Nepal's Foreign Trade Surges by 18.8% Despite Persistent Trade Deficit

Nepal's foreign trade has recorded a significant upswing in the first eleven months of fiscal year 2024/25, reaching Rs. 1.89 trillion, marking an 18.8% increase compared to the same period in the previous fiscal year. This growth was primarily driven by a sharp rise in exports, even as imports continued to outpace them, resulting in a persistent but slightly improved trade deficit.

Export Boom Led by India

Exports surged by an impressive 77.8% to Rs. 247.57 billion in the eleven-month period of 2024/25, a notable rebound from a 3.0% decline in the same period of 2023/24. The spike was mainly attributed to exports to India, which more than doubled, rising by 112.6% to Rs. 200.9 billion. Exports to China, on the other hand, saw a modest increase of 3.0% to Rs. 2.48 billion, while exports to other countries rose slightly by 4.4% to Rs. 44.19 billion.

Import Growth Moderates

Total imports stood at Rs. 1.64 trillion, registering a 13.1% rise compared to the previous year. Imports from China rose sharply by 15.3% to Rs. 314.58 billion, and imports from other countries also rebounded by 29.5% to Rs. 353.08 billion. Interestingly, imports from India slightly decreased by 3.1%, totaling Rs. 977.14 billion, indicating some diversification in Nepal's import sources.

Trade Deficit Narrows Slightly

Despite the surge in exports, Nepal continues to operate under a large trade deficit. The total trade balance for the eleven-month period of 2024/25 stood at a negative Rs. 1.39 trillion, a 6.3% improvement compared to the same period of 2023/24. The trade deficit with India narrowed by 4.6%, while the deficit with China and other countries widened by 15.4% and 34.2% respectively, reflecting rising import dependency.

Regional Trade Highlights

Nepal’s total trade with India, which dominates its trade portfolio, increased by 17.5% to Rs. 1.18 trillion. Trade with China also grew significantly by 15.2% to Rs. 317.06 billion, reaffirming China's position as Nepal’s second-largest trading partner. Trade with other countries reached Rs. 397.27 billion, up by 26.1%, signaling Nepal’s gradual engagement with diverse global markets.

The data suggests that while Nepal has made strong strides in boosting exports—particularly to India—the structural imbalance in trade remains, driven by high import dependency. Policymakers must now focus on sustaining export growth, enhancing product diversification, and strengthening trade logistics to manage the growing trade gap and build a more resilient foreign trade regime.