Economy of Nepal
Encyclopedia
Nepal
Nepal , officially the Federal Democratic Republic of Nepal, is a landlocked sovereign state located in South Asia. It is located in the Himalayas and bordered to the north by the People's Republic of China, and to the south, east, and west by the Republic of India...
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
Five-year plans of Nepal
Five-Year Plans of Nepal generally strove to increase output and employment; develop the infrastructure; attain economic stability; promote industry, commerce, and international trade; establish administrative and public service institutions to support economic development; and introduce...
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
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
remains Nepal's principal economic activity, employing 80% of the population and providing 37% of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. 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.
Economic development in social services and infrastructure has not made dramatic progress due to GDP dependency on India. A countrywide primary education system is under development, and Tribhuvan University
Tribhuvan University
Tribhuvan University [त्रिभुवन विश्वविध्यालय] is a public university located in Kirtipur, Kathmandu, Nepal. Established in 1959, TU is the oldest of the five universities in Nepal...
has several campuses. Please see Education in Nepal
Education in Nepal
Modern education in Nepal began with the establishment of the first school in 1853; this school was only for the members of the ruling families and their courtiers. Schooling for the general people began only after 1951 when a popular movement ended the autocratic Rana family regime and initiated a...
for further details. Although eradication efforts continue, malaria
Malaria
Malaria is a mosquito-borne infectious disease of humans and other animals caused by eukaryotic protists of the genus Plasmodium. The disease results from the multiplication of Plasmodium parasites within red blood cells, causing symptoms that typically include fever and headache, in severe cases...
had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
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.
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.
Nepal was ranked 54th worst of 81 ranked countries (those with GHI > 5.0) on the Global Hunger Index
Global Hunger Index
The Global Hunger Index is a multidimensional statistical tool used to describe the state of countries’ hunger situation. The GHI measures progress and failures in the global fight against hunger...
in 2011, between Cambodia
Cambodia
Cambodia , officially known as the Kingdom of Cambodia, is a country located in the southern portion of the Indochina Peninsula in Southeast Asia...
and Togo
Togo
Togo, officially the Togolese Republic , is a country in West Africa bordered by Ghana to the west, Benin to the east and Burkina Faso to the north. It extends south to the Gulf of Guinea, on which the capital Lomé is located. Togo covers an area of approximately with a population of approximately...
. 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.
Foreign Investments and Taxation
Nepal enterred into agreement for avoidance of double taxation (all in credit method) with 10 countries (PSRD) since 1987. Similarly, it has Investment protectionInvestment protection
Investment protection is a broad economic term referring to any form of guarantee or insurance that investments made will not be lost, this may be through fraud or otherwise...
agreement with 5 countries (PSRD) since 1983.
Imports/Exports
Nepal's merchandise trade balance has improved somewhat since 2000 with the growth of the carpet and garment industries. In FY 2000-01 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 UnionEuropean Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
has become the largest buyer of Nepali ready made garments (RMG). Exports to the EU accounted for "46.13 percent of the country’s total 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 situation and increase international reserves. Nepal receives substantial amounts of external assistance from the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, and the Scandinavian
Scandinavian
Scandinavian refers to a resident of or something associated with Scandinavia, including:* Scandinavians, a Nordic ethnic group* Scandinavian Airlines , an aviation corporation* Scandinavian Defense, a chess opening...
countries. Several multilateral organizations, such as the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, the Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
, 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
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
and in May 2000 began direct negotiations on its accession.
Resources
Progress has been made in exploiting Nepal's natural resources, tourismTourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
and hydroelectricity
Hydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
. With eight of the world's 10 highest mountain peaks, including Mount Everest
Mount Everest
Mount Everest is the world's highest mountain, with a peak at above sea level. It is located in the Mahalangur section of the Himalayas. The international boundary runs across the precise summit point...
at 8,850 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
Bhote Koshi Project
The Bhote Koshi Project is a hydroelectric power plant in Nepal. It was constructed from 1997 to 2000 and started operating in January 2001. The project cost about US$ 98 million, the majority of which was provided by Panda Energy International, making it the largest American investor in Nepal.The...
(36 MW).The project is still undergoing and has dependancy on India to take the further steps.
The environmental impact of Nepal's hydroelectric projects has been limited by the fact that most are "run-of-the-river
Run-of-the-river hydroelectricity
Run-of-the-river hydroelectricity is a type of hydroelectric generation whereby a considerably smaller water storage called pondage or none is used to supply a power station. Run-of-the-river power plants are classified as with or without pondage...
" with only one storage project undertaken to date. The largest under active consideration is the private sector West Seti (750 MW) storage project which is dedicated to exports. Negotiations with India for a power purchase agreement have been underway for several years, but agreement on pricing and capital 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
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
surveys have found small deposits of limestone
Limestone
Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera....
, magnesite
Magnesite
Magnesite is magnesium carbonate, MgCO3. Iron substitutes for magnesium with a complete solution series with siderite, FeCO3. Calcium, manganese, cobalt, and nickel may also occur in small amounts...
, zinc
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...
, copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
, iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...
