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Nepal Main Page

Economy of Nepal

 

 

 

 


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Economy

Terraced farming on the foothills of the Himalayas.

A Rs.500 banknote of The Republic of Nepal. For economical reasons, the watermark on the right still contains a picture of King Gyanendra, obscured by printing a rhododendron, the national flower of Nepal.

Nepal's gross domestic product (GDP) for 2008 was estimated at over US$12 billion (adjusted to Nominal GDP), making it the 115th-largest economy in the world. Agriculture accounts for about 40% of Nepal's GDP, services comprise 41% and industry 22%. Agriculture employs 76% of the workforce, services 18% and manufacturing/craft-based industry 6%. Agricultural produce  mostly grown in the Terai region bordering India  includes tea, rice, corn, sugarcane, root crops, milk, and water buffalo meat. Industry mainly involves the processing of agricultural produce, including jute, sugarcane, tobacco, and grain.

Its workforce of about 10 million suffers from a severe shortage of skilled labour. The spectacular landscape and diverse, exotic cultures of Nepal represent considerable potential for tourism, but growth in this hospitality industry has been stifled by recent political events. The rate of unemployment and underemployment approaches half of the working-age population. Thus many Nepali citizens move to India in search of work; the Gulf countries and Malaysia being new sources of work. Nepal receives US$50 million a year through the Gurkha soldiers who serve in the Indian and British armies and are highly esteemed for their skill and bravery. The total remittance value is worth around US$1 billion, including money sent from the Persian Gulf and Malaysia, who combined employ around 700,000 Nepali citizens.

A long-standing economic agreement underpins a close relationship with India. The country receives foreign aid from India, Japan, the United Kingdom, the United States, the European Union, China, Switzerland, and Scandinavian countries. Poverty is acute; per-capita income is less than US$470. The distribution of wealth among the Nepalis is consistent with that in many developed and developing countries: the highest 10% of households control 39.1% of the national wealth and the lowest 10% control only 2.6%.

The government's budget is about US$1.153 billion, with expenditures of $1.789 billion (FY05/06). The Nepalese rupee has been tied to the Indian Rupee at an exchange rate of 1.6 for many years. Since the loosening of exchange rate controls in the early 1990s, the black market for foreign exchange has all but disappeared. The inflation rate has dropped to 2.9% after a period of higher inflation during the 1990s.

Nepal's exports of mainly carpets, clothing, leather goods, jute goods and grain total $822 million. Import commodities of mainly gold, machinery and equipment, petroleum products and fertilizer total US$2 bn. India (53.7%), the US (17.4%), and Germany (7.1%) are its main export partners. Nepal's import partners include India (47.5%), the United Arab Emirates (11.2%), China (10.7%), Saudi Arabia (4.9%), and Singapore (4%).

Infrastructure

Nepal remains isolated from the world's major land, air and sea transport routes although, within the country, aviation is in a better state, with 48 airports, ten of them with paved runways; flights are frequent and support a sizable traffic. The hilly and mountainous terrain in the northern two-thirds of the country has made the building of roads and other infrastructure difficult and expensive. There were just over 8,500 km (5,282 mi) of paved roads, and one 59-km railway line in the south in 2003. There is only one reliable road route from India to the Kathmandu Valley.

The only practical seaport of entry for goods bound for Kathmandu is Calcutta in India. Internally, the poor state of development of the road system (22 of 75 administrative districts lack road links) makes volume distribution unrealistic. Besides having landlocked, rugged geography, few tangible natural resources and poor infrastructure, the long-running civil war is also a factor in stunting the economic growth.

There is less than one telephone per 19 people. Landline telephone services are not adequate nationwide but are concentrated in cities and district headquarters. Mobile telephony is in a reasonable state in most parts of the country with increased accessibility and affordability; there were around 175,000 Internet connections in 2005. After the imposition of the "state of emergency", intermittent losses of service-signals were reported, but uninterrupted Internet connections have resumed after Nepal's second major people's revolution to overthrow the King's absolute power.

