe structural obstacles to development, which receive special trade and aid treatment.
Background
The World Bank's country overview for Bhutan records that 12.4 per cent of the population remained under Bhutan's national poverty threshold in 2022.
The regional spread is wide, from 1.5 per cent in Thimphu to 41.4 per cent in Zhemgang.
Thimphu is Bhutan's capital and Zhemgang is one of its central dzongkhags.
The figure is measured against Bhutan's own national poverty line, not an international one.
National poverty, 2022:
12.4%
Thimphu:
1.5%
Zhemgang:
41.4%
Why it matters for exams: The contrast between a capital city and a remote district is the classic illustration of regional inequality within a small country.
Kerala PSCUPSC
In plain words
National poverty line National poverty line — A country's own income or consumption threshold for counting the poor, set separately from international lines.