The economy > Industry and trade

Industrial production represents a small but growing segment of economic activity. Most industries are small, localized operations based on the processing of agricultural products. The jute industry, centred in Biratnagar, is an important earner of foreign exchange. Sugar factories are located in Biratnagar, Birganj, and Bhairahawa. There are a sawmill and a meat-processing plant in Hitaura and a number of rice and oil mills in the Tarai. Other industries include brick and tile manufacture; processing of construction materials, paper, and food grain; cigarette manufacture; cement production; and brewing of beer. In general, there are more industrial enterprises in the private than in the public sector, although most of these are cottage industries. The main areas of manufacturing concentration are Biratnagar, the Birganj–Hitaura corridor, and the Kathmandu Valley.


Tourism represents a small but expanding industry. Foreign tourism is primarily confined to the Kathmandu Valley, which is the only area equipped with the necessary hotels, food supplies, roads, and international transport services. There are, however, many areas outside the Kathmandu Valley with potential for the development of tourism; these include Pokhara, the Mount Everest area, and the Narayani area (where big game exists).

For geographic and historical reasons, nearly all of Nepal's trade is with India. Attempts have been made to diversify trade through agreements with such countries as Japan, South Korea, Pakistan, the United States, Germany, Poland, and China. The state trading agency, National Trading Limited, has expanded its activities by fostering the development of commercial entrepreneurial activity. Large-scale commercial activity has hitherto been in the hands of foreigners, primarily Indians.

Nepal's foreign trade and balance of payments have suffered setbacks, and exports have not increased enough to pay for imports of consumer goods and basic supplies. Nepal's dependence on the Indian market for most of its imports and exports and on the port of Calcutta for its access to the sea has been the source of periodic friction between the two countries Transport facilities in Nepal are very limited; few independent nations in the world of comparable size have such little road mileage and so few motor vehicles. Construction of new roads has been undertaken since the 1970s with aid from India, China, Great Britain, and the United States. The main means of transportation has been the network of footpaths, which interlace the mountain terrain and valleys. Trails have evolved into main trade routes, which tend to follow the river systems.


The meagre road-transport facilities in Nepal are supplemented by only a few railway and air-transport links. Increased use of road transport has reduced the significance of the two narrow-gauge railroads that run from Amlekhganj to Raxaul (India) and from Janakpur to Jaynagar (India). The Royal Nepal Airline Corporation, an autonomous government agency, is the only commercial airline. Together with Indian Airlines, it operates flights from Kathmandu to various points in India and other nearby countries. Domestic air service within the country has been expanded. The United States built the Kathmandu–Hitaura aerial ropeway in the 1950s, and it is still used for carrying goods into the capital.

The people

The large-scale migrations of Asian groups from Tibet and Indo-Aryan people from northern India, which accompanied the early settlement of Nepal, have produced a diverse linguistic, ethnic, and religious pattern. Nepalese of Indo-Aryan ancestry comprise the people of the Tarai, the Pahari, the Newar, and the Tharus—the great majority of the total population. Indo-Aryan ancestry has been a source of prestige in Nepal for centuries, and the ruling families have been of Indo-Aryan and Hindu background. Most of the Tibeto-Nepalese groups—the Tamang, Rai, Limbu, Bhutia (including the Sherpa), and Sunwar—live in the north and east, while the Magar and Gurung inhabit west-central Nepal. The majority of the famous Gurkha contingents in the British army have come from the Magar, Gurung, and Rai groups.

The principal and official language of Nepal is Nepali (Gorkhali), spoken in the Tarai and the mid-mountain region. Nepali, a derivative of Sanskrit, belongs to the Indo-Aryan branch of the Indo-European family. There are a number of regional dialects found in the Tarai and mountain areas. The languages of the north and east belong predominantly to the Tibeto-Burman family. These include Magar, Gurung, Rai, Limbu, Sunwar, Tamang, Newari, and a number of Bhutia dialects, including Sherpa and Thakali. Although Newari is commonly placed in the Tibeto-Burman family, it was influenced by both Tibeto-Burman and Indo-European languages.

In Nepal a vast majority of the population is Hindu, but a small percentage follows Buddhism or other religious faiths. Hindus and Buddhists tend to be concentrated in areas where Indian and Tibetan cultural influences, respectively, have been dominant.

Almost all Nepalese live in villages or in small market centres. Outside of Kathmandu, there are no major cities. Smaller urban centres (Biratnagar, Nepalganj, and Birganj) are located in the Tarai along the Indian border, and Pokhara is situated in a valley in the mid-mountain region. In addition, a few townships—such as Hitaura, Butwal, and Dharan—have begun to emerge in the foothills and hill areas, where economic activity has developed.