The hospitality industry is the largest industry in Gangtok as the city is the main base for Sikkim tourism. Summer and spring seasons are the most popular tourist seasons. Many of Gangtok's residents are employed directly and indirectly in the tourism industry, with many residents owning and working in hotels and restaurants.
Ecotourism has emerged as an important economic activity in the region which includes trekking, mountaineering, river rafting and other nature oriented activities. An estimated 351,000 tourists visited Sikkim in 2007, generating revenue of about Rs 50 crores (Rs 500 millions).
The Nathula Pass, located about 50 km (31 mi) from Gangtok, used to be the primary route of the wool, fur and spice trade with Tibet and spurred economic growth for Gangtok till the mid-20th century. In 1962, after the border was closed during the Sino-Indian War, Gangtok fell into recession. The pass was reopened in 2006 and trade through the pass is expected to boost the economy of Gangtok. The Sikkim government is keen to open a Lhasa–Gangtok bus service via Nathula pass. Sikkim's mountainous terrain results in the lack of train or air links, limiting the area's potential for rapid industrial development. The government is the largest employer in the city, both directly and as contractors. Gangtok's economy does not have a large manufacturing base, but has a thriving Cottage industry in watch-making, country-made alcohol and handicrafts. Among the handicrafts are the handmade paper industry made from various vegetable fibres or cotton rags. The main market in Gangtok provides many of the state's rural residents a place to offer their produce during the harvest seasons. The majority of the private business community is made up of Marwaris and Biharis. As part of Sikkim, Gangtok enjoys the status of being an income-tax free region as per the state's 1948 Income tax law. As Sikkim is a frontier state, the Indian army maintains a large presence in the
