TRADE

Trade is a basic economic concept involving the buying and selling of goods and services, with
compensation paid by a buyer to a seller, or the exchange of goods or services between parties.
Trade covers domestic wholesale and retail commodity trade. Trade can take place within an
economy between producers and consumers. Domestic trade, also known as internal trade or
home trade, is the exchange of domestic goods within the boundaries of a country. This may be sub-
divided into two categories, wholesale and retail. Wholesale trade is concerned with buying goods
from manufacturers or dealers or producers in large quantities and selling them in smaller quantities
to others who may be retailers or even consumers. Wholesale trade is undertaken by wholesale
merchants or wholesale commission agents.

Retail trade is concerned with the sale of goods in small quantities to consumers. This type of trade
is taken care of by retailers. In actual practice, however, manufacturers and wholesalers may also
undertake retail distribution of goods to bypass the intermediary retailer, by which they earn higher
profits.

The importance of domestic trade in a country is that it facilitates exchange of goods within the
country. By doing this it also makes sure that factors of production reach to the right places so that
the economy of the country can grow. By allowing all different types of goods and services to reach
to all parts of the country it improves the standard of living of the residents of the country as well as
the employment rate of the country. And it helps the growth of an industry by ensuring the availability
of raw materials.

In 2011 it’s contribution to gdp was 13.8 %. GDP From Services in Nepal increased to 131079 NPR
Million in 2018 from 118204 NPR Million in 2017. GDP From Services in Nepal averaged 81820.42
NPR Million from 2000 until 2018, reaching an all time high of 131079 NPR Million in 2018 and a
record low of 61837 NPR Million in 2001.
 Growth of trade

1. Agriculture sector:
Nepal’s economy is largely dependent on agricultural, which accounts for 36% of GDP and
absorbs about two-thirds of the labor 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 labor 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.
Food and live animals comprise over 90% of total agricultural exports to India.The government
is currently focusing on the modernisation, diversification, commercialisation and marketing of
the agriculture sector.
2. Domestically manufactured commodities:
• Trade in domestically manufactured commodities has been growing. The production
index increased from 100 in 2004 to 112 in 2013.
• Foods, chemical, iron, and steel, dairy and beverages have experienced high rates of
growth. All domestically manufactured commodities are traded.
• Nepal's Industrial production rose 7.9 % YoY in Jul 2018. An average rate of 12.2 %.
• The data reached an all-time high of 27.5 % in Jan 2017 and a record low of 5.9 % in Apr
2018.
• Industrial Production Index covers Manufacturing sector only. Industrial Production
Index is in quarterly frequency, ending in April, July, October, and January of each year.
3. Import in Nepal:
• Import trade in commodities have grown at a very high rate.
• Nepal mainly imports oil, gold, iron and steel, clothes, pharmaceutical products, cement,
electronic appliances, food and vehicles.
• Nepal’s main imports partner is India (accounting for 58 percent of all imports). Others
include China, Indonesia, Argentina, South Korea, Malaysia, Japan and Germany. 
Source- Himalayan times, (may30, 2019)
• Between 2004 and 2012, the import trade increased almost three fold.
• On 2019 May 30, Government raised tax on imported goods
 To promote local industries
 The budget has increased custom tax on imported goods like; chicken by 3 times 10% to
30%, milk products 40%, 15% custom tax levied on dry coconuts, cashews and peas, 40
% on imported tea and coffee, 40 % on import of sugar or sugar products.
 40 % Custom tax levied on chocolates, cocoa powder, pasta, macaroni, noodles, crispy
bread, biscuits, fruit juice and potato chips.
 Excise duty on mobile phone has been set at 2.5 %.
 Government has announced to provide 50% exemption on transportation vehicles
imported by agricultural cooperative.
 Government will only levy 1% custom charge on machinery, spare parts for garment
industry.
 Trading Economics/ nrb:
Imports in Nepal decreased to 116940.90 Million NPR in December from 123238.80 Million
NPR in November of 2018. Imports in Nepal averaged 40022.89 Million NPR from 2001 until
2018, reaching an all time high of 141240.60 Million NPR in September of 2018 and a record
low of 8000.30 Million NPR in October of 2001.
The following product groups represent the highest dollar value in Nepal’s import purchases
during 2017. : Source- www.woldstopexports.com
• Mineral fuels including oil: US$1.5 billion (15.2% of total imports)
• Iron, steel: $947.8 million (9.4%)
• Machinery including computers: $913.5 million (9.1%)
• Vehicles: $713.9 million (7.1%)
• Electrical machinery, equipment: $657.6 million (6.6%)
• Cereals: $409.8 million (4.1%)
• Gems, precious metals: $369.7 million (3.7%)
• Plastics, plastic articles: $367.2 million (3.7%)
• Salt, sulphur, stone, cement: $317.9 million (3.2%)
• Animal/vegetable fats, oils, waxes: $297.9 million (3%)
4. Export in Nepal:
Nepal mainly exports carpets, beverage, textile, tea and plastic.Its main export partners include
India, the US, Bangladesh and Germany. Nepal mainly imports fuel, apparel, gold, iron and
steel, machinery and equipment.
Export to india; source: Himalayan times 2018 , Nrb
• The country’s export to India slowed to a crawl in the first five months (mid-July to mid-
December) of this fiscal as major export items recorded negative growth in the review
period.
• As per the central bank’s report, exports to India stood at 53.3 per cent of total exports in
first five months of this fiscal against 55.6 per cent in corresponding period of previous
fiscal.
• The country exported goods worth Rs 17.96 billion to India in the review period.
• Export of major export items like juice, cardamom, plastic utensils, GI pipes, among
others, plunged heavily after the integrated GST( goods and service; tax) increased the
tariff to export to India.
• Export of cardamom plummeted by 68.4 per cent to Rs 393.5 million in the first five
months of this fiscal compared to the corresponding period of the previous fiscal.
• The country had exported cardamom worth Rs 1.25 billion in the first five months of last
fiscal 2016-17.
• Commerce Secretary Chandra Kumar Ghimire said that exporters need to diversify the
market of their products to minimise the risk of market concentration.

