𝐁𝐡𝐮𝐭𝐚𝐧’𝐬 𝐆𝐫𝐨𝐰𝐭𝐡 𝐭𝐨 𝐎𝐮𝐭𝐩𝐚𝐜𝐞 𝐑𝐞𝐠𝐢𝐨𝐧𝐚𝐥 𝐏𝐞𝐞𝐫𝐬, 𝐃𝐫𝐢𝐯𝐞𝐧 𝐛𝐲 𝐄𝐧𝐞𝐫𝐠𝐲 𝐚𝐧𝐝 𝐈𝐧𝐟𝐫𝐚𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐆𝐚𝐢𝐧𝐬

…𝒏𝒆𝒘 𝒉𝒚𝒅𝒓𝒐𝒑𝒐𝒘𝒆𝒓 𝒑𝒓𝒐𝒋𝒆𝒄𝒕𝒔 𝒂𝒏𝒅 𝒓𝒊𝒔𝒊𝒏𝒈 𝒅𝒐𝒎𝒆𝒔𝒕𝒊𝒄 𝒅𝒆𝒎𝒂𝒏𝒅 𝒔𝒕𝒓𝒆𝒏𝒈𝒕𝒉𝒆𝒏 𝒃𝒉𝒖𝒕𝒂𝒏’𝒔 𝒆𝒄𝒐𝒏𝒐𝒎𝒊𝒄 𝒑𝒓𝒐𝒔𝒑𝒆𝒄𝒕𝒔

By Kezang Choden

Bhutan is projected to lead South Asia in Gross Domestic Product (GDP) growth in 2025, according to recent economic forecasts. The country is expected to rank second after India in 2026, reflecting its strong economic momentum. South Asia is poised to remain the fastest-growing sub-region, driven by robust domestic demand expected to boost growth across several economies this year. Growth in the region is projected to rise from 5.8 percent in 2024 to 6.0 percent in 2025, and further to 6.2 percent in 2026. The steady improvement highlights the resilience of South Asian economies despite global uncertainties. Bhutan’s performance, in particular, highlights the effectiveness of its ongoing economic reforms and development initiatives.

Bhutan’s GDP growth is projected to rise sharply to 8.5 percent in fiscal year (FY) 2025, up from 5.5 percent in FY 2024. The surge is expected to be driven by increased investment, higher hydroelectricity production, and a boom in construction activity. However, growth is anticipated to moderate to 6.0 percent in FY 2026.

Meanwhile, India’s growth is expected to strengthen, reaching 6.7 percent in FY 2025 and 6.8 percent in FY 2026. The expansion will be supported by falling inflation, easing monetary policy, improved agricultural production boosting rural incomes, and more favorable fiscal conditions, including tax cuts for middle-income households. These factors are likely to enhance domestic demand across the country.

In Nepal, economic growth is similarly forecast to accelerate in both FY 2025 and FY 2026, driven by robust consumption supported by higher remittance inflows, moderate inflation, and increased private and public investment.
Sri Lanka’s economic recovery is expected to continue, although at a slower pace, with growth projected at 3.9 percent in 2025 and 3.4 percent in 2026. Consumption will remain subdued as household purchasing power, severely weakened during the recent crisis, continues to struggle. Fiscal conditions are likely to remain tight, and the resumption of debt servicing this year is expected to exert downward pressure on the currency.

In Bangladesh, political instability and persistent supply bottlenecks are forecast to weigh on economic performance in FY 2025, dampening growth prospects by affecting both investment and trade.

Meanwhile, growth in the Maldives is projected to moderate, with the economy expanding by 5.0 percent in FY 2025 and 4.8 percent in FY 2026. Despite the slowdown, tourism-related sectors are expected to continue making strong contributions to overall growth.

In Pakistan, economic growth is forecast to remain steady at 2.5 percent in 2025 and 3.0 percent in 2026. The outlook is supported by the implementation of a reform program aimed at strengthening private sector investment and improving economic resilience.

According to the Druk Green Power Corporation (DGPC) Limited’s Company Profile 2024, Bhutan’s total installed power generation capacity now stands at 2,453 megawatts (MW). The growth of the power industry has been a key driver of the country’s socio-economic development. Approximately 70 percent of the total energy generated is exported to India, contributing significantly to Bhutan’s economy. Energy exports account for at least 24 percent of the government’s direct revenues and help offset a large portion of the balance of payments with India. At present, the hydropower sector contributes more than 17 percent to the national GDP, highlighting its critical role in Bhutan’s economic landscape.

The DGPC continues to anchor its business strategy on its robust hydroelectric assets, which provide consistent hydropower generation under long-term power purchase agreements. The company also makes strategic investments to expand its generation capacity and enhance related hydropower services. On average, DGPC’s hydropower facilities generate around 10,000 million units of electricity annually. According to the company’s profile, electricity generation reached 10,299.36 gigawatt-hours (GWh) in 2021, increased slightly to 10,312.91 GWh in 2022, and stood at 10,090.43 GWh in 2023.

While total generation has remained steady, domestic electricity consumption has seen a notable increase over the years. DGPC sold 2,548.26 GWh of electricity within the country in 2021, rising to 3,441.17 GWh in 2022 and further to 5,315.02 GWh in 2023. In contrast, electricity exports have declined over the same period — from 7,589.37 GWh in 2021 to 6,802.29 GWh in 2022 and 4,664.19 GWh in 2023.

