Sectors of Nepal’s economy

It is customary to look at the economy of each state not only as a whole, but also broken down into certain categories, or sectors. Nepal’s economy is no exception in this case. This article takes an in-depth look at the most promising sectors of Nepal’s economy as potential sources of investment.

Manufacturing Industry

Most of the processing of agricultural raw materials takes place in small and semi-customized factories. With the help of the USSR, India and China, a sugar factory, a cigarette factory, an agricultural implements factory, a rosin and turpentine plant, cement factories, etc., were built. Manufactured products include cotton, jute and other textiles, sugar, matches, tobacco products, carpets and shoes. Weaving, pottery, blacksmithing, and jewelry crafts are widespread.

Main industrial centers are Biratnagar and Birgunj. In both towns, which grew up in the Terai belt, production is largely oriented towards sales to neighboring regions of India and Bangladesh. A large proportion of goods cross the state border by smuggling and therefore are not accounted for in foreign trade statistics.

There is also a mining industry, with developing deposits of iron, copper, lead and zinc ores, mica, marble, gold, dolomite and limestone. However, the mining sector is experiencing difficulties due to poor transport infrastructure and artisanal mode of production.


Foreigners are primarily attracted by Hindu and Buddhist places of worship (including Lumbini, the birthplace of the Buddha, and several Hindu temples in and around the capital). Serving Western climbers has also become a source of sustained employment for the inhabitants of the alpine villages of the Himalayas, especially the Sherpas.

However, due to the complication of the domestic political situation, the tourism sector has recently experienced a strong decline. The flow of tourists in 2002 decreased by 34% (compared to 2001). The level of currency income from tourism has decreased almost three times.


The government gives priority to developing the energy sector. Nepal has a huge hydropower potential of 83,000 MW, which is still very little used.

A hydropower plant in Kathmandu Valley meets the needs of the capital and its surroundings, while smaller hydropower facilities serve the cities of Pokhara, Biratnagar and Birgunj.

In the mid-1990s there were major changes in the industrial sector, primarily due to the planned hydropower construction in the central mountain region. It is now possible to reliably provide cheap electricity to mountainous areas, and the construction of relatively large industrial facilities in Kathmandu, Pokhara and other mountain settlements has begun.

High construction costs and risks associated with the civil war have put many initiatives in doubt. The most significant hydropower projects to date financed by private investors are Khimti Khola (60 MW) and Bhote Koshi (36 MW). Private investment in the hydropower sector over the past 8 years has exceeded $360 million.


Transport in Nepal is underdeveloped, with many goods still being delivered by porters and pack animals. The development of transport infrastructure is mainly due to foreign investment.

There are three short rail lines between Nepal and India, but none of them reach the mountainous areas. The main railroad line runs from Birgunj to Kathmandu. The total length of the railroads is 59 kilometers. Through the Mahabharat range there is a Kathmandu to Hitaura ropeway (42 km).

Air routes, many of which are operated by private companies, connect Kathmandu with several cities in different parts of the country. Several airlines, including Royal Nepal Airlines, link Kathmandu with India, Bangladesh, China, Germany, Pakistan, Russia, Singapore, Sri Lanka, Thailand, and the United Arab Emirates.

At the end of 1987, the Kathmandu – Lhasa (Tibet) airline started operating. The total number of airfields in the country is 45, 9 of them are paved with asphalt. The main international airport is Tribhuvan near Kathmandu.


Forests currently occupy about 41.6% of the country (2020). In the late 1990s forests harvested 19.5 million cubic meters of wood, of which 19 million cubic meters were used for fuel. In 2001 the logging decreased to 13.4 mln cubic meters. In the jungle, of economic interest are hardwood trees, as well as bamboo and rattan palm.

Nepal has the 1st rate of deforestation in South Asia (4% per year). Destruction of forested areas contributes to soil erosion and landslides, causing the country to lose up to 66,000 hectares of fertile soil annually; the risk of flooding in the lower, most populated parts of the valleys is growing.


Arable land occupies 38% of the land area. More than half of the cultivable area remains in the hands of only 9% of large landowners. Cultivation is primarily rice (50% of the cultivated area), legume mixtures, wheat, corn and barley. The average yield is low at 18.5 cwt/ha. The considerable quantity of jute (for sale), tobacco, potato, sugar cane, indigo, and opium poppy is cultivated. Vegetables, oats, spices and a number of fruit crops are also cultivated.

Agriculture in Nepal is poorly mechanized. On the lower slopes of the ridges and in the valleys terracing is actively practiced to extend the cropland. The population of the Greater Himalayas suffers particularly from want of food.

In the highlands of northern Nepal pastoralism is developed. Cattle, sheep, goats, pigs, and poultry are kept almost everywhere. The oxen are concentrated in the lower intermountain valleys, and yaks and tszos (crossbred yaks and cows) are bred high in the mountains.


From the above discussion, we can conclude that Nepal as a developing country has great opportunities for foreign investment. Almost every sector of the economy is capable of rapid development, for which the high level of education in the country is maintained.

In the long term, agriculture as well as commercial real estate and telecommunications should be considered for foreign investment. In any case, the success and profit depends on a well-considered action and the development of the Nepalese economy as a whole.

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