Economic Scenario of Nepal:
Nepal had set a federal structure in 2015 and after the 2017 general election. Optimism rose for greater political stability, inclusion, good governance and sustainable growth. The economy recorded 7.9 percent growth in Financial Year 2017 but worst flood in decade led to dismal firm production and overall GDP growth boiled down to 6.3 percent in FY 2018. Spending was higher in the first half of FY2018 due to fiscal transfers, general elections and developing capital goods among others. High inflation has moderated after two years due to easing of inflationary pressure in India and partial removal of supply side constraints. Increase in share of investment as a key driver of growth is a good sign for the economy. GDP growth is projected at an average of 6 percent over the medium term.
India-Nepal Economic Relation:
Over the last ten years to 2016-17, bilateral trade between India and Nepal grew by 6 times, India’s export grew by eight times and Nepal’s export to India more than doubled. Total merchandise trade was recorded at US$ 7