Economy of Nepal


Economic development in Nepal has been complicated and affected by the constant change in political scenarios which has ranged from monarchy to being ruled by the Communist party in 2019. 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 opened the country to economic liberalization leading to economic growth and improvement in living standards than 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 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 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 ; most of the rest is mountainous. Fruits and vegetables, 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 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 transport of supplies caused by a crippling general strike in southern Nepal on 17 February 2008.
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. Nepal was ranked 54th worst of 81 ranked countries on the Global Hunger Index in 2011, between Cambodia and Togo. Nepal's current score of 19.5 is better than in 2010 and much improved than its score of 27.5 in 1990.

Foreign investments and taxation

Huge numbers of Small Foreign Investments come to Nepal via the Non Resident Nepali, who are investing in shopping malls, plazas, real estate, tourism, etc. Nepal has a huge capacity for hydroelectricity. Accordingly, a large number of foreign companies are in line, but political instability has stopped the process at the same time as it is growing on its own.
Nepal has entered into agreements for avoidance of double taxation with 10 countries since 2000. Similarly, it has Investment protection agreements with 5 countries 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.

Imports and exports

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 than imports, 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 from Nepal. Exports to the EU accounted for 46.13 percent of the country's garment exports.
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 United Kingdom, the United States, Japan, Germany, and the Scandinavian 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

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 and the Bhote Koshi Project. 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.
The environmental impact of Nepal's hydroelectric Own calendar 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 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.
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.

Macro-economic trend

This is a chart of trend of gross domestic product of Nepal at market prices by the International Monetary Fund and EconStats with figures in millions of Nepali Rupees.
YearGross domestic product
19603,870
19655,602
19708,768
197516,571
198023,350
198546,586
1990103,415
1995219,174
2000379,488

The following table shows the main economic indicators in 1980–2018.
Year1980198519901995200020052006200720082009201020112012201320142015201620172018
GDP in $
6.02 Bln.9.86 Bln.14.39 Bln.20.90 Bln.28.75 Bln.38.45 Bln.40.97 Bln.43.49 Bln.47.05 Bln.49.56 Bln.52.58 Bln.55.50 Bln.59.23 Bln.62.67 Bln.67.62 Bln.70.62 Bln.71.82 Bln.78.59 Bln.84.37 Bln.
GDP per capita
in $ 		4045907679771,2111,5001,5791,6591,7771,8531,9462,0312,1422,2392,3872,4642,4772,6792,842
GDP growth
−2.3 %6.1 %14.4 %3.5 %6.1 %3.5 %3.4 %3.4 %6.1 %4.5 %4.8 %3.4 %4.8 %4.1 %6.0 %3.3 %0.6 %8.2 %6.7 %
Inflation
9.8 %4.1 %8.9 %7.7 %3.4 %4.5 %8.0 %6.2 %6.7 %12.6 %9.6 %9.6 %8.3 %9.9 %9.0 %7.2 %9.9 %4.5 %4.2 %
Gov. debt
............58 %51 %49 %43 %42 %39 %34 %32 %34 %32 %28 %25 %27 %27 %27.4 %

Statistics

GDP: purchasing power parity - $84.37 Billion
GDP - real growth rate: 21.77%
GDP - per capita: purchasing power parity - $2700
GDP - composition by sector:
agriculture: 17%
industry: 13.5%
services: 60.5%
tourism: 9%
Population below poverty line: 21.6% https://mof.gov.np/uploads/document/file/for%20web_Economic%20Survey%202075%20Full%20Final%20for%20WEB%20_20180914091500.pdf
Household income or consumption by percentage share:
lowest 10%: 3.2%
highest 10%: 29.8%
Inflation rate : 4.5%
Labour force: 4 million
Labor force - by occupation: agriculture 19%, services 69%, industry 12%
Unemployment rate: 3.2%
Budget:
revenues: $5.954 billion
expenditures: $5.974 billion, including capital expenditures of $NA
Industries:
tourism, carpet, textile; small rice, jute, sugar, and oilseed mills; cigarette; cement and brick production
Industrial production growth rate: 10.9% :
Electricity - production: 41,083 GWh
Electricity - production by source:
fossil fuel: 7.5%
hydro: 91.5%
nuclear: 0.3%
other: 0.7%
Available energy:6257.73 GWh
NEA Hydro:2290.78 GWh
NEA Thermal:9.56 GWh
purchase :2331.17 GWh
India :2175.04 GWh
Nepal :1258.94 GWh
Electricity - consumption: 4,776.53 GWh
Electricity - exports: 856 GWh
Electricity - imports: 12 GWh
Oil - production:
Oil - consumption: 2001
Agriculture - products:
Fruits and vegetables, mostly: apples, pears, tomatoes, peaches, nectarines, potatoes, rice, maize, wheat, sugarcane, root crops, milk, and buffalo meat.
Exports: $1.34 billion f.o.b., but does not include unrecorded border trade with India
Exports - commodities: carpets, clothing, leather goods, jute goods, grain
Exports - partners: India 56.6%, US 11.5%, Turkey 4%
Imports: $1.03 billion f.o.b.
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%.
Debt - external: $5.948 billion
Economic aid - recipient: $424 million
Currency: 1 Nepali rupee = 100 paisa
Fiscal year: 16 July - 15 July