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Nepal Investment Summit 2017

Agriculture

  • Sector Overview

  • Opportunities

Sector Overview

Nepal’s economy is largely dependent on agricultural, which accounts for 36% of GDP and absorbs about two-thirds of the labour market. About 30% of Nepal’s total land is used for agricultural purposes. The major cash crops are oilseed, potato, tobacco, sugarcane, jute, cotton, and rubber; and the major cereal crops are paddy, maize, millet, wheat, barley, and buckwheat. Cardamom, ginger, garlic, turmeric, silk cocoons, honey and mushroom are also cultivated in copious amounts.
 
Nepal’s geography, water resources and ample supply of labour gives Nepal a comparative advantage in agricultural production. The temperature and rainfall differ from place to place, but the wet season is roughly the same in all areas of Nepal. The sector has seen NPR 3.37 billion (USD 338 million) in foreign investment in about 180 agriculture projects, which employ over 7,500 people.

Even though Nepal is endowed with the resources needed for high land productivity, many households, particularly in the mountainous regions of Nepal, experience food shortages for 4–9 months a year. More than 50% of the districts in Nepal are considered food-deficient by FAO. This problem of low agricultural productivity arises due to fragmented subsistence farming, poor technical knowledge, and lack of irrigation facilities. Erratic weather patterns, pest epidemics, and lack of fertilizers and improved seeds exacerbate the problem.

Nepal also faces a negative trade balance in agriculture. The country’s agricultural imports were NPR 40 billion (USD 400 million) in 2012/13. This figure is estimated to be at least NPR 45 billion (USD 450 million) for 2013/14. However, agricultural imports from India have been growing at an astounding rate of 40% annually for the past 7 years. On the other hand, exports in 2012/13 stood only at NPR 13 billion (USD 130 million) and were expected to reach NPR 18 billion (USD 180 million) for 2013/14. Agricultural equipment, chemical fertilizers, rice, and vegetables account for more than two-thirds of the imports from India, whereas food and live animals comprise over 90% of total agricultural exports to India.

As the agriculture sector is the biggest contributor to GDP, the Government of Nepal is committed to uplifting this sector. The government is currently focusing on the modernisation, diversification, commercialisation and marketing of the agriculture sector. Towards this, the government plans to make available agricultural inputs, such as irrigation, electricity, transportation, and agro-credit.

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Opportunities

Food crops

  • Rice is the main cereal consumed in Nepal, however, in 2012-13, rice worth NPR 9 billion was imported, signalling an opportunity for the expansion of rice cultivation. 
  • Lentils, which are grown in the Terai region, are a good source of export earnings for Nepal and are popular in South East Asian markets. 
  • Cardamom, turmeric and cinnamon are the main spices exported from Nepal.

 
Beverages

  • Nepali tea is considered some of the best tea in the world, with major export markets in Europe and the US.
  • Coffee farming has become popular in recent times and its market share has grown domestically and overseas.
     

Fertilizer and agricultural equipment

  • Nepal depends primarily on imported chemical fertilizers, creating a market for chemical fertilizers to be manufactured in Nepal.
  • Modern agricultural equipment could alleviate the problem of low land productivity in Nepal. 

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