Economy of Nepal

Foreign investments and taxation

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.

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 (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.

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, 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

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.

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.

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.

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 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 estimated by the International Monetary Fund and EconStats with figures in millions of Nepali Rupees.

The following table shows the main economic indicators in 1980–2024.

Statistics

GDP: purchasing power parity - $84.37 Billion (2018 est.)

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)

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.)

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 oilbbl/d (2001 est.)

Oil - consumption: 1600 oilbbl/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

References

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