Economy - overview:
Nepal is among the poorest and least developed countries in the world, with almost one-quarter of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for about one-third of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. During the global recession of 2009, remittances from foreign workers abroad increased 47% to $2.8 billion while tourist arrivals only decreased 1% compared to the previous year. Nepal has considerable scope for exploiting its potential in hydropower, with an estimated 42,000 MW of feasible capacity, but political instability hampers foreign investment. Additional challenges to Nepal's growth include its technological backwardness, landlocked geographic location, civil strife and labor unrest, and its susceptibility to natural disaster.
GDP (purchasing power parity):
$33.25 billion (2009 est.)
country comparison to the world: 102
$31.76 billion (2008 est.)
$30.16 billion (2007 est.)
note: data are in 2009 US dollars
GDP (official exchange rate):
$12.47 billion (2009 est.)
GDP - real growth rate:
4.7% (2009 est.)
country comparison to the world: 29
5.3% (2008 est.)
3.3% (2007 est.)
GDP - per capita (PPP):
$1,200 (2009 est.)
country comparison to the world: 207
$1,100 (2008 est.)
$1,100 (2007 est.)
note: data are in 2009 US dollars
GDP - composition by sector:
agriculture: 35%
industry: 16%
services: 49% (FY09 est.)
Labor force:
18 million
country comparison to the world: 33
note: severe lack of skilled labor (2009 est.)
Labor force - by occupation:
agriculture: 76%
industry: 6%
services: 18% (2004 est.)
Unemployment rate:
46% (2008 est.)
country comparison to the world: 190
42% (2004 est.)
Population below poverty line:
24.7% (2008)
Household income or consumption by percentage share:
lowest 10%: 6%
highest 10%: 40.6% (2008)
Distribution of family income - Gini index:
47.2 (2008)
country comparison to the world: 34
36.7 (1996)
Budget:
revenues: $2.3 billion
expenditures: $3.7 billion (FY10)
Inflation rate (consumer prices):
13.2% (September 2009 est.)
country comparison to the world: 210
7.7% (2008 est.)
Central bank discount rate:
6.5% (31 December 2009)
country comparison to the world: 64
6.5% (31 December 2008)
Commercial bank prime lending rate:
NA%
Stock of money:
$2.53 billion (31 July 2009)
country comparison to the world: 86
$2.106 billion (31 December 2008)
Stock of quasi money:
$7.49 billion (1 April 2009)
country comparison to the world: 71
$6.99 billion (31 December 2008)
Stock of domestic credit:
$6.11 billion (31 December 2009 est.)
country comparison to the world: 86
$5.556 billion (31 December 2008)
Market value of publicly traded shares:
$5.721 billion (31 December 2009 est.)
country comparison to the world: 81
$4.894 billion (31 December 2008)
$4.909 billion (31 December 2007)
Agriculture - products:
pulses, rice, corn, wheat, sugarcane, jute, root crops; milk, water buffalo meat
Industries:
tourism, carpets, textiles; small rice, jute, sugar, and oilseed mills; cigarettes, cement and brick production
Industrial production growth rate:
1.8% (FY08)
country comparison to the world: 55
Electricity - production:
2.6 billion kWh (2009 est.)
country comparison to the world: 128
Electricity - consumption:
2.243 billion kWh (2007 est.)
country comparison to the world: 132
Electricity - exports:
0 kWh (2009 est.)
Electricity - imports:
213 million kWh (2008 est.)
Oil - production:
0 bbl/day (2009 est.)
country comparison to the world: 156
Oil - consumption:
18,000 bbl/day (2008 est.)
country comparison to the world: 129
Oil - exports:
0 bbl/day (2007 est.)
country comparison to the world: 160
Oil - imports:
16,920 bbl/day (2007 est.)
country comparison to the world: 120
Oil - proved reserves:
0 bbl (1 January 2009 est.)
country comparison to the world: 152
Natural gas - production:
0 cu m (2009 est.)
country comparison to the world: 159
Natural gas - consumption:
0 cu m (2009 est.)
country comparison to the world: 160
Natural gas - exports:
0 cu m (2009 est.)
country comparison to the world: 87
Natural gas - imports:
0 cu m (2009 est.)
country comparison to the world: 150
Natural gas - proved reserves:
0 cu m (1 January 2009 est.)
country comparison to the world: 153
Current account balance:
$537 million (2009)
country comparison to the world: 46
$241 million (2008)
Exports:
$907 million (2008)
country comparison to the world: 153
$868 million (2008)
Exports - commodities:
clothing, pulses, carpets, textiles, juice, pashima, jute goods
Exports - partners:
India 54.8%, US 9.7%, Bangladesh 9.2%, Germany 4.7% (2008)
Imports:
$3.626 billion (2009)
country comparison to the world: 129
$3.229 billion (2008)
Imports - commodities:
petroleum products, machinery and equipment, gold, electrical goods, medicine
Imports - partners:
India 55.2%, China 13.4%, Singapore 2% (2008)
Debt - external:
$4.5 billion (2009)
country comparison to the world: 105
$3.285 billion (2008)
Stock of direct foreign investment - at home:
$NA
Stock of direct foreign investment - abroad:
$NA
Exchange rates:
Nepalese rupees (NPR) per US dollar - 77.44 (2009), 65.21 (2008), 70.35 (2007), 72.446 (2006), 72.16 (2005)

 

 

 
 
 
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