Tawang's economy is predominantly driven by tourism, agriculture, traditional handicrafts, and the presence of the military.
* **Local Markets**: The Old Market and Nehru Market are the primary commercial hubs, bustling with shops selling traditional Monpa clothing, Buddhist artifacts, woolen garments, and daily necessities. * **Handicrafts and Handlooms**: Local artisans produce world-renowned Tibetan carpets, Thangka paintings, and wooden carvings. The Government Craft Center is a key institution promoting and selling these items. * **Tourism and Hospitality**: Numerous boutique hotels, homestays, and tour agencies operate in the town, forming a major source of local employment. * **Agriculture**: Farming of apples, walnuts, kiwi, and mountain crops like buckwheat and barley remains a staple livelihood for many in the district.