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Economy of Nepal

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Economy of Nepal
Kathmandu, the financial centre and capital of Nepal
CurrencyNepalese rupee (NPR, रू)
16 July - 15 July
Trade organizations
WTO and SAFTA
Country group
Statistics
PopulationIncrease 29,164,578 (2021)[3]
GDP
  • Increase $43.53 billion (nominal, 2024 est)[4]
  • Increase $163.82 billion (PPP, 2023 est)[4]
GDP growth
  • Increase4.2% (FY2020-21)
  • Increase5.8% (FY2021-22)
  • Increase4.4% (FY2022-23) [5]
GDP per capita
  • Increase $1,489 (nominal, 2023 est.)[4]
  • Increase $5,321 (PPP, 2023 est.)[4]
GDP by sector
4.10% (September 2024)[7]
Population below poverty line
32.8 medium (2010)[10]
  • Increase 0.601

medium (2023)[11] (142nd)

Labour force
  • Decrease 16,016,973 (2020)[13]
  • semi skilled labor[6]
  • 76.2% employment rate (2020)[14]
Labour force by occupation
  • agriculture: 43.1%
  • industry: 21.24%
  • services: 35.66%
  • (2020)[6]
Unemployment12.6% (2022)[6]
Main industries
tourism, carpets, textiles; small rice, jute, sugar, and oilseed mills; cigarettes, cement and brick production[6]
External
ExportsDecrease $1.13 billion (2023-24)[6]
Export goods
clothing, pulses, carpets, textiles, juice, jute goods[6]
Main export partners
  •  India(-) 67.7% (2023-24)
  •  China(+) 1.7% (2023-24)
  • Others(-) 30.6% (2023-24)

[6]

ImportsPositive decrease $11.8 billion (2023-24)[6]
Import goods
petroleum products, machinery and equipment, gold, electrical goods, medicine[6]
Main import partners
  •  India(+) 62.6%(2023-24)
  •  China(-) 18.8%(2023-24)
  • Others(-) 18.7% (2023-24)

[6]

FDI stock
  • $20 billion (31 July 2013 est.)[6]
  • Abroad: NA[6]
Positive decrease $11 billion (31 December 2020)[6]
Public finances
Negative increase 41.38% of GDP (2021/22)[15]
−1% (of GDP) (2022 est.)[6]
Revenues10.925 billion (2017 est.)[6]
Expenses15.945 billion (2017 est.)[6]
Increase $15.58 billion (September 2024)[16]
All values, unless otherwise stated, are in US dollars.


The economy of Nepal is a developing category and is largely dependent on agriculture and remittances.[6] Until the mid-20th century Nepal was an isolated pre-industrial society, which 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. The country was opened to economic liberalization, leading to economic growth and improvement in living standards when compared to the past. The biggest challenges faced by the country in achieving higher economic development are the frequent changes in political leadership, as well as corruption. Nepal has consistently been ranked as one of the poorest countries in the world.[17][18][19]

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 privatised. Foreign aid to Nepal accounts for more than half of the development budget. Government priorities over the years have been result in the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasised.

Agriculture remains Nepal's principal economic activity, employing about 65% of the population and providing 31.7% of GDP. Only about 20% of the total area is cultivable; another 40.7% is forested (i.e., covered by shrubs, pastureland and forest); most of the rest is mountainous. Fruits and vegetables (apples, pears, tomatoes, various salad greens, peach, nectarine, potatoes), as well as 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 remittances (9.1%) 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. 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 supplies, due to a crippling general strike in southern Nepal on 17 February 2008.[20]

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. Together, they account for approximately 70% of the country's 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 a much less desirous value in recent years.[21] In the 2021 Global Hunger Index, Nepal ranks 76th out of the 116 countries with sufficient data to calculate 2021 GHI scores. With a score of 19.1, Nepal has a level of hunger that is moderate.[22] Nepal has the worst road infrastructure in Asia.[23]

Foreign investments and taxation

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Huge numbers of Small Foreign Investments come to Nepal via the Non Resident Nepali, who are investing in many sectors. Nepal has a huge potential for hydroelectricity. Accordingly, a large number of foreign companies are willing to invest in Nepal, but political instability has stopped the process. Nepal has entered into agreements for avoidance of double taxation (all in credit method) with 10 countries (PSRD) since 2000. Similarly, it has Investment protection agreements with 5 countries (PSRD) since 1983. In 2014, Nepal restricted the Foreign aid by setting a minimum limit for foreign grants, soft and commercial loans from its development partners.[24]

Imports and exports

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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; fruits and vegetables (mostly apples, pears, tomatoes, various salads, peach, nectarine, potatoes, rice) from Nepal. Exports to the EU accounted for 46.13 percent of the country's garment exports.[25]

The annual monsoon rain 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 United Kingdom,[26][27][28] the United States, Japan, Germany, and the Nordic countries.

