10 Characteristics or Features of the Nepalese Economy

Characteristics or Features of the Nepalese Economy

The Nepalese economy has several contemporary features, which are explained as follows:

1. Agriculture-based economy: Agriculture is the primary sector of Nepal’s economy, contributing around 23.95% of the country’s GDP. Over two-thirds of the population is engaged in agriculture, making it a crucial sector for development.
2. Tourism: Tourism is an essential sector of the Nepalese economy, contributing around 3% (Informal sources say 11%) to the GDP. Nepal is home to several popular tourist destinations, including the Himalayan mountains, which attract a large number of tourists every year.
3. Remittances: Remittances are a significant contributor to Nepal’s economy, accounting for around 22% of the country’s GDP. A large number of Nepalese work abroad, primarily in Gulf countries, and send money back to their families in Nepal.
4. Infrastructure development: Nepal has been focusing on infrastructure development in recent years, including the construction of roads, airports, and hydropower projects. This has helped to improve connectivity within the country and create new employment opportunities.
5. Foreign investment: Nepal has been attracting foreign investment in recent years, particularly in the manufacturing and tourism sectors. The government has introduced several policies to encourage foreign investment and ease the process of doing business in Nepal.
6. Trade deficit: Nepal has a significant trade deficit, as the country imports more than it exports. The country’s primary exports include textiles, carpets, and agricultural products, while its primary imports include petroleum products, machinery, and electronics.
7. Small and medium-sized enterprises (SMEs): SMEs play a significant role in Nepal’s economy, contributing around 22% of the country’s GDP. These enterprises are critical for job creation and income generation, particularly in rural areas.
8. The informal economy: Nepal has a large informal economy, which is estimated to contribute around 50% to the country’s GDP. This informal sector includes small businesses, street vendors, and self-employed individuals who do not register their businesses with the government. The informal economy is crucial for providing employment opportunities and income generation, particularly for society’s poor and marginalized sections.
9. Dependence on foreign aid: Nepal heavily depends on foreign aid, which accounts for around 7.1% of the country’s budget (Nepal Economic Forum, 2023). The government receives aid from various bilateral and multilateral donors, which is used to fund development projects and social welfare programs. However, Nepal’s dependence on foreign aid has also led to concerns about sustainability and accountability in the use of aid funds.
10. High poverty and inequality: Nepal continues to face high levels of poverty and inequality, with around 25.2% of the population living below the poverty line (World Population Review, 2023). The country ranks low on the Human Development Index (HDI) and faces significant challenges in providing its citizens with basic health, education, and sanitation services. Additionally, there are significant disparities between urban and rural areas, with rural areas having lower levels of access to basic services and opportunities for economic growth.

Important economic statistical facts of Nepal

Table 1: Important economic statistical facts of Nepal

Economic Indicators of Nepal	Value F.Y 2019/20	Value F.Y 2022/23
GDP at base Price (In Rs. Billion)	3,208.519	US$ 270 billion
Per Capita GNI (In US$)	1,097	US$ 1,220
GDP growth rate at the basic price (In percent)	2.27	4.25
Remittance Income (In Rs. Billion)	879	Rs. 378.04 billion
Remittance income as a percent of GDP	25.4	23%
Contribution of agriculture to GDP in Percent	27.5	23.95%
Contribution of the industrial sector in percent	14.6	14.29
Rate of Inflation in Percent	4.6	7.26
Hydroelectricity generation in MW	1,233	1,480
Population living below the poverty line in %	16.67	17.4
The population Growth rate in  Percent	1.35	0.93
HDI value	0.579	0.654
HDI rank of Nepal in the world	147th	143rd
Area covered by forest in percent	40.4	44.0

Source: Economic Survey, 2022/23

The above table presents important economic statistical facts about Nepal. It includes various economic indicators such as Gross Domestic Product (GDP), Per Capita Gross National Income (GNI), GDP growth rate, remittance income, the contribution of agriculture and industry to GDP, inflation rate, hydroelectricity generation, poverty rate, population growth rate, Human Development Index (HDI), and forest area coverage.

The table shows the values of these indicators for the fiscal year 2019/20 and 2022/23. The GDP at the base price was Rs. 3,208.519 billion in 2019/20, which reached US$ 270 billion in 2022/23. The per capita GNI was US$ 1,097 in 2019/20 and has increased to US$ 1,220 in 2022/23.

Other notable information includes the contribution of agriculture to GDP, which was 27.5% in 2019/20 and declined to 23.95% in 2022/23. The industrial sector’s contribution to GDP was 14.6% in 2019/20 and remained nearly the same in 2022/23. The inflation rate was 4.6% in 2019/20, which went up to 7.26% in 2022/23.

The data also includes information on hydroelectricity generation, poverty rate, population growth rate, HDI value, and forest area coverage. Hydroelectricity generation was 1,233 MW in 2019/20 in Nepal, which increased to 1,480 MW in 2022/23. The poverty rate was 16.67% in 2019/20 and has increased slightly to 17.4% in 2022/23. The population growth rate was 1.35% in 2019/20, which decreased to 0.93% in 2022/23, according to the latest census in 2021.