Economy of Nepal
The United Nations (UN) classifies Nepal as one of the least
developed countries in the world.
The country’s gross domestic product
(GDP) was $5.5 billion in 2002, with an estimated per capita GDP of
$230. Several factors have contributed to Nepal’s underdevelopment,
including its landlocked geography, rugged terrain, lack of natural
resources, and poor infrastructure. China, India, Japan, the United
States, and several European nations have made large investments in
Nepal’s economy through foreign aid since 1952. Still, the country’s
economic growth has been slow. Nepal’s economy is characterized by heavy
dependence on foreign aid, a narrow range of exports, increasing
economic disparity between the mountain areas and the more developed Tarāi region, excessive governmental control and regulation, and
inefficient public enterprises and administration. In addition, the
economy has not kept pace with the country’s high population growth. In
particular, the slow growth of agriculture has resulted in food
shortages and malnutrition for some of Nepal’s people.
A. Agriculture and Manufacturing
Agriculture dominates Nepal’s economy. It provides a livelihood for 79
percent of the population and contributes 41 percent of GDP. The Tarāi
is the main farming region of the country. Rice and corn are major food
crops; potato, oilseed, sugarcane, jute, and tobacco are major cash
crops. Nepal’s industrial base is limited. Most industries are based on
agricultural raw materials or dependent on various imported materials,
mostly from India. Large manufacturing plants are owned and operated by
the government. Major manufactured products include jute, sugar,
cigarettes, beer, matches, shoes, cement, and bricks. Traditional
cottage industries such as basket and carpet weaving are also important
to Nepal’s economy.
B. Services
Tourism represents a growing sector of the economy. Foreign tourism is
primarily confined to Kathmandu Valley and major national parks such as
the Sagarmatha National Park (around the Mount Everest area), Annapūrna
Conservation Area, and Royal Chitwan National Park. Tourism has created
demands for services and materials that are slowly changing the ecology,
environment, and economy of the Himalayan region. Sherpas, well known
for assisting as guides on Himalayan treks and mountain-climbing
expeditions, benefit from Nepal’s growing popularity as a tourist
destination.
A unique part of Nepal’s economy are the famous Gurkha mercenaries.
Beginning with a treaty signed with British-controlled India in the
early 1800s, young Nepali men served in the British, and later Indian,
armies. Known for their brave fighting skills, these mercenaries have
fought in nearly every major war, and with UN peacekeeping forces. Nepal
receives more than $50 million in hard currency annually from soldiers’
salaries sent home, pensions, and other Gurkha-related payments.
C. Energy
Most of the energy consumed in Nepal comes from traditional sources such
as fuelwood, the use of which contributes to deforestation. Tremendous
potential exists for hydroelectric power development, but growth is
inhibited by terrain, lack of infrastructure, and insufficient capital
investment. Nepal has harnessed only a fraction of its potential
hydropower. The country is heavily reliant on India for imported,
nonrenewable sources of power such as oil and kerosene.
D. Transportation and Communications
Nepal has a relatively underdeveloped network of roads. There are some
main roads, which connect major cities and stretch to the borders of
both India and China. However, the main means of transportation is the
network of footpaths and trails that interlace the mountains and
valleys. There is also a small railway along the Indian border. The
government-owned Royal Nepal Airlines was the only commercial airline
until 1992, when the government permitted other airlines to operate. Now
a number of airlines provide domestic service between Nepal’s major
cities as well as to its remote regions. International service is
available to India, Singapore, Hong Kong, Thailand, Pakistan, and Japan.
Tribhuvan International Airport outside Kathmandu is the main airport.
There are also several smaller airstrips serving domestic air travel in
Nepal.
Nepal has limited telecommunication services. Postal services have
improved in recent years but are still inaccessible to many Nepalese.
Few people own telephones, although most urban areas have public
telephone services. Radio Nepal broadcasts programs in Nepali and
English to more than 90 percent of the population. Television
programming is limited, but programs from overseas are available via
satellite in remote parts of the country. The major newspapers in Nepal
include the Gorkhapatra, Nepali Hindi Daily, Samaya, and Daily News;
freedom of the press was guaranteed under Nepal’s 1990 constitution.
E. Foreign Trade
For geographical and historical reasons, most of Nepal’s trade is with
India. Attempts have been made to diversify trade by making new
agreements with China, Pakistan, Bangladesh, the United States, the
United Kingdom, Singapore, Thailand, Germany, and Japan. Nepal has a
growing trade deficit with India. Major exports are clothing, carpets,
grain, and leather goods. Major imports are petroleum products,
fertilizer, and machinery.
F. Currency and Banking
Nepal’s monetary unit is the Nepalese rupee (71 Nepalese rupees equal
U.S. $1; 2004 average). It is issued from the country’s central bank,
Nepal Rastra Bank (founded in 1956). Indian rupees are still used in
Nepal, although less widely than before trade disputes between the two
countries in 1989.
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