Several multilateral organisations such as the World Bank, the Asian Development Bank, and the UN Development Programme also provide assistance. In June 1998, Nepal submitted its memorandum on a foreign trade regime to the World Trade Organization and in May 2000 began direct negotiations on its accession.

Resources

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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 8,848.86 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.

Upper Tamakoshi hydropower, biggest hydropower in Nepal.
Upper Tamakoshi hydropower, biggest hydropower in Nepal.
Kulekhani dam also known as "Indra sarobar"or "Kulekhani Reservoir" combinely producing 106 MW, in Makwanpur, Nepal
Middle Marsyangdi Hydropower Station, producing 70 MW. Nepal has significant potential to generate hydropower, which it plans to export across South Asia.

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 2500 MW and increasing.[29]

The environmental impact of Nepal's hydroelectric Own calendar (Bikram Sambat) New year in mid- April 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 Dam (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 fulfilment against demand. As of June 2022 surplus electricity up to 364 MWp by Nepal is exported to India.[30]

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. Coal mining is also done with 11522 tones produced in 2018 alone.

The development of hydroelectric power projects also cause some tension with local indigenous groups, recently[when?] empowered by Nepal's ratification of ILO Convention 169.[31]

Macro-economic trend

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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 Nepali Rupees.[citation needed]

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

The following table shows the main economic indicators in 1980–2018.[32]

Year GDP (in bil. US$ PPP) GDP per capita (in US$ PPP) GDP (in bil. US$ nominal) GDP growth (real) Inflation (in Percent) Government debt (in % of GDP)
1980 6.0 404 2.3 −2.3 % 9.8 % ...
1985 9.9 590 3.2 6.1 % 4.1 % ...
1990 14.4 767 4.4 14.4 % 8.9 % ...
1995 20.9 977 5.4 3.5 % 7.7 % ...
2000 28.8 1,211 6.5 6.1 % 3.4 % 58 %
2005 38.5 1,500 9.3 3.5 % 4.5 % 51 %
2006 41.0 1,579 10.3 3.4 % 8.0 % 49 %
2007 43.5 1,659 11.8 3.4 % 6.2 % 43 %
2008 47.1 1,777 14.3 6.1 % 6.7 % 42 %
2009 49.6 1,853 14.7 4.5 % 12.6 % 39 %
2010 52.6 1,946 18.3 4.8 % 9.6 % 34 %
2011 55.5 2,031 21.7 3.4 % 9.6 % 32 %
2012 59.2 2,142 21.7 4.8 % 8.3 % 34 %
2013 62.7 2,239 22.2 4.1 % 9.9 % 32 %
2014 67.6 2,387 22.7 6.0 % 9.0 % 28 %
2015 70.6 2,464 24.4 3.3 % 7.2 % 25 %
2016 71.8 2,477 24.5 0.6 % 9.9 % 27 %
2017 78.6 2,679 29.0 8.2 % 4.5 % 27.4 %

Statistics

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GDP: purchasing power parity - $84.37 Billion (2018 est.)[33][dubious – discuss]

GDP - real growth rate: 21.77% (2017)

GDP - per capita: purchasing power parity (current international $) - $2700 (2017 est.) GDP - composition by sector:
agriculture: 17%
industry: 13.5%
services: 60.5% (2017 est.)
tourism: 9%

Population below poverty line: 25.6% (2017/2018)[34]

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

Inflation rate (consumer prices): 4.5% (2017)

Labour force: 4 million (2016 est.) [citation needed]

Labor force - by occupation: agriculture 19%, services 69%, industry 12% (2014 est.)

Unemployment rate: 1.47% (2017 est.)

Budget:
revenues: $5.954 billion
expenditures: $5.974 billion, including capital expenditures of $NA (2017 est.)

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

Industrial production growth rate: 10.9% (2017 est.):

Electricity - production: 41,083 GWh (2017)

Electricity - production by source:
fossil fuel: 7.5%
hydro: 91.5%
nuclear: 0.3%
other: 0.7% (2001)

Available energy:6957.73 GWh (2017) NEA Hydro:2290.78 GWh (2014) NEA Thermal:9.56 GWh (2014) purchase (total):2331.17 GWh (2014) India (purchase):2175.04 GWh (2017) Nepal (IPP):1258.94 GWh (2014)

Electricity - consumption: 4,776.53 GWh (2017)

Electricity - exports: 856 GWh (2001) Electricity - imports: 12 GWh (2001)

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

Oil - consumption: 1,600 barrels per day (250 m3/d) 2001

Agriculture - products: Fruits and vegetables, mostly: apples, pears, tomatoes, peaches, nectarines, potatoes, rice, maize, wheat, sugarcane, root crops, milk, and buffalo meat.

Exports: $1.29 billion f.o.b., but does not include unrecorded border trade with India (2020 est.)

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

Exports - partners: India 56.6%, US 11.5%, Turkey 9.2% (2016 est.)

Imports: $1.6 billion f.o.b. (2021 est.)

