FDI Commitments Cross Rs 40 Billion in Eight Months as Policy Reforms Boost Investor Confidence

Kathmandu — Nepal has witnessed a notable rise in foreign investment commitments in the first eight months of the current fiscal year, with total pledged Foreign Direct Investment (FDI) exceeding Rs 40.66 billion. The surge comes at a time when the government has introduced policy reforms aimed at simplifying investment procedures, including the removal of the cap under the automatic route, allowing foreign investors to bring in capital without prior approval in designated sectors.

According to data from the Department of Industry, FDI commitments have been secured for 524 industries between Shrawan and Falgun. Of the total pledged amount, a dominant Rs 37.23 billion has come through the traditional approval route across 177 industries, while Rs 3.43 billion has been committed via the automatic route in 377 industries. Although the automatic route accounts for a larger number of projects, the comparatively lower investment size indicates that it is currently attracting smaller-scale ventures, likely in early-stage or service-oriented sectors.

The employment outlook linked to these commitments appears promising, with an estimated 21,495 jobs expected to be generated once the approved industries come into operation. This suggests that FDI is not only contributing to capital inflow but also playing a role in addressing employment challenges, particularly in a slowing domestic economy.

In addition to new project approvals, investment commitments have also been facilitated through equity transactions. Around Rs 5.80 billion has been pledged via Share Purchase Agreements (SPA) and Share Subscription Agreements (SSA) across 38 industries. Meanwhile, 34 industries have received approval for Technology Transfer Agreements (TTA), indicating a gradual shift towards knowledge and technology-driven investment, which could enhance productivity and industrial competitiveness over time.

A closer look at the composition of industries reveals that small enterprises dominate in number, with 537 small industries receiving FDI commitments, compared to only 8 large and 8 medium industries. This trend highlights Nepal’s current positioning as a destination for small-scale, possibly less capital-intensive investments. While this broadens participation, it also raises questions about the country’s ability to attract large, transformative investments that could significantly impact infrastructure and industrial capacity.

Sector-wise distribution presents a mixed picture. The information technology sector leads in terms of number of projects, with 307 industries attracting foreign interest. However, in terms of investment volume, agriculture emerges as the top sector, drawing commitments worth Rs 21.90 billion. This suggests growing investor confidence in Nepal’s agri-based potential, possibly driven by export opportunities and untapped value chains.

Tourism, traditionally a key sector for Nepal, has attracted FDI commitments of nearly Rs 11 billion across 155 industries, reaffirming its continued appeal despite global uncertainties. The manufacturing sector, however, remains relatively underrepresented, with only Rs 2.52 billion committed across 37 industries. Similarly, the services sector has secured Rs 3.62 billion across 39 industries. The lower investment in manufacturing may indicate structural challenges such as infrastructure gaps, policy bottlenecks, or higher operational risks.

In the month of Falgun alone, FDI commitments amounted to Rs 386 million across 30 industries, reflecting a slowdown compared to cumulative trends. This could signal short-term investor caution or delays in project approvals, which may need to be addressed to maintain momentum.

Cumulatively, Nepal has approved FDI worth Rs 6.76 trillion across 7,793 industries to date. While this reflects a long-term upward trajectory in foreign investment, the gap between approved and actual realized investment remains a critical issue. Ensuring that committed investments translate into operational projects will be key to maximizing economic benefits.

From a policy perspective, the removal of the investment ceiling under the automatic route marks a significant shift toward liberalization. However, its effectiveness will depend on complementary reforms such as improving ease of doing business, strengthening infrastructure, and ensuring policy stability. Without these, Nepal may continue to attract predominantly small-scale investments rather than large strategic inflows.

Overall, while the rise in FDI commitments signals renewed investor interest and policy traction, the structure and scale of investment highlight the need for deeper reforms. The coming months will be crucial in determining whether Nepal can convert these commitments into tangible economic growth, industrial expansion, and sustainable employment generation.