Nepal: Economy and Infrastructure

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For 2008 Nepal’s gross domestic product was estimated at over $ 12 billion, making it the 115th- largest economy in the world. Agriculture accounts for about 40% of Nepal’s GDP, services comprise 41% and industry 22%. Agriculture employs 76% of the workforce, services 18% and manufacturing/craft-based industry 6%. Agricultural products – mostly grown in the Terai region bordering India – includes tea, rice, corn, wheat, sugarcane, root crops, milk and water buffalo meat. Industry mainly involves the processing of agricultural products, including jute, sugarcane, tobacco, and grain.

Its workforce of about 10 million suffers from a severe shortage of skilled labour. The spectacular landscape and diverse, exotic cultures of Nepal represent considerable potential for tourism, but growth in this hospitality industry has been stifled by recent political events. The rate of unemployment and underemployment approaches half of the working-age population. Thus many Nepali citizens move to India in search of work; the Gulf countries and Malaysia being new sources of work. Nepal receives $ 50 million a year through the Gurkha soldiers who serve in the Indian and British armies and are highly esteemed for their skill and bravery. The total remittance value is worth around $ 1 billion, including money sent from the Persian Gulf and Malaysia, who combined employ around 700,000 Nepali citizens.

A long standing economic agreement underpins a close relationship with India. The country receives foreign aid from India, Japan, the UK, the US, the EU, China, Switzerland and Scandinavian countries. Poverty is acute; per-capita income is around $ 1,000. The distribution of wealth among the Nepalese is consistent with that in many developed and developing countries: the highest 10% of households control 39.1% of the national wealth and the lowest 10% control only 2.6%.

The government’s budget is about $1.153 billion, with expenditure of $1.789 billion. The Nepalese rupee has been tied to the Indian Rupee at an exchange rate of 1.6 for many years. Since the loosening of exchange rate controls in the early 1990s, the black market for foreign exchange has all but disappeared. The inflation rate has dropped to 2.9% after a period of higher inflation during the 1990’s.

Nepal’s export of mainly carpets, clothing, leather goods, jute goods and grain total $882 million. Import commodities of mainly gold, machinery and equipment, petroleum products and fertilizer total US $ 2 billion. India, the US and Germany are its main export partners. Nepal’s import partners include India, the United Arab Emirates, China, Saudi Arabia, and Singapore.

From the world’s major land, air and sea transport routes Nepal remains isolated, although, within the country, aviation is a better state, with 48 airports, ten of them with paved runways; flights are frequent. There were just over 8,500 km of paved roads, and one 59 km railway line in the south in 2003. There is only one reliable road route from India to the Kathmandu Valley.

Calcutta in India is the only practical seaport of entry for goods bound for Kathmandu. Internally, the poor state of development of the road system makes volume distribution unrealistic. Besides having landlocked, rugged, geography, few tangible natural resources and poor infrastructure, the long-running civil war is also a factor in stunting the economic growth.

Per 19 people there is less than one telephone. Landline telephone services are not adequate nationwide but are concentrated in cities and district headquarters. Mobile telephony is in a reasonable state in most parts of the country with increased accessibility and affordability; there were around 175,000 internet connections in 2005. After the imposition of the “state of emergency”, intermittent losses of service-signals were reported, but uninterrupted internet connections have resumed after Nepal’s second major people’s revolution to overthrow the King’s absolute power.

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