Economy of Nepal

The economy of Nepal is a developing category and is largely dependent on agriculture and remittances. Until the mid-20th century Nepal was an isolated pre-industrial society, which entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s. The country was opened to economic liberalization, leading to economic growth and improvement in living standards when compared to the past. The biggest challenges faced by the country in achieving higher economic development are the frequent changes in political leadership, as well as corruption.

Nepal has used a series of five-year plans in an attempt to make progress in economic development. It completed its ninth economic development plan in 2002; its currency has been made convertible, and 17 state enterprises have been privatised. Foreign aid to Nepal accounts for more than half of the development budget. Government priorities over the years have been result in the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasised. The economy is heavily dependent on imports of basic materials and on foreign markets for its forest and agricultural products. Nepal possesses immense potential for sustainable energy resources that can be harnessed for energy security, economic growth, and environmental sustainability.

Agriculture remains Nepal's principal economic activity, employing about 65% of the population and providing 31.7% of GDP. Only about 20% of the total area is cultivable; another 40.7% is forested (i.e., covered by shrubs, pastureland and forest); most of the rest is mountainous. Fruits and vegetables (apples, pears, tomatoes, various salad greens, peach, nectarine, potatoes), as well as rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas.

GDP is heavily dependent on remittances (9.1%) of foreign workers. Subsequently, economic development in social services and infrastructure in Nepal has not made dramatic progress. A countrywide primary education system is under development, and Tribhuvan University has several campuses under it . Although eradication efforts continue, malaria had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by road and an expanding highway network. The capital was almost out of fuel and supplies, due to a crippling general strike in southern Nepal on 17 February 2008.

Major towns are connected to the capital by telephone and domestic air services. The export-oriented carpet and garment industries like pasmina have grown rapidly in recent years. Together, they account for approximately 70% of the country's merchandise exports. The Cost of Living Index in Nepal is comparatively lower than many countries but not the least. The quality of life has declined to a much less desirous value in recent years. In the 2021 Global Hunger Index, Nepal ranks 76th out of the 116 countries with sufficient data to calculate 2021 GHI scores. With a score of 19.1, Nepal has a level of hunger that is moderate. Nepal has the worst road infrastructure in Asia. World Economics estimates Nepal's 2024 GDP at $243 billion in PPP terms (Purchasing Power Parity) and an initial estimate of $255 billion for 2025. This figure is 65% higher than the official estimate published by the World Bank.