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Synopsis Study of Bhutan is fascinating in many respects. Its complex ecology has provided it a distinct identity not only geographically but also socially and culturally. For a long time this small Himalayan state was ruled under a dual authority system of Dev Raja and Dharma Raja. Today, Bhutan is among those few countries of the world which have a monarchic system. Being a backward and underdeveloped country Bhutan is faced with immense challenges of socio-economic transformation. Bhutan’s quest for modernization and political liberalization has further aggravated popular needs and aspirations. The country is today passing through a transitional phase. To what extent Bhutanese ruling elite will succeed in preserving its cultural uniqueness in the context of ongoing process of Political liberalization is a significant issue. ‘ the multi-structured society of Bhutan has fallen into a vortex of ethnic conflict with the explosion of the problem of Nepali immigrants. These are serious issues which the Bhutanese society and polity is concerned with today. This study is an attempt to probe into the above-mentioned issues and thereby understand the dynamics of a transitional society.