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Sriram Balasubramanian and Mr. Paul Cashin
This paper examines the origins and use of the concept of Gross National Happiness (or subjective well-being) in the Kingdom of Bhutan, and the relationship between measured well-being and macroeconomic indicators. While there are only a few national surveys of Gross National Happiness in Bhutan, the concept has been used to guide public policymaking for the country’s various Five-Year Plans. Consistent with the Easterlin Paradox, available evidence indicates that Bhutan’s rapid increase in national income is only weakly associated with increases in measured levels of well-being. It will be important for Bhutan to undertake more frequent Gross National Happiness surveys and evaluations, to better build evidence for comovement of well-being and macroeconomic concepts such as real national income.
Sriram Balasubramanian and Mr. Paul Cashin

, growing from about US$400 in 1980 to about US$2,800 in 2016, with Bhutan now nearing middle-income status (see IMF, 2018 ). 2 3 Gross National Happiness (GNH) as a multi-dimensional development approach The most important element of the Bhutanese model of development has been the concept of Gross National Happiness (GNH), and the GNH index and tool which has been formulated alongside this philosophy. GNH was in Bhutan in 1972 by the Fourth King of Bhutan, Jigme Singhye Wangchuk, the father of the current king, Jigme Khesar Namgyel Wangchuck (see Government of

International Monetary Fund

harmonious balance between the material and non-material dimensions of development. Box 2.1: MEASURING WELL-BEING and HAPPINESS: THE GNH INDEX In keeping with the spirit of the results based planning approach of the Tenth Plan, efforts were undertaken to develop an appropriate development measure that will capture the essence of GNH and help in tracking national progress towards meeting this overall long-term development objective. The GNH Index (GNHI) is that critical evaluation tool for the results based planning framework of the Tenth Plan and future plans to

International Monetary Fund. Asia and Pacific Dept

the 1970s, this approach to development, which measures well-being of its citizens not based on GDP but on the principles of GNH, which considers the spiritual, physical, social and environmental health of its citizens and the natural environment. Since 2008, precise metrics to measure GNH have been developed based on equitable social development, cultural preservation, conservation of the environment and promotion of good governance. The GNH Index provides an overview of performance across 9 domains, which include psychological well-being, time use, community

International Monetary Fund
Bhutan has evolved from a closed economy to a trading nation that exhibits a high degree of dependence on trade. Exports have grown rapidly but overall the country’s trade deficit continues to widen owing to an even faster growth in the value of imports. The manufacturing and industry sector is constrained by various factors that impede its further development. FDI and joint ventures are some of the mechanisms that must be actively promoted to help jump start the process.
International Monetary Fund. Asia and Pacific Dept
This 2014 Article IV Consultation highlights that the GDP growth in Bhutan has slowed from about 10 percent in FY2011 (July 1–June 30) to 5 percent in FY2013. Slower growth reflects policy efforts to contain overheating pressures in the form of restrictions on credit for construction and vehicle. Inflation has remained elevated, tracking closely that of India (Bhutan’s main trading partner). Social development indicators have improved steadily, and Bhutan is on track or has achieved most of its Millennium Development Goals. Growth is projected to recover to 6½ percent in FY2014, driven mainly by a pick-up in hydropower-related construction activities and domestic services.