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General Information of Nepal

Economy of Nepal

The United Nations (UN) classifies Nepal as one of the least developed countries in the world.

The countryís gross domestic product (GDP) was $5.5 billion in 2002, with an estimated per capita GDP of $230. Several factors have contributed to Nepalís underdevelopment, including its landlocked geography, rugged terrain, lack of natural resources, and poor infrastructure. China, India, Japan, the United States, and several European nations have made large investments in Nepalís economy through foreign aid since 1952. Still, the countryís economic growth has been slow. Nepalís economy is characterized by heavy dependence on foreign aid, a narrow range of exports, increasing economic disparity between the mountain areas and the more developed Tarāi region, excessive governmental control and regulation, and inefficient public enterprises and administration. In addition, the economy has not kept pace with the countryís high population growth. In particular, the slow growth of agriculture has resulted in food shortages and malnutrition for some of Nepalís people.

A. Agriculture and Manufacturing

Agriculture dominates Nepalís economy. It provides a livelihood for 79 percent of the population and contributes 41 percent of GDP. The Tarāi is the main farming region of the country. Rice and corn are major food crops; potato, oilseed, sugarcane, jute, and tobacco are major cash crops. Nepalís industrial base is limited. Most industries are based on agricultural raw materials or dependent on various imported materials, mostly from India. Large manufacturing plants are owned and operated by the government. Major manufactured products include jute, sugar, cigarettes, beer, matches, shoes, cement, and bricks. Traditional cottage industries such as basket and carpet weaving are also important to Nepalís economy.

B. Services

Tourism represents a growing sector of the economy. Foreign tourism is primarily confined to Kathmandu Valley and major national parks such as the Sagarmatha National Park (around the Mount Everest area), Annapūrna Conservation Area, and Royal Chitwan National Park. Tourism has created demands for services and materials that are slowly changing the ecology, environment, and economy of the Himalayan region. Sherpas, well known for assisting as guides on Himalayan treks and mountain-climbing expeditions, benefit from Nepalís growing popularity as a tourist destination.

A unique part of Nepalís economy are the famous Gurkha mercenaries. Beginning with a treaty signed with British-controlled India in the early 1800s, young Nepali men served in the British, and later Indian, armies. Known for their brave fighting skills, these mercenaries have fought in nearly every major war, and with UN peacekeeping forces. Nepal receives more than $50 million in hard currency annually from soldiersí salaries sent home, pensions, and other Gurkha-related payments.

C. Energy

Most of the energy consumed in Nepal comes from traditional sources such as fuelwood, the use of which contributes to deforestation. Tremendous potential exists for hydroelectric power development, but growth is inhibited by terrain, lack of infrastructure, and insufficient capital investment. Nepal has harnessed only a fraction of its potential hydropower. The country is heavily reliant on India for imported, nonrenewable sources of power such as oil and kerosene.

D. Transportation and Communications

Nepal has a relatively underdeveloped network of roads. There are some main roads, which connect major cities and stretch to the borders of both India and China. However, the main means of transportation is the network of footpaths and trails that interlace the mountains and valleys. There is also a small railway along the Indian border. The government-owned Royal Nepal Airlines was the only commercial airline until 1992, when the government permitted other airlines to operate. Now a number of airlines provide domestic service between Nepalís major cities as well as to its remote regions. International service is available to India, Singapore, Hong Kong, Thailand, Pakistan, and Japan. Tribhuvan International Airport outside Kathmandu is the main airport. There are also several smaller airstrips serving domestic air travel in Nepal.

Nepal has limited telecommunication services. Postal services have improved in recent years but are still inaccessible to many Nepalese. Few people own telephones, although most urban areas have public telephone services. Radio Nepal broadcasts programs in Nepali and English to more than 90 percent of the population. Television programming is limited, but programs from overseas are available via satellite in remote parts of the country. The major newspapers in Nepal include the Gorkhapatra, Nepali Hindi Daily, Samaya, and Daily News; freedom of the press was guaranteed under Nepalís 1990 constitution.

E. Foreign Trade

For geographical and historical reasons, most of Nepalís trade is with India. Attempts have been made to diversify trade by making new agreements with China, Pakistan, Bangladesh, the United States, the United Kingdom, Singapore, Thailand, Germany, and Japan. Nepal has a growing trade deficit with India. Major exports are clothing, carpets, grain, and leather goods. Major imports are petroleum products, fertilizer, and machinery.

F. Currency and Banking

Nepalís monetary unit is the Nepalese rupee (71 Nepalese rupees equal U.S. $1; 2004 average). It is issued from the countryís central bank, Nepal Rastra Bank (founded in 1956). Indian rupees are still used in Nepal, although less widely than before trade disputes between the two countries in 1989.

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