Nepal is a land-locked developing country located between China in the North and India in the East, West and South. As an agriculture-based economy, Nepalese economy has not been able to perform to meet the rising expectations of the people. The average growth rate of country for the last ten years has stood to 3.7 percentages only, and sometimes, even below that point. With a GDP of around Rs. 170 billion (increasing at an average of 10 percent per year, Nepal has been attempting hard to reduce poverty and bringing in socio-economic transformation of the country.  The major contributors of the Nepalese economy such as agriculture, industry and service sectors have been performing to the lower marks due to the prolonged political transition and instability in the government. The production and productivity of all the sectors are to be enhanced through concerted efforts in the major priorities of the country.

Lower economic growth rate, increasing trade deficit, reduced level of domestic production and productivity and inability to contain inflation rate within the desired limit, exacerbating industrial environment, sloth in private sector investment,  energy crisis and lower credit expansions of banks have been attributed for the lower economic performance of the country. Side by side, the number of people below poverty line has been decreasing, per capita income of the Nepalese ciitizens has been increasing, living standard of people is improving, access to health, education, transportation and communication has been significantly improved in recent times.

The mainstay of the Nepalese economy
Agriculture is contributing 34.3 percentage while the non-agriculture sector is contributing around 64.3 percent in the economy. The industrial sector is contributing merely 6.2 percent and education 5.4 percent. Thus, the Government’s effort to expand the contribution of non-agricultural sector to the GDP has got momentum but the overall contribution of this sector is still lethargic. The government has implemented 13th Three Year Plan of the country with a view to engage in the multi-faceted development of the country through increased investment in energy, agriculture, education, health, drinking water, sanitation, tourism, environment protection and climate change, infrastructure development, trade and good governance.

Being one of the 49 least developed countries and one of the 34 least developed land-locked developing countries, Nepal has been exerting its efforts to change its socio-economic face. Pursuant to this effort and commitment, the Government has recently decided to graduate the country from the LDC to the developing country by 2022. For the fulfillment of the commitment, the Government has geared up its concentration towards focused economic development. Currently, around 24 percent of Nepalese population lives below the poverty line. The Government is committed to transform the country through the introduction of commercialized and scientific pattern of farming in agriculture, proper irrigation facility, all-weather farming, self-employment schemes, and proper skill training to the farmers. Similarly, the Government has planned to revive sick industries and create proper investment climate, industrial environment and industrial relations in the existing industries. Trade deficit has remained one of the major challenges of Nepalese economy. It is easier said than done. Reducing trade deficit is not an easy task. The Government has adopted the policy of export promotion and import substitution in trade. It has identified major 19 Nepalese products as major products having comparative advantage if exported to the foreign markets. The contribution of services sector has increased in the national GDP together with opening of the economy in the 1990s. Private sector is readily engaged in services sectors such as hotels, restaurants, tourism and so on. The Government has introduced various administrative, legal, infrastructural and policy initiatives to cope with the changing international economic environment for making the country’s economy globally competitive and integrating the country’s economy with international markets.

The major exportable items include readymade garments & apparels, scarf & pashminas, woolen carpets, vegetable oils and seeds, noodles, pulses, tea, coffee, jutes, handicrafts, cardamom, handmade paper, leather and leather goods, food grains, apparels, clothing and textile items, beverage and mineral water, gold and silver jewelry, PVC and plastic products, paper and paper products, live animal and animal products, furniture, household articles and wooden products, and electric, electronic and mechanical products. The 19 products identified by National Trade Integration Strategy, 2010 includes; cardamom, honey, lentils, tea, ginger, noodles, medicinal herbs/essential oils, hand-made paper, silver jewelry, iron and steel, pashmina, wool products, tourism, labour service, information technology, health services, education, engineering, hydro-electricity, transit trade services, sugar, cement, dairy products and transformer under the broad headings of agro-food, craft and industrial goods, services and other potential goods as the major exportable products having comparative advantage in addition to the traditionally established products. Import largely includes petroleum products, pharmaceuticals, textiles and fabrics, fertilizer, raw materials for manufacturing units and machinery and equipment. India has been the major trading partner, which alone holds almost 67.1 percent of Nepalese import and 64.8 percent of export. Recently, the Government has concentrated its efforts to diversify both the export products and markets.

Nepal is seeking increased flow of foreign investment, foreign direct investment (FDI) and technical cooperation for the development of priority projects in the country aimed at bringing in socio-economic development and improved rate of economic growth. The potential sector for investment in Nepal include energy/hydropower, tourism, manufacturing, agriculture and dairy development, mines and minerals, service (including hotels, resorts and restaurants), ICT, infrastructure development (road, ropway, cable car), airlines industry, telecommunication, media and advertising, pharmaceuticals and chemical industries, textile and garment, consultancy and management services, film / cargo industry, education (medical, engineering, management), construction and insurance and reinsurance.

The Government has taken appreciative initiatives for attracting foreign investment and FDI. Nepal Investment Board has been established to handle larger scale investments coming into Nepal for mega projects. The Board has identified Arun III hydro power project (900 MW), chemical fertilizer plants, five star hotels, infrastructure development bank, Kathmandu Metro Railway, Kathmandu valley solid waste management, Kathmandu-terai fast track, Nijgadh airport, North-South corridor, Tamakoshi III hydro power project (650 megawatts) and Tribhuvan International Airport (TIA) upgradation project, Pashupati Area Development, Lumbini Aread Development,President Chure Hill Conservation and Veri Babai Diversion project as the priority projects for the Board.

Investment of up to 100 percent is allowed to the foreign individuals or firms except in some domestic, health and environment related and security sensitive industries as prescribed in the annex of Industrial Policy 2010. Nepalese nationals are not allowed to make investment in foreign countries.