Nepal’s gross domestic product (GDP) was projected to be more than $17.921 billion in 2012. (adjusted to nominal GDP). Agriculture contributed for 36.1 percent of Nepal’s GDP in 2010, services 48.5 percent, and industry 15.4 percent. While agriculture and manufacturing are shrinking, the service sector is growing in importance.
Agriculture employs 76% of the workforce, followed by services (18%), manufacturing, and craft-based industries (6%). Tea, rice, maize, wheat, sugarcane, root crops, milk, and water buffalo meat are among the agricultural products produced in the Terai area, which borders India. The processing of agricultural products such as jute, sugarcane, tobacco, and grain is the mainstay of industry. Its roughly ten million-strong workforce faces a serious labor shortage.
Political instability continues to have a negative impact on Nepal’s economic development. Despite this, real GDP growth is expected to rise to almost 5% in 2011–2012. This would be the second-highest growth rate in the post-conflict period, behind the 3.5 percent growth rate in 2010–2011. Agriculture, building, finance, and other services are all sources of development. Since 2010/2011, spending driven by remittances has contributed less to growth. While remittance growth dropped to 11% in 2010/2011 (in Nepali Rupee terms), it has subsequently accelerated to 37%. Remittances are projected to account for 25–30% of total GDP. The rate of inflation has dropped to a three-year low of 7%.
Since 2003, the number of impoverished individuals has decreased significantly. In the last seven years, the number of individuals living below the international poverty line (those earning less than US$1.25 per day) has decreased by half. The proportion of impoverished individuals fell from 53.1 percent in 2003/2004 to 24.8 percent in 2010/2011 on this metric. Poverty fell by one-quarter to 57.3 percent with a higher poverty threshold of US$2 per capita per day. The income distribution, on the other hand, remains very unequal.
According to a recent survey, Nepal, along with Rwanda and Bangladesh, performed exceptionally well in reducing poverty, with the percentage of the population living in poverty falling to 44.2 percent in 2011 from 64.7 percent in 2006—a drop of 4.1 percentage points per year, indicating that Nepal has improved in areas such as nutrition, child mortality, electricity, improved flooring, and assets. If the present pace of poverty reduction continues, Nepal is expected to half its current poverty rate and eliminate it entirely over the next 20 years.
Nepal’s beautiful scenery and varied, exotic cultures provide significant tourist potential, but the country’s development has been hampered by political instability and inadequate infrastructure. Despite these issues, the number of foreign visitors who visited Nepal in 2012 was 598,204, up 10% from the previous year. In 2012, tourism generated almost 3% of national GDP and is the second-largest source of foreign revenue after remittances.
Unemployment and underemployment affect almost half of the people of working age. As a result, many Nepalese people migrate to other nations in quest of employment. India, Qatar, the United States, Thailand, the United Kingdom, Saudi Arabia, Japan, Brunei Darussalam, Australia, and Canada are among the countries visited. The Gurkha troops, who serve in the Indian and British forces and are highly regarded for their skill and courage, provide Nepal about $50 million each year. The overall remittance value was approximately $3.5 billion in 2010. Remittances accounted for 22.9 percent of the country’s GDP in 2009.
A tight connection with India is based on a long-standing business agreement. The United Kingdom, India, Japan, the United States, the European Union, China, Switzerland, and Scandinavian nations all provide assistance to the country. The poverty rate is high, with a per-capita income of about $1,000. The wealth distribution in Nepal is similar to that in many developed and developing countries: the top ten percent of families own 39.1% of the national wealth, while the bottom ten percent own just 2.6 percent.
The government’s budget is about $1.153 billion, with $1.789 billion in spending (FY 20005/06). For many years, the Nepali rupee has been pegged to the Indian rupee at a rate of 1.6. The underground market for foreign currency has all but vanished since exchange rate restrictions were loosened in the early 1990s. After a period of greater inflation in the 1990s, the inflation rate has fallen to 2.9 percent.
Nepal exports $822 million in carpets, textiles, hemp, leather products, jute goods, and grain. Imports of US$2 billion in gold, machinery and equipment, petroleum products, and fertilizer are the most common. Its major export partners are the European Union (EU) (46.13 percent), the United States (17.4 percent), and Germany (7.1 percent). The European Union has emerged as Nepal’s biggest consumer of ready-to-wear clothing (RMG). “EU garment exports accounted for 46.13 percent of the country’s overall garment exports,” according to the report. India (47.5 percent), the United Arab Emirates (11.2 percent), China (10.7 percent), Saudi Arabia (4.9 percent), and Singapore are Nepal’s top import partners (4 percent ).
In addition to the country’s landlocked, harsh terrain, few tangible natural resources, and inadequate infrastructure, the country’s economic growth and development has been hampered by an ineffectual post-1950 administration and a long-running civil conflict.