World Library  
Flag as Inappropriate
Email this Article

Economy of Nepal

Article Id: WHEBN0000021327
Reproduction Date:

Title: Economy of Nepal  
Author: World Heritage Encyclopedia
Language: English
Subject: Economy of Afghanistan, Economy of Thailand, Economy of Tajikistan, Economy of Indonesia, Economy of the Maldives
Collection: Economy of Nepal, World Trade Organization Member Economies
Publisher: World Heritage Encyclopedia

Economy of Nepal

Economy of Nepal
Currency 1 Nepalese rupee (NPR) = 100 paisa
16 July - 15 July
Trade organizations
GDP $67 billion (2014est.)[1]
GDP growth
5.1% (2014est.)
GDP per capita
$2,400 (2014 est.)
GDP by sector
agriculture (35%), industry (20%), services (45%) (2010 est.)
8.6% (September 2013 est.), 10.6% (October 2011 est. source:
Population below poverty line
24.7% (2008 est.)
Main industries
Tourism, garment, food and beverages, metal manufactures, herbs.
Exports $ 2 Billion (2013) f.o.b.; note - does not include unrecorded border trade with India (2013)
Export goods
carpets, clothing, leather goods, jute goods, grain, herbs, tea,coffee, steel,Cement,Business Processing Outsourcing, Software, Information Technology, Furniture, Cardamoms, Cloths etc
Main export partners
 India 55.7%
 United States 10.1%
 Germany 4.4% (2012 est.)[3]
Imports $ 7 billion f.o.b. (2013)
Import goods
Petroleum Products, Gold, Machinery.
Main import partners
 India 51.0%
 China 34.5% (2012 est.)[4]
Public finances
Revenues $ 6 billion (FY 2013)
Expenses $ 7 billion (FY 2013)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

An isolated, agrarian society until the mid-20th century, Nepal entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s and is committed to a program of economic liberalization.

Nepal has used a series of five-year plans in an attempt to make progress in economic development. It completed its ninth economic development plan in 2002; its currency has been made convertible, and 17 state enterprises have been privatized. Foreign aid accounts for more than half of the development budget. Government priorities over the years have been the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasized.

Agriculture remains Nepal's principal economic activity, employing 70% of the population and providing 37% of GDP. Only about 20% of the total area is cultivable; another 33% is forested; most of the rest is mountainous. Rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas.

GDP is heavily dependent on India, particularly with regard to remittances of foreign workers. Subsequently, economic development in social services and infrastructure in Nepal has not made dramatic progress. A countrywide primary education system is under development, and Tribhuvan University has several campuses. Please see Education in Nepal for further details. Although eradication efforts continue, malaria had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by road and an expanding highway network. The capital was almost out of fuel and transport of supplies caused by a crippling general strike in southern Nepal on February 17, 2008.[5]

Major towns are connected to the capital by telephone and domestic air services. The export-oriented carpet and garment industries have grown rapidly in recent years and together now account for approximately 70% of merchandise exports.

The Cost of Living Index in Nepal is comparatively lower than many countries but not the least. The quality of life has declined to much less desirous value in recent years.[6] Nepal was ranked 54th worst of 81 ranked countries (those with GHI > 5.0) on the Global Hunger Index in 2011, between Cambodia and Togo. Nepal's current score of 19.9 is better than in 2010 (20.0) and much improved than its score of 27.5 in 1990.[7]


  • Foreign investments and taxation 1
  • Imports and exports 2
  • Resources 3
  • Macro-economic trend 4
  • Statistics 5
  • References 6
  • External links 7

Foreign investments and taxation

Huge numbers of Small Foreign Investments come to Nepal via the Non Resident Nepali, who are investing in Shopping Mall, Plaza, Real Estate Business, Tourism etc. Nepal has huge capacity of Hydroelectricity due to which huge number of foreign companies in line but the political instability has stop the process at the same time its growing own its own. Nepal entered into agreement for avoidance of double taxation (all in credit method) with 10 countries (PSRD) since 1987. Similarly, it has Investment protection agreement with 5 countries (PSRD) since 1983. In 2014, Nepal restricted the Foreign aid by setting minimum limit for foreign grants, soft and commercial loans from its development partners.[8]

Imports and exports

Graphical depiction of Nepal's product exports in 28 color-coded categories.

Nepal's merchandise trade balance has improved somewhat since 2000 with the growth of the carpet and garment industries. In the fiscal year 2000-2001, exports posted a greater increase (14%) than imports (4.5%), helping bring the trade deficit down by 4% from the previous year to $749 million. Recently, the European Union has become the largest buyer of ready-made garments (RMG) from Nepal. Exports to the EU accounted for 46.13 percent of the country’s garment exports.[9]

The annual monsoon rain, or lack of it, strongly influences economic growth. From 1996 to 1999, real GDP growth averaged less than 4%. The growth rate recovered in 1999, rising to 6% before slipping slightly in 2001 to 5.5%.

Strong export performance, including earnings from tourism, and external aid have helped improve the overall balance of payments and increase international reserves. Nepal receives substantial amounts of external assistance from the World Trade Organization and in May 2000 began direct negotiations on its accession.


Tourists trekking in Annapurna region in western Nepal. Tourism plays a vital role in Nepal's economy.

Progress has been made in exploiting Nepal's natural resources, tourism and hydroelectricity. With eight of the world's 10 highest mountain peaks, including Mount Everest at 8,848 m. In the early 1990s, one large public sector project and a number of private projects were planned; some have been completed. The most significant private sector financed hydroelectric projects currently in operation are the Khimti Khola (60 MW) and the Bhote Koshi Project (36 MW).The project is still undergoing and has dependency on China, India and Japan to take the further steps.

