Market Overview

Nepal is a low-income, developing nation with an estimated Fiscal Year 2023/2024 GDP of $43.5 billion and per capita income of $1,434 (note: Nepal’s fiscal year runs from July 16 to July 15). Nepal’s estimated population is 30.9 million, with a median age of 25.3 years.

Nepal endured a political insurgency from 1996 – 2006 that led to the end of the monarchy and the establishment of today’s democratic republic. This was followed by a nearly decade-long process to draft, and ultimately promulgate, a new Constitution in 2015. Elections under the new Constitution were held in 2017 and 2022. Frequent political turnover has often resulted in disruptions in governance and the inability to pass laws and regulations, including those that can help attract and retain foreign direct investment (FDI). This has resulted in a challenging business environment that has constrained Nepal’s economy, contributing to slower economic progress. 

On September 8-9, 2025, nationwide protests erupted against widespread corruption, the rising challenges of labor migration and unemployment, and the Nepali government’s September 4 ban on social media platforms. Protesters targeted and damaged government buildings and the residences of political figures and large businesses rumored to benefit from cronyism and corruption. These demonstrations ultimately led to the Prime Minister’s resignation, and the establishment of an interim government for six months, with new elections held in March 2026.

In October 2025, the International Monetary Fund (IMF) estimated that Nepal’s economy grew by 4.3% in FY 2024/2025, driven by construction, manufacturing, hydropower project expansion, and agriculture. However, the World Bank’s November 2025 Nepal report projected that growth in FY 2025/2026 would decrease to 2.1%, reflecting the impact of the September 2025 public unrest and ensuing political instability.

The services sector, whose largest sub-sectors include real state, tourism, trade, transport, communications and education, contributes to 62.9% of Nepal’s GDP. It is followed by the agriculture sector, which employes 69 percent of Nepal’s population and contributes to 24.6% of GDP. The industrial sector – whose largest sub-sectors consist of manufacturing and construction – contributes 12.5% of GDP. 

Nepal’s economy is slowly shifting away from agriculture as the population migrates from rural to urban areas and to foreign countries. An estimated four to six million Nepalis work abroad, primarily in Middle Eastern Gulf countries, Malaysia, and India. Nepal received $10.86 billion in remittance flows from these overseas workers and expatriates in FY 2023/2024, equivalent to 23% of GDP. Much of Nepal’s wealth is generated abroad via the export of its labor versus the export of goods and services produced in Nepal. Nepal’s declining trade deficit is largely attributed to subdued domestic demand for goods and services, driven by lower government and private sector investment spending, as well as increasing migration of Nepali youths.

Political instability, widespread corruption, the nation’s landlocked location, challenging topography, poor infrastructure, a poorly trained and educated workforce, and a weak policy and regulatory environment have been some of the key impediments to economic growth. The Government has prioritized infrastructure development, job creation, and the passage of business enabling legislation, but policy implementation is weak and uneven. The government professes to focus on attracting foreign investors to Nepal, yet it has not completed the necessary reforms to attract large scale investment, nor effectively address the regulatory and government process challenges international firms currently face operating in Nepal. One of the biggest hindrances is the public procurement law, which favors lowest bidders over the quality products/services and total cost of ownership of an asset or project. The current bill favors Indian and Chinese products/services because U.S. products/services can be comparatively more expensive, despite higher returns and lower lifecycle costs over the long term.  

Nepal’s trade is characterized by large deficits. In FY/2023/2024, Nepal’s trade deficit was $10.2 billion and, in 2022, its $1.3 billion in exports consisted of palm and soybean oil, woolen carpets, polyester yarn, juices, tea and spices (particularly cardamom), textiles, jute goods, readymade garments, and other apparel items. Nepal’s $11.5 billion in imports, mainly from India, China, and Indonesia, included petroleum products (diesel, gasoline, LPG), industrial use items (mainly steel billets), gold, construction equipment and cement clinker, rice, and telecommunications equipment. Indian has traditionally been Nepal’s largest trade partner. In FY 2023/2024, India accounted for 62.6% percent of Nepal’s imports, followed by China at 18.8%, and the rest of the world the remaining 18.7%. Of Nepal’s exports, 67.7% went to India and 11.4% to the United States. 

U.S exports to Nepal totaled approximately $146 million in FY 2023/2024, representing 1.22% of total imports. Major U.S. exports have included medical equipment, aircraft machinery and parts, information and communications technology products, electrical machinery and equipment, and miscellaneous grains, seeds, and nuts (mainly soybeans). Until 2018, the United States was one of the very few countries with which Nepal had a trade surplus. Key Nepali exports to the United States are carpets, handicrafts and antiques, animal feed (dog and cat food), textiles, glassware, and apparel (shawls, scarves, other knit material, and felt products). 

In December 2016, the United States established a new stand-alone trade preference program for Nepal (NTPP), as mandated by the Trade Facilitation and Trade Enforcement Act of 2015. Designed to help support Nepal’s economic recovery following the 2015 earthquakes, this program provides duty-free access to the United States for some products made in Nepal, including certain kinds of carpets, headgear, shawls, scarves, handbags, and suitcases. The NTPP program expired in December 2025. More information on this program can be found at https://np.usembassy.gov/business/nepal-trade-preference-program/.

Historically, Nepal has attracted little FDI, including from the United States. As per World Bank data, in 2024 Nepal’s FDI as a percent of GDP reached only 0.2%. Annual FDI net inflows into Nepal, which rose from $126 million in FY 2019/2020 to $196 million in FY 2020/2021, dropped to $65 million in 2021/2022, according to the World Bank. An NRB report states that the total stock of FDI in Nepal as of July 2022 was $1.7 billion, of which the U.S. share was only 2.9% ($50 million).

Political Environment

Visit State Department’s website for background on Nepal’s political and economic environment.