Over the past few years, hydropower generation has seen a downward trend during the winter months due to a significant drop in river flow. This seasonal reduction is primarily attributed to a lack of rainfall and limited snowmelt during colder periods. As rivers dry up, the generation capacity of hydropower plants declines, affecting overall electricity production.

Despite these seasonal challenges, domestic electricity consumption has shown a gradual increase each year, largely driven by the emergence of mini industries and small-scale manufacturing units across the country. These industries are steadily boosting demand for power within the domestic sector. While electricity exports have slightly declined, the domestic market is gradually emerging as a more significant consumer.

DGPC has reported strong financial performance over the past three years, showing consistent growth across key indicators despite minor fluctuations. According to the company’s latest annual report, DGPC recorded a revenue of Nu 12,509.07 million in 2021, which decreased to Nu 12,026.29 million in 2022 and further to Nu 11,668.60 million in 2023.

Total expenditure stood at Nu 5,179.07 million in 2021, increased slightly to Nu 5,483.34 million in 2022, and dropped to Nu 4,848.92 million in 2023. Corporate Income Tax (CIT) contributions improved, with DGPC paying Nu 2,232.14 million in 2021, Nu 1,918.54 million in 2022, and Nu 2,295.59 million in 2023. Comprehensive income for the year was Nu 5,118.68 million in 2021, declining to Nu 4,625.96 million in 2022 and slightly further to Nu 4,547.84 million in 2023. The report highlights DGPC’s ongoing efforts to maintain financial stability while continuing to supply reliable electricity for both domestic consumption and export. With the integration of the Mangdechhu project, the company is expected to grow further in the coming years.

DGPC is moving ahead with the third phase of its hydropower development, with several large-scale projects under active consideration. Among the proposed projects are the 85 MW Gamri II, 363 MW Khomachhu, 170 MW Dangchhu, and the 900 MW Wangchhu Storage Project. These developments mark a significant expansion in Bhutan’s efforts to harness clean energy through hydropower.

In addition, DGPC is exploring climate-resilient and sustainable alternatives such as pumped storage and seasonal storage hydropower schemes to strengthen long-term energy security and adapt to changing climate patterns. Updates to detailed project reports (DPRs) for several major hydropower projects are underway, including the 1,125 MW Dorjilung project, the 180 MW Bunakha project, and the 404 MW Nyera Amari I and II projects. DGPC is also preparing DPRs for the integrated 740 MW Gongri Reservoir and the 1,800 MW Jerrichhu Pumped Storage Scheme, which are expected to play a key role in Bhutan’s future energy strategy.

DGPC has reaffirmed its commitment to developing renewable energy projects in a sustainable manner, aligning its efforts with international best practices on environmental and social standards, as well as safeguard policies. As part of its broader vision, DGPC continues to support social and community vitality through various initiatives, carried out independently and in collaboration with partner agencies to ensure inclusive and long-lasting impact.

Recognizing the importance of catchment protection, DGPC emphasizes that healthy catchments provide consistent precipitation and serve as a perennial source of water for river systems. This is vital for the operation of hydropower plants. In addition, the preservation of catchments helps reduce soil erosion, which can otherwise lead to sedimentation that shortens the lifespan of underwater equipment in DGPC’s power plants. Protecting these natural resources remains a key part of the company’s strategy to ensure reliable and efficient energy production for the country.

Bhutan has begun implementing a 17 MW solar farm as part of its efforts to diversify renewable energy sources and strengthen the power supply during the lean season. DGPC is leading the initiative to explore alternative sources such as solar and wind energy. These ventures aim to reduce dependence on hydropower during dry months when water levels are low and electricity generation is affected. In this effort, DGPC has started implementing both solar photovoltaic utility-scale projects and rooftop solar systems in various government institutions across the country.
With a long-term vision for sustainable energy, DGPC has set a target to install 1,000 megawatts peak (MWp) of solar energy capacity by 2030, with plans to expand the target to 4,000 MWp by 2040, reinforcing Bhutan’s commitment to clean and resilient energy development.

Bhutan’s hydropower development continues in full swing, with several projects underway across multiple dzongkhags aimed at boosting national energy capacity and supporting economic growth.
Under Phase One, the construction of the 54 MW Burgangchhu project in Zhemgang, the 32 MW Yungichhu project in Lhuentse, and the 18 MW Suchhu project in Haa began in 2022. These projects are expected to be commissioned between 2024 and 2025.

Phase Two involves projects that have already completed feasibility studies, including the 26 MW Druk Bindu I and II, the 54 MW Gamri I, the 90 MW Jomori, and the 25 MW Begana integrated projects, expected to be commissioned between 2026 and 2027.

In Phase Three, projects such as the 85 MW Gamri II, the 24 MW Yurmochhu, the 53 MW Sherichhu, the 64 MW Jigmechhu, and the 33 MW Parochhu have been identified for future development.

Phase Four includes the largest upcoming projects, with the 363 MW Komachhu, the 170 MW Dangchhu, and the 237 MW Jongthang projects set to significantly enhance Bhutan’s energy capacity.