Nepal-Chapter 3 - NEPAL: The Economy

A Nepalese porter carrying supplies for a trek

NEPAL IS ONE OF THE POOREST COUNTRIES in the world and was listed as the eleventh poorest among 121 countries in 1989. Estimates of its per capita income for 1988 ranged from US$158 to US$180. Various factors contributed to the economic underdevelopment--including terrain, lack of resource endowment, landlocked position, lack of institutions for modernization, weak infrastructure, and a lack of policies conducive to development.

Until 1951 Nepal had very little contact with countries other than India, Tibet, and Britain. Movement of goods or people from one part of the country to another usually required passage through India, making Nepal dependent on trade with or via India. The mountains to the north and the lack of economic growth in Tibet (China's Xizang Autonomous Region after 1959) meant very little trade was possible with Nepal's northern neighbor.

Prior to 1951, there were few all-weather roads, and the transportation of goods was difficult. Goods were able to reach Kathmandu by railroad, trucks, and ropeways, but for other parts of the country such facilities remained almost non-existent. This lack of infrastructure made it hard to expand markets and pursue economic growth. Since 1951 Nepal has tried to expand its contacts with other countries and to improve its infrastructure, although the lack of significant progress was still evident in the early 1990s.

The effects of being landlocked and of having to transit goods through India continued to be reflected in the early 1990s. As a result of the lapse of the trade and transit treaties with India in March 1989, Nepal faced shortages of certain consumer goods, raw materials, and other industrial inputs, a situation that led to a decline in industrial production.

Data as of September 1991