, mica
Mica
The mica group of sheet silicate minerals includes several closely related materials having highly perfect basal cleavage. All are monoclinic, with a tendency towards pseudohexagonal crystals, and are similar in chemical composition...
, lead
Lead
Lead is a main-group element in the carbon group with the symbol Pb and atomic number 82. Lead is a soft, malleable poor metal. It is also counted as one of the heavy metals. Metallic lead has a bluish-white color after being freshly cut, but it soon tarnishes to a dull grayish color when exposed...
, and cobalt
Cobalt
Cobalt is a chemical element with symbol Co and atomic number 27. It is found naturally only in chemically combined form. The free element, produced by reductive smelting, is a hard, lustrous, silver-gray metal....
.
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 Nepalese Rupees.{| class="wikitable"
|-
! 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
|- 2005 900,000
Statistics
GDP: purchasing power parity - $31.09 billion (2008 est.)GDP - real growth rate: 5.6% (2008 est.)
GDP - per capita: purchasing power parity - $1,100 (2008 est.)
GDP - composition by sector:
agriculture: 40%
industry: 20%
services: 40% (2002 est.)
Population below poverty line: 33% (2007)
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: 47% (2001 est.)
Budget:
revenues: $665 million
expenditures: $1.1 billion, including capital expenditures of $NA (FY 99/00 est.)
Industries:
tourism, carpet, textile; small rice, jute
Jute
Jute is a long, soft, shiny vegetable fibre that can be spun into coarse, strong threads. It is produced from plants in the genus Corchorus, which has been classified in the family Tiliaceae, or more recently in Malvaceae....
, sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, and oilseed mills; cigarette
Cigarette
A cigarette is a small roll of finely cut tobacco leaves wrapped in a cylinder of thin paper for smoking. The cigarette is ignited at one end and allowed to smoulder; its smoke is inhaled from the other end, which is held in or to the mouth and in some cases a cigarette holder may be used as well...
; cement
Cement
In the most general sense of the word, a cement is a binder, a substance that sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term opus caementicium to describe masonry resembling modern concrete that was made from crushed...
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 oilbbl/d (2001 est.)
Oil - consumption: 16000 oilbbl/d 2001
Agriculture - products:
rice
Rice
Rice is the seed of the monocot plants Oryza sativa or Oryza glaberrima . As a cereal grain, it is the most important staple food for a large part of the world's human population, especially in East Asia, Southeast Asia, South Asia, the Middle East, and the West Indies...
, maize
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...
, sugarcane
Sugarcane
Sugarcane refers to any of six to 37 species of tall perennial grasses of the genus Saccharum . Native to the warm temperate to tropical regions of South Asia, they have stout, jointed, fibrous stalks that are rich in sugar, and measure two to six metres tall...
, root crops; milk
Milk
Milk is a white liquid produced by the mammary glands of mammals. It is the primary source of nutrition for young mammals before they are able to digest other types of food. Early-lactation milk contains colostrum, which carries the mother's antibodies to the baby and can reduce the risk of many...
, domestic buffalo meat
Exports: $568 million f.o.b., but does not include unrecorded border trade with India (2002 est.)
Exports - commodities: carpet
Carpet
A carpet is a textile floor covering consisting of an upper layer of "pile" attached to a backing. The pile is generally either made from wool or a manmade fibre such as polypropylene,nylon or polyester and usually consists of twisted tufts which are often heat-treated to maintain their...
s, clothing, leather
Leather
Leather is a durable and flexible material created via the tanning of putrescible animal rawhide and skin, primarily cattlehide. It can be produced through different manufacturing processes, ranging from cottage industry to heavy industry.-Forms:...
goods, jute
Jute
Jute is a long, soft, shiny vegetable fibre that can be spun into coarse, strong threads. It is produced from plants in the genus Corchorus, which has been classified in the family Tiliaceae, or more recently in Malvaceae....
goods, grain
Cereal
Cereals are grasses cultivated for the edible components of their grain , composed of the endosperm, germ, and bran...
Exports - partners: India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
50.5%, US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
26%, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
6.6% (2003 est.)
Imports: $1.419 billion f.o.b. (2002 est.)
Imports - commodities: gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, machinery and equipment, petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
products, fertilizer
Imports - partners: India 82.9%, China 13.5%, UAE
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
2.6%, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
2.1%, Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
1.2%.
Debt - external: $2.7 billion (2001)
Economic aid - recipient: $424 million (FY 00/01)
Currency: 1 Nepalese rupee
Rupee
The rupee is the common name for the monetary unit of account in India, Sri Lanka, Nepal, Pakistan, Mauritius, Seychelles, Maldives, and formerly in Burma, and Afghanistan. Historically, the first currency called "rupee" was introduced in the 16th century...
(NPR) = 100 paisa
Exchange rates:
Nepalese rupees (NPR) per USD
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
1 – 64.20 (2007), 78.88 (2002), 74.95 (2001), 68.253 (1999), 65.976 (1998), 58.010 (1997), 56.692 (1996), 51.890 (1995)
F year: 16 July - 15 July
External links
- Global Economic Prospects: Growth Prospects for South Asia The World Bank, December 13, 2006