Economy:
Aggregate Economic Indicators in general for first ten months of the current fiscal year 2012/13 have been positive. Achieved economic growth less than targeted, monetary inflation rate higher than targeted, and growing trade deficit, however, remain as challenges to the economy. According to preliminary estimates, economy in FY 2012/13 is estimated to grow only by 3.56 percent at basic price and 3.65 percent at producers’ price against the targeted 5.5 percent.
Economic growth rate in the previous fiscal year was 4.5 percent, while in the current fiscal year decreased food grain production resulted in the decrease of 3.7 percentage points in the agriculture sector, thereby reflecting in the decline in aggregate economic growth rate. The non-agriculture sector in the current fiscal year, however, is estimated to grow by 4.98 percent, which is higher by 0.68 percentage points compared to the previous fiscal year. In the current fiscal year, Gross Domestic Production (GDP) is estimated to reach Rs. 170.01 billion with a growth of 10.8 percent from the previous fiscal year. In the previous fiscal year GDP totaled Rs. 153.6 billion.
In the current fiscal year 2012/13, GDP of the agriculture sector is estimated to grow by 1.3 percent as compared to previous fiscal year. This sector had recorded a growth of 5.0 percent in the previous fiscal year. Agriculture and forestry sub-sector is estimated to grow by 1.2 percent and that of fishery by 4.0 percent. Production of food grain, which plays a major role in the growth of agriculture sector shrunk by 11.3 percent in the current fiscal year resulted 8.0 percent decline in production of major food crops and reached to totaled 8,738,000 MT. In this current fiscal year total area under major food crops is estimated at 3,344,000 Ha, which is lower by 4.0 percent than in the previous year.
Growth rate of non-agriculture sector in FY 2011/12 is estimated to reach 4.98 percent from the previous year’s 4.30 percent. In FY2010/11 the growth rate was 3.64 percent. On the non-agriculture sector, growth rate of construction, electricity, gas and water, real estate, rent and trading, public services, education, and other community services, social and personal services has declined while that of other sub-sectors recorded growth as compared to the previous fiscal year. In non-agriculture sector, mining and exploration is expected to expand by 5.45 percent, industrial production by 1.85 percent, electricity, gas and water by 0.20 percent, wholesale and retail trade by 9.54 percent, hotel and restaurant by 6.84 percent, transport, warehouse, and communication by 6.73 percent, financial intermediation by 6.65 percent, real estate and business activities by 1.64 percent, public administration and defense by 3.31 percent, education by 4.11 percent, health and social work by 6.95 percent, other community, social and personal service activities by 5.20 percent, and that of construction sub sector is estimated to grow by 1.57 percent.
Investment:
Government has taken steps to restructure the economy by introducing measures such as tax reform, massive privatisation of public enterprises, dismantling Investment & Trade barriers, liberalising the foreign exchange system and fostering the industrial potential of the country, particularly for export-oriented industries. Nepalese water resources has been opened with liberal policies for Foreign Investment at a time the world is passing through energy crisis and looking for alternative and renewable energy resources which also helps to combat climate change and Global Warming.
Nepal has entered into a new era of development with open, liberal and transparent economic policies. Giving high priority to foreign direct investment in Nepal, the government of Nepal has pursued pragmatic, one window and outward looking investment policies. As identified by the Government, there are two potential growth areas for Nepal- hydropower and Tourism . Policy reforms have further opened up the hydropower and Tourism sector to foreign investment.
Water resource is the vital natural resource in Nepal. 6000 rivers and rivulets flow in the country throughout the year. There was an estimate many years back that major rivers in Nepal had the combined capacity to generate 83 thousands MW of electricity, of which less than one percent has so far been exploited. But now there are estimates that this potential is much higher than the earlier calculations.
Similarly, because of the scenic and geological beauty of Nepal, there is tremendous prospect of investment in the Tourism sector.
Nepal started liberalizing her economy with a wide range of economic reforms in late eighties and early 1990s. Reforms have been instrumental in making the economy more investment friendly. Transparent one window type and export oriented investment and Investment & Trade policies have provided sound base to investment. Economic Reform policies have paved way for the establishment of joint venture banks and private financial institutions as well.
he liberalized measures have encouraged the private sector to actively participate in economic activities and limited the government role to a facilitator.
Trade
Nepal became a member of World Trade Organization (WTO) in 2004, the first least-developed country (LDC) to join the WTO through the full working party process and is in process to amend or adopt certain laws and regulations consistent with WTO requirements. This has expanded the investment and Investment & Trade environment of Nepal.
Nepal’s Investment & Trade with the world has been in deficit particularly her Investment & Trade deficit with neighbouring countries India and China is comparably huge.
Major exports from Nepal:
Hand knotted woolen Carpets, Jute and Jute products, Orthodox and other varieties of tea, Hides and Skins, Pulses, Vegetable Oils, Oil Cakes Niger seeds, Catechu, Ginger, Handicrafts, Silver wear and Jewelery.
Major Imports to Nepal: Machineries and Parts, Petro Products, Raw wool, Transport equipment, Vehicles and spare parts, Pharmaceuticals, Fertilizers, Thread, Electrical goods, Textiles, Soybean Oil, Billets etc.