Imports - commodities: gold, machinery and equipment, petroleum products, electrical goods, medicine

Imports - partners: India 70.1%, China 10.3%, UAE 2.6%, Singapore 2.1%, Saudi Arabia 1.2%. (2016 est.)

Debt - external: $9.1 billion (2022 est.)

Economic aid - recipient: $2 billion (FY 2019/20)

Currency: 1 Nepali rupee (NPR) = 100 paisa

Fiscal year: 16 July - 15 July

See also

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References

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  1. ^ "World Economic Outlook Database, April 2019". IMF.org. International Monetary Fund. Retrieved 29 September 2019.
  2. ^ "World Bank Country and Lending Groups". datahelpdesk.worldbank.org. World Bank. Retrieved 1 July 2020.
  3. ^ "Population, total - Nepal". Central_Bureau_of_Statistics_(Nepal). 24 March 2023. Retrieved 29 March 2023.
  4. ^ a b c d "World Economic Outlook Database, April 2021". IMF.org. International Monetary Fund. Retrieved 10 April 2021.
  5. ^ "International Monetary Fund". www.img.org. International Monetary Fund. Retrieved 22 May 2023.
  6. ^ a b c d e f g h i j k l m n o p q r "The World Factbook". CIA.gov. Central Intelligence Agency. Retrieved 1 November 2020.
  7. ^ "Nepal's September Inflation" (PDF). Retrieved 26 September 2024.
  8. ^ "Poverty headcount ratio at national poverty lines (% of population) - Nepal". xinhuanet.net. Xinhuanet. Retrieved 18 January 2020.
  9. ^ "Poverty headcount ratio at $3.20 a day (2011 PPP) (% of population) - Nepal". data.worldbank.org. World Bank. Retrieved 1 July 2020.
  10. ^ "GINI index (World Bank estimate)". data.worldbank.org. World Bank. Retrieved 25 January 2019.
  11. ^ "Human Development Index (HDI)". hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Retrieved 11 December 2019.
  12. ^ "Inequality-adjusted HDI (IHDI)". hdr.undp.org. UNDP. Retrieved 22 May 2020.
  13. ^ "Labor force, total". World Bank. Retrieved 2 November 2019.
  14. ^ "Employment to population ratio, 15+, total (%) (national estimate)". World Bank. Retrieved 14 September 2019.
  15. ^ "Nepal's Debt". Retrieved 1 January 2023.
  16. ^ "Nepal's Forex Reserves" (PDF). Retrieved 26 September 2024.
  17. ^ "Climbing Higher: Toward a Middle-Income Nepal".
  18. ^ "10 Causes of Poverty in Nepal - Friends of WPC Nepal". 29 May 2020.
  19. ^ "Poverty in Nepal, Hunger and food shortages, INF".
  20. ^ Kathmandu nearly out of fuel, Nepal says. CNN. 17 February 2008. Retrieved 2008-04-13.
  21. ^ Cost of Living Index in Nepal - Statistics & Graphs of Nepalese Citizen's Economic Power. Retrieved 10 January 2014.
  22. ^ "Nepal". Global Hunger Index (GHI) - peer-reviewed annual publication designed to comprehensively measure and track hunger at the global, regional, and country levels. Retrieved 27 May 2022.
  23. ^ "Best and worst Asian countries for road quality". 22 February 2018.
  24. ^ "Nepal puts a minimum amount limit on foreign aid and loans". IANS. news.biharprabha.com. Retrieved 3 July 2014.
  25. ^ "EU as Nepal's largest exporter". ktm2day. 11 October 2011. Retrieved 11 October 2011.
  26. ^ "UK should cut aid to Nepal if "endemic" corruption persists: report". Reuters. 27 March 2015. Retrieved 16 May 2015.
  27. ^ "DFID's bilateral programme in Nepal". The International Development Committee of the House of Commons. 27 March 2015. Retrieved 17 May 2015.
  28. ^ "A Conversation with Departing Nepal Chief of the UK Aid Agency". United We Blog! for a Democratic Nepal. 15 June 2013. Retrieved 16 May 2015.
  29. ^ "Nepal's Electricity".
  30. ^ "Nepal starts exporting surplus electricity to India". english.onlinekhabar.com. 2 June 2022. Retrieved 13 June 2022.
  31. ^ Jones, Peris: When the lights go out. Hydroelectric power and indigenous rights in Nepal Archived 30 April 2011 at the Wayback Machine. NIBR International Blog 11.03.10
  32. ^ "Report for Selected Countries and Subjects". Retrieved 30 August 2018.
  33. ^ "Nepal Economy Profile 2019". www.indexmundi.com.
  34. ^ https://mof.gov.np/uploads/document/file/for%20web_Economic%20Survey%202075%20Full%20Final%20for%20WEB%20_20180914091500.pdf [bare URL PDF]

Public Domain This article incorporates public domain material from The World Factbook (2024 ed.). CIA. (Archived 2003 edition.)

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