Nepal has 83,000 MW of theoretical and 42,133 MW of technically/financially viable hydroelectric potential, however the total installed capacity, at present, is mere 730.47 MW.[10]

The environmental impact of Nepal's hydroelectric projects has been limited by the fact that most are "run-of-the-river" with only one storage project undertaken to date. The largest hydroelectric plant under consideration is the West Seti (750 MW) storage project dedicated to exports to be built by the private sector. Negotiations with India for a power purchase agreement have been underway for several years, but agreement on pricing and financing remains a problem. Currently demand for electricity is increasing at 8-10% a year whereas Nepal's option to have agreement with India will make this fulfillment against demand.

Population pressure on natural resources is increasing. Over-population is already straining the "carrying capacity" of the middle hill areas, particularly the Kathmandu Valley, resulting in the depletion of forest cover for crops, fuel, and fodder and contributing to erosion and flooding. Although steep mountain terrain makes exploitation difficult, mineral surveys have found small deposits of limestone, magnesite, zinc, copper, iron, mica, lead, and cobalt.

The development of hydroelectric power projects also cause some tension with local indigenous groups, recently empowered by Nepal's ratification of ILO Convention 169.[11]

Macro-economic trend

This is a chart of trend of gross domestic product of Nepal at market prices estimated by the International Monetary Fund and EconStats with figures in millions of Nepalese Rupees.
Year Gross domestic product
1960 3,870
1965 5,602
1970 8,768
1975 16,571
1980 23,350
1985 46,586
1990 103,415
1995 219,174
2000 379,488


GDP:: purchasing power parity - $42.60 billion (2012)[12]

GDP - real growth rate: 5.6% (2008 est.)

GDP - per capita: purchasing power parity - $1,400 (2012)

GDP - composition by sector:
agriculture: 40%
industry: 20%
services: 40% (2002 est.)

Population below poverty line: 25.2% (2011)

Household income or consumption by percentage share:
lowest 10%: 3.2%
highest 10%: 29.8% (1995–96)

Inflation rate (consumer prices): 2.9% (2002 est.)

Labour force: 10 million (1996 est.)
note: severe lack of skilled labour

Labor force - by occupation: agriculture 81%, services 16%, industry 3%

Unemployment rate: 38% (2012 est.)

revenues: $665 million
expenditures: $1.1 billion, including capital expenditures of $NA (FY 99/00 est.)

Industries: tourism, carpet, textile; small rice, jute, sugar, and oilseed mills; cigarette; cement and brick production

Industrial production growth rate: 8.7% (FY 99/00):

Electricity - production: 1,755 GWh (2001)

Electricity - production by source:
fossil fuel: 8.5%
hydro: 91.5%
nuclear: 0%
other: 0% (2001)

Electricity - consumption: 1,764 GWh (2001)

Electricity - exports: 95 GWh (2001)

Electricity - imports: 227 GWh (2001)

Oil - production: 0 barrels per day (0 m3/d) (2001 est.)

Oil - consumption: 16,000 barrels per day (2,500 m3/d) 2001

Agriculture - products: rice, maize, wheat, sugarcane, root crops; milk, domestic buffalo meat

Exports: $568 million f.o.b., but does not include unrecorded border trade with India (2002 est.)

Exports - commodities: carpets, clothing, leather goods, jute goods, grain

Exports - partners: India 50.5%, US 26%, Germany 6.6% (2003 est.)

Imports: $1.419 billion f.o.b. (2002 est.)

Imports - commodities: gold, machinery and equipment, petroleum products, fertilizer

Imports - partners: India 82.9%, China 13.5%, UAE 2.6%, Singapore 2.1%, Saudi Arabia 1.2%.

Debt - external: $2.7 billion (2001)

Economic aid - recipient: $424 million (FY 00/01)

Currency: 1 Nepalese rupee (NPR) = 100 paisa

Fiscal year: 16 July - 15 July


  1. ^
  2. ^ "Doing Business in Nepal 2012".  
  3. ^ "Export Partners of Nepal".  
  4. ^ "Import Partners of Nepal".  
  5. ^ Kathmandu nearly out of fuel, Nepal says. CNN. 2008-02-17. Retrieved 2008-04-13.
  6. ^ Cost of Living Index in Nepal - Statistics & Graphs of Nepalese Citizen's Economic Power. Retrieved 2014-01-10.
  7. ^ IFPRI/ Concern/ Welthungerhilfe: 2011 Global Hunger Index The challenge of hunger: Taming price spikes and excessive food price volatility. Bonn, Washington D. C., Dublin. October 2011.
  8. ^ "Nepal puts a minimum amount limit on foreign aid and loans". IANS. Retrieved 3 July 2014. 
  9. ^ "EU as Nepal's largest exporter". ktm2day. Retrieved 2011-10-11. 
  10. ^ "Nepali Political parties criticize Indian Hydel Power proposal". IANS. Retrieved 20 July 2014. 
  11. ^ Jones, Peris: When the lights go out. Hydroelectric power and indigenous rights in Nepal. NIBR International Blog 11.03.10
  12. ^

 This article incorporates public domain material from the CIA World Factbook document "2003 edition".

External links

  • Global Economic Prospects: Growth Prospects for South Asia The World Bank, December 13, 2006
  • World Bank Summary Trade Statistics Nepal
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from World Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.