Nepal is largely a subsistence economy with more than 80% of people engaged in agriculture. Manufacturing sector which engages only about 3% of the population is yet to progress in this remote country engulfed by rebel fighting since 1996. Service sector is not in a good position either, however, it employs about 16% of the population. Unemployment is high. To be more exact,Nepal suffers from disguised unemployment in the agricultural sector. Trade balance has continued to be negative over the past several years. Inflation has been continuous, though at a lower rate. While other countries have been able to register a double digit growth in their GDP per capita over the past five years;Nepal suffered a dismal growth of GDP per capita of just 3.8% between 2001 and 2005.
Several reasons float around to account for the poor performance of Nepal over the past years. Nepal is a landlocked country with limited access to the sea ports. So, trade with nations other than India is limited. Besides, there is a lack of proper infrastructure. Hence, private investment is low in the country. Furthermore, the country has been suffering the brunt of Maoist violence over the past few years raising the level of uncertainty in the economy. Investors are deterred from investing in the country. Businessmen are coerced by the rebels to give donations. So, insecurity might have been the major factor in determining the slow progress of
Nepal after 1996. Various indicators are evidence to the fact that Maoist problem is the major hindrance towards Nepalese progress.
Nepal is among the poorest countries with a GDP per capita ( current prices) of just US $246 in 2005
Nepal is a subsistence economy with more than 80% involved in agriculture
Agriculture contributes 40% to total GDP while industry and services account for 20% and 40 % respectively
Nepal has a current account surplus for the past 5 years; however, it has a deficit in its trade balance.
GDP growth rate in Nepal is among the lowest in the region with just 3.8% over the past 5 years while
Pakistan enjoyed a growth of approximately 30% during the same period
Inflation rates are higher in the region with
Nepal having a rise in inflation rate from 2.4% in 2001 to 3.8% in the year 2005.
Rate of increase in consumption has gone down with the inception of Maoists problem in 1996.
Nepal recorded a higher growth in public consumption than in private consumption between 1996/97 and 2002/03.
Instability, insecurity, lack of skilled labor, lack of infrastructure and lack of technology are among the major reasons for poor performance of
If you are interested to read the whole paper, download the word file. Since the paper was written in 2005, it might not be totally relevant today, however, the problems pointed out are still those which have been troubling Nepal.