Bhutan, country of south-central Asia, located on the eastern ridges of the Himalayas. Historically a remote kingdom, Bhutan became less isolated in the second half of the 20th century, and consequently the pace of change began to accelerate. With improvements in transportation, by the early 21st century a trip from the Indian border to the Bhutanese capital, Thimphu, that once took six days by mule could be made in just a few hours by car along a winding mountain road from the border town of Phuntsholing. The governmental structure also changed radically. Reforms initiated by King Jigme Dorji Wangchuk (reigned 1952–72) in the 1950s and ’60s led to a shift away from absolute monarchy in the 1990s and toward the institution of multiparty parliamentary democracy in 2008.

The economic core of Bhutan lies in the fertile valleys of the Lesser Himalayas, which are separated from one another by a series of high and complex interconnecting ridges extending across the country from north to south. The political nucleus of Bhutan is centred in the Paro and Thimphu valleys in the Lesser Himalayan region. Its location between the Assam-Bengal Plain of India to the south and the Plateau of Tibet of southwestern China to the north gives the country considerable geopolitical significance.

Bhutan’s northern and western boundary with the Tibet Autonomous Region (part of China), although undefined, generally follows the crest of the Great Himalayas. In the Duars Plain to the south of the Himalayan range lies Bhutan’s boundary with the Indian states of West Bengal and Assam. Bhutan borders the Indian states of Arunachal Pradesh to the east and Sikkim to the southwest. Physically, Bhutan may be divided into three regions from north to south: the Great Himalayas, the Lesser Himalayas, and the Duars Plain.

The three main ethnic groups of Bhutan—the Bhutia, the Nepalese, and the Sharchop—display considerable variety in their cultures and lifestyles. A typical Bhutia house is a two-storied structure of timber and stone with thick, pounded mud walls to keep out the cold. Livestock are kept on the ground floor, while the family lives above. Inside the house, a family will usually maintain a small Buddhist shrine in a corner. Among the livestock kept by Bhutia families is the yak, which supplies not only meat but also milk, from which butter is made for use in food preparations, in lamps, and on the shrine altar. Ordinary households may not be able to afford meat in their daily meals, however, and often rely on ema datshi, a chili and cheese stew, or kewa datshi, which adds potatoes to the mix. Both can be considered national dishes, and both are served with basmati or Bhutanese red rice.

Although the Bhutia have a tradition of polyandry (marriage of a woman to more than one man), their family system is basically patriarchal, with estates divided equally between sons and daughters. Both men and women may choose whom they marry and may initiate a divorce. 

The Sharchop are closely linked to the Bhutia because they share a common religion in Tibetan Buddhism, though among the Sharchop there is often a strong element of the older pre-Buddhist Bon religion. The Sharchop build their houses of stone and wood, often on stilts on the hillslopes. They generally practice shifting agriculture, whereby land is cleared by burning the vegetation, is cultivated for several years, and then is abandoned in favour of another site when the productivity of the soil declines.

The Nepalese of Bhutan are predominantly Hindus and have caste and family ties to Nepal and India. Because they live in the warmer climate of southern Bhutan, their houses are made of bamboo and thatch. The Nepalese do not eat beef, and some of them abstain from meat altogether. Instead, they eat the rice and curry dishes that are common among the Hindus of Nepal and India. Their caste system separates different social levels and influences the choice of marriage partners and other social relationships.

There are three major ethnic groups in Bhutan: the Bhutia (also called Ngalop), the Nepalese, and the Sharchop. The Bhutia are the largest ethnic group and make up about half of the population. They are the descendants of Tibetan immigrants who came southward into Bhutan beginning about the 9th century. The Bhutia are dominant in northern, central, and western Bhutan. They speak a variety of Tibeto-Burman languages, and the most common of these, Dzongkha, is Bhutan’s official language; the written language is identical with Tibetan. The Bhutia dominate Bhutan’s political life.

An ethnically mixed population is found in southern and southwestern Bhutan. The Nepalese (including members of the Gurung ethnic group) predominate in the region and constitute roughly one-third of the country’s total population; they are the most recent arrivals in Bhutan. Most speak Nepali. The growing numbers of Nepalese prompted the Bhutanese government to ban further immigration from Nepal beginning in 1959 and to prohibit Nepalese settlement in central Bhutan. Relatively little assimilation has taken place between the Tibetan and Nepalese groups, and tension between the two communities has remained a major internal political problem for Bhutan.

Most of the people in eastern Bhutan are ethnically related to the hill tribes living in adjacent areas of Assam and Arunachal Pradesh. The Sharchop, as these people are called, are believed to have been the earliest inhabitants of Bhutan.

The Bhutanese economy is largely agrarian, and the significant variations in elevation and climate across the country allow Bhutan’s farms to support a wide variety of crops and livestock. However, the amount of land available for agriculture is only a small fraction of the total area of the country; the adverse climate, poor soil, and steep slopes in much of Bhutan have made it necessary to leave a large land area covered with forest growth, meadows, and grasslands. The relatively low, well-watered, and fertile valleys of central Bhutan have the largest percentage of cultivated land.

The main priority of Bhutan’s development strategy has been to bring the country out of its geographic isolation. To this end, Bhutan has relied on external assistance from India, the World Bank, the United Nations, and the Asian Development Bank. The success of a series of five-year plans—the first of which was launched in 1961—has depended largely on the regular flow of funds from India to Bhutan and on the availability of Indian technical personnel. Much of the country’s development budget has been devoted to improvement of the infrastructure, but the five-year plans also have emphasized the exploitation of agricultural and power resources, and the country’s economy has been on a general upward trend since the late 20th century. Propelling much of the growth has been the Chhukha Hydel hydroelectric power project (completed in 1987–88), which enabled the country not only to provide for its own energy needs but also to export electricity to India.