Scenario in first five months

2 2
C
P 0 0
h
ro 1 1
a
d 6 7
n
u - -
g
ct  1 1
e
7 8
R
R
s
s -
2
8
,
Ju 3 3
1
ic 4 .
0
e 4 7
6
. 0
.
3 %
9
m
m
R
R
s
s -
C 1
6
ar ,
3 8
da 2
9 .
m 4
3 4
o 6
. 0
m .
5 %
5
m
m
R R
-
s s
G 9
4
I 0
5 4
pi .
9 5
pe 0
. .
s 0
8 8
%
m m
C
o R R
-
p s s
7
pe 3
2
r 5 9
.
w 4 7
5
ir . .
0
e 0 5
%
ro m m
ds
R
R
s -
s
N 2
2
o 2 2
6
o 0 .
7
dl 6 8
.
es . 0
7
6 %
m
m
R R
-
s s
7
G 1
9
in 3 2
.
ge 1 7
0
r . .
0
9 7
%
m m
R
ea
d R R
-
y s s
3
m 1
1
ad 1 7
.
e 0 5
3
ga . .
0
r 5 8
%
m m m
en
ts
Pl R R -
as s s 7
 ti
7 8
c 1
8 .
ut 6
. 7
en .
9 0
sil 8
m %
s m
R
R -
V s
s 1
eg
6 6
et 5
5 .
ab 4
. 0
le .
4 0
s 9
m %
m
R R -
s s 4
Fr 1 3
ui 6 9 .
ts . . 3
9 6 0
m m %

Exports to China: the Kathmandu post/nrb

2018
• Jun 11, 2018-Exports to China nearly doubled in the first 10 months of the current fiscal
year, as the profile of Nepali products rose due to increased participation in China’s trade
fairs.
• Nepal secured export earnings of Rs2.66 billion, up from Rs1.42 billion, according to
Nepal Rastra Bank (NRB) statistics.
• Over the period, earnings from wheat flour, tea, noodles, pashmina, woolen carpets and
handicraft items surged dramatically. 
 • Suyash Khanal, director at Trade and Export Promotion Centre (TEPC), said demand for
Nepali products of late has been increasing from China
• China provides duty-free, quota-free market access to 8,030 Nepali goods.
• As per the TEPC, most of Nepal’s exportable goods qualify for preferential treatment in
China.
• According to the government record, Nepal’s exports to China reached an all-time high
of Rs2.98 billion in 2013-14. 
• However, exports went into freefall after Chinese authorities closed the Tatopani trade
route following April 2015 earthquake.
• Chinese traders have also been buying Nepali goods from the local market to sell them in
China. 
• Around 25 percent of Nepal’s total trade with China is done through the Rasuwagadhi-
Kerung overland route.
•
According to Sheshkanta Gautam, executive director of the National Tea and Coffee
Development Board, a number of Chinese traders have been buying Nepali tea to re-
export it to other countries including Australia.
• Likewise, Buddha statues made out of metal and felt products among other Nepali
handicraft items are also among the favourite items of Chinese consumers, shows NRB
statistics.
• Meanwhile, Nepal imported goods worth Rs127.24 billion from China in the first 10
months of the current fiscal year, up 22.3 percent than in the same period a year ago.
• Telecommunications equipment, electronic goods, machineries, readymade garments,
chemical fertilisers, medical equipment and footwear are among the major imports from
China.

