Key Sectors Driving Nepal’s Export Performance in FY 2082/83

Published on September 24, 2025

Nepal’s export sector has shown remarkable momentum in FY 2082/83, with growth nearly doubling by 95.7% in mid-August 2025/26 compared to the same period last year. This surge is not the result of one factor alone but rather a combination of traditional strengths and new opportunities. Traditional products such as handmade carpets, garments, pashmina, and handicrafts continue to dominate, particularly in European markets like Germany, where Nepal has recorded its largest trade surplus. Alongside these, agro and herbal exports—including orthodox tea, coffee, cardamom, ginger, and medicinal plants—are gaining popularity in South Asia and Europe, aligning with rising global demand for organic and natural products. A transformative driver of recent performance has been hydropower exports to India, marking a shift toward higher-value, sustainable exports that diversify Nepal’s trade base. Light manufacturing, such as cement, processed foods, and semi-finished iron and steel products, has also started contributing, albeit modestly, reflecting the gradual capacity of Nepal to move into industrial exports. Meanwhile, the IT and digital services sector, though still underreported in official statistics, is emerging as a promising frontier as Nepali youth increasingly participate in outsourcing and global freelancing markets.

Despite these achievements, challenges remain. Exports are still far smaller than imports—Rs. 23.9 billion vs. Rs. 143 billion by mid-August—keeping the trade deficit wide. Moreover, the export base is narrow and concentrated in limited products and markets, which makes it vulnerable to external shocks and policy shifts in destination countries. To make this growth sustainable, Nepal must focus on value addition, market diversification, and policy support for emerging sectors like hydropower and IT. Strengthening infrastructure, ensuring consistent supply chains, and improving trade facilitation will be key to turning the recent rebound into long-term structural transformation.

Policy Lessons from India: Can Nepal Control Inflation More Effectively?

India has kept inflation relatively moderate through strong agricultural systems, buffer stocks, and inflation-targeting policies, while Nepal has historically struggled with food-driven volatility. Nepal’s CPI fell below India’s in 2025/26 for the first time in four years, but to sustain this trend, Nepal must strengthen supply chains, adopt buffer policies, and set clearer inflation targets.

Inflation Convergence in South Asia: What Nepal-India CPI Data Reveals

Nepal and India’s inflation rates, once far apart, have gradually converged—Nepal’s CPI dropping from 7.74% in 2022/23 to 1.68% in 2025/26, while India’s remained steadier around 2–5%. For the first time in four years, Nepal’s inflation fell below India’s, highlighting both shared regional cycles and unique domestic vulnerabilities.

Nepal vs India: Monthly CPI Comparison and Regional Economic Impact

Nepal’s inflation fell to 1.68% in August 2025/26, below India’s 2.07%, reversing a four-year trend. While both economies share similar seasonal inflation cycles, Nepal’s sharper food-driven spikes contrast with India’s steadier, monsoon-driven patterns. Regionally, this convergence impacts household costs, trade competitiveness, and economic stability.

Inflation Gap Narrows: Nepal’s Deviation with India Falls to -0.39% in 2025/26

In August 2025/26, Nepal’s CPI stood at 1.68%, lower than India’s 2.07%, with the inflation deviation dropping to -0.39% for the first time in four years. While Nepal gained from falling food prices, India’s inflation stayed higher due to agricultural pressures, though both countries continue to face rising service costs.

Cross-Border Inflation Trends: How Nepal and India’s Prices Move Together and Apart

Nepal and India’s inflation trends usually move in sync, reflecting shared regional and global factors. But in August 2025/26, Nepal’s inflation (1.68%) fell below India’s (2.07%) for the first time in four years, thanks to easing food prices in Nepal, while India faced higher agricultural pressures.

Nepal vs India Inflation 2025/26: Why Nepal’s CPI Fell Below India’s for the First Time

In August 2025/26, Nepal’s inflation dropped to 1.68%, falling below India’s 2.07% for the first time in four years. While food price declines drove Nepal’s slowdown, India’s inflation held slightly higher due to agricultural pressures. However, Nepal’s service costs remain a long-term challenge, even as headline CPI looks favorable.