Economy of Nepal


Economy of Nepal
Economy of Nepal
Currency 1 Nepalese Rupee (NPR) = 100 paisa
Fiscal year 16 July - 15 July
Trade organizations WTO
Statistics
GDP $35.81 billion (2010 est.)
GDP growth 4.6% (2010 est.)
GDP per capita $1,200 (2010 est.)
GDP by sector agriculture (40%), industry (20%), services (40%) (2002 est.)
Inflation (CPI) 8.6% (September 2010 est.), 10.6% (October 2011 est. source: myrepublica.com)
Population
below poverty line
24.7% (2008 est.)
Main industries Tourism, garment, food and beverages, metal manufactures, herbs.
Ease of Doing Business Rank 107th[1]
External
Exports $849 million (2009) f.o.b.; note - does not include unrecorded border trade with India (2008)
Export goods carpets, clothing, leather goods, jute goods, grain, herbs, tea
Main export partners European Union 42.5%, US 8%, Bangladesh 6.04%, Germany 5% (2009
Imports $5.26 billion f.o.b. (2008)
Import goods Petroleum Products, Gold, Machinery
Main import partners India 57%, China 13% (2009)
Public finances
Revenues $3 billion (FY 2010)
Expenses $4.6 billion (FY 2010)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars
A 500 rupee banknote
Terraced farming and a child.

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 is committed to a program of economic liberalization.

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 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 remains Nepal's principal economic activity, employing 80% of the population and providing 37% of GDP. 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 has several campuses. Please see Education in Nepal for further details. 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 February 17, 2008.[2]

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 in 2011, between Cambodia and Togo. 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.[3]

Contents

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 protection 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 Union 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".[4]

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, the United States, Japan, Germany, and the Scandinavian countries. Several multilateral organizations, 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 8,850 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 (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" 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 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[when?] empowered by Nepal's ratification of ILO Convention 169.[5]

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.

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

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, sugar, and oilseed mills; cigarette; cement 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 barrels per day (0 m3/d) (2001 est.)

Oil - consumption: 16,000 barrels per day (2,500 m3/d) 2001

Agriculture - products: rice, maize, wheat, sugarcane, root crops; milk, domestic buffalo meat

Exports: $568 million f.o.b., but does not include unrecorded border trade with India (2002 est.)

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

Exports - partners: India 50.5%, US 26%, Germany 6.6% (2003 est.)

Imports: $1.419 billion f.o.b. (2002 est.)

Imports - commodities: gold, machinery and equipment, petroleum products, fertilizer

Imports - partners: India 82.9%, China 13.5%, UAE 2.6%, Singapore 2.1%, Saudi Arabia 1.2%. Debt - external: $2.7 billion (2001)

Economic aid - recipient: $424 million (FY 00/01)

Currency: 1 Nepalese rupee (NPR) = 100 paisa

Exchange rates: Nepalese rupees (NPR) per USD 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

References

 This article incorporates public domain material from the CIA World Factbook document "2003 edition".

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