Import export in Nepal from 1980-2017; source: atlas.media.mit.edu

Employment in trade
• Agriculture provides employment opportunities to 66 percent of the total population and
contributes about 34.7 percent in the GDP. ( Economic Survey: 069/70)
• Employment in industry (% of total employment) in Nepal was reported at 8.109 % in
2017, according to the World Bank collection of development indicators, compiled from
officially recognized sources.
• Employees are people who work for a public or private employer and receive
remuneration in wages, salary, commission, tips, piece rates, or pay in kind.
• Industry corresponds to divisions 2-5 (ISIC revision 2) or tabulation categories C-F (ISIC
revision 3) and includes mining and quarrying (including oil production), manufacturing,
construction, and public utilities (electricity, gas, and water).
• Trade is also a source of self employment.
• Creates employment for loading, unloading, clearing, and forwarding of goods.
• Every month, the working age population increases by 35,000 people and Nepal must
create 286,900 jobs a year to maintain its employment rate,” WB said in its report.
• While WB projected Nepal’s GDP growth at 4.6 percent in 2018, “providing
opportunities to these young entrants while attracting more women into the labor market,
will require generating even more jobs for every point of economic growth,” says Martin
Rama, World Bank South Asia Region Chief Economist 
• Nepal has seen an economic recovery after disruptions from earthquakes and a trade
blockade, but growth is expected to slow from 7.5 percent in fiscal year 2017 to 4.6
percent in 2018 due to the heaviest floods in decades combined with slow recovery of
exports, slowdown in remittances, and an increase in lending rates,” the report added

Problems of domestic trade:

• Lack of surplus
The subsistence nature of Nepal’s economy leaves very little surplus for trade. The
declining productivity in traditional agricultural commodities have further constrained the
trade.
• Slow industrial growth
Manufacturing enterprises in Nepal suffer from slow growth. Their capacity utilization
has been poor. Their financial health is bad. Market information is lacking. the low
growth of industries have constrained trade.
 • Rugged topography
Mountainous topography, landlockedness of the country, poor infrastructure development
and open borders have also contrained trade.
• Low quality products
The quality of Nepalese products is generally poor. Product imitation are widespread.
Low quality has adversely affected Nepal’s trade.
• Changing government policies
Trade policies in Nepal change frequently. The restrictive policies of past have been
replaced by open door policy. Imports have risen sharply. However, effective
implementation of trade policies are lacking. Research and information about trade is also
inadequate.

Economic contribution of trade:

• Agriculture remains Nepal's principal economic activity, employing about 65% of the
population and providing 31.7% of GDP.
• In the fiscal year 2000-2001, exports posted a greater increase (14%) than imports
(4.5%), helping bring the trade deficit down by 4% from the previous year to $749
million.
Strong export performance, including earnings from tourism, and external aid have helped
improve the overall balance of payments and increase international reserves.
 SWOT Analysis:
STRENGTH:
 Nepal is rich in biodiversity especially in medicinal herbs like yarshagumba and
many other life saving drugs.
 Nepal has one of the largest untapped hydropower resources in the world an
estimated 83000 MW of hydropower potential.
 Tea and coffee of Nepal have also good market.
 Nepal is 6th producer of lentils. This is huge achievement and we can focus on such
product , which could put into the world agriculture map and buyers could get
attracted towards our country.
Weakness
 Tax burden is relatively higher in nepal than other SAARC countries lacking simplicity,
transparency and competitiveness. This has resulted in tax evasion by more than 80%.
 High value crops suitable for viable exports have not yet been fully identified except
Yarshagumba.
 Although government emphasized on the commercialization of agriculture, major
political parties don’t subscribe to the proposal in favors of large or estate farming.
 Poor physical connectivity-road denasity is one of the lowest in south asia. 60% of road
network, mostly rural roads cannot provide all weather connectivity.
 Politcal instability, absence of proper plans and policies.
 No energy strategy plan to streamline hydropower development and there is no regulating
commission to regulating commission to regulate power sector.
Opportunities and threats:
 Agriculture
Agriculture is the biggest source of Nepalese livelihood. Still more than 70% of total
population derives their livelihood directly from agriculture.
 Hydropower
 Biodiversity
 Globalization
1. Development of tourism sector
2. Improvement of IT
3. Foreign direct investment (FDI), Multi National companies
4. Foreign trade globalization
This helps to open the economic border of the country and remove trade
barriers.
 Potential to be major hydropower supplier to India and surrounding countries.
 Modern day fisheries are able to produce in huge quantity all around the year, turning
into one of the recreational facility for the city dwellers and tourist.
 Threats:
 Ranks 11th in the world in the terms of vulnerability to earthquakes and climate extremes
such as droughts and floods.
 Crisis of fertilizer every time, lack of proper guidance and training in agricultural
production.
 Poor industrial relation with rigid labor laws and tax regulations, continuous blockade
and strikes.
 Scarce resource to funding mega projects resulting in poor condition of industry.