Bhutan is one of the poorest countries in the world. But until recently the country had been totally self-sufficient in food. Most people live by subsistence farming or herding; together they account for about 95% of the country's economy. The natural resources of the country, including timber and swift-running waters for hydroelectric plants, remain little utilized.
Historically, economic development has not been allowed to undermine cultural traditions. However, the 1959 Chinese invasion of Tibet and the massing of Chinese troops on the Sino-Bhutan border led Wangchuk to undertake a modernization program out of fear that Bhutan would suffer the same fate as Tibet. In 1962 the government embarked on a series of five-year plans, relying heavily on Indian assistance, to build the country's infrastructure and develop its resources. Considerable improvements have been made in agriculture, irrigation, and road transportation. The country has come to rely on financial assistance from not only India, but also the United Nations (UN) and other international organizations. With widespread illiteracy (over 30% of men and 60% of women as of 2000) and an unskilled labor force, dramatic improvements in living standards are unlikely to occur quickly, although the government has been attempting to improve this situation. During the 1990s, economic growth was slow, largely because of Bhutan's internal problems. Since 1997, however, the economy has been expanding at over 6% per year, and this has been reflected in increased government domestic spending.
The most pressing domestic issue, besides economic development, has been the status of the Nepalese minority and Tibetan refugees. Members of the Nepalese community have felt discriminated against in both political affairs and economic matters. They have formed a party-in-exile based in India, the Bhutan State Congress, to pressure the Wangchuk regime for reforms, although their emphasis has been more on the liberalization of immigration and increased electoral representation in the government rather than a demand for a complete restructuring of Bhutanese political institutions.
Tibetan refugees resettled in Bhutan in the aftermath of the 1959 Tibet revolt against Chinese rule. However, many of the refugees refused Bhutanese citizenship in hopes of returning to their country. In 1979, in light of their uncertain status, the Bhutan government issued expulsion orders to those who refused to become citizens of Bhutan. Most of the refugees at that point agreed to accept citizenship, while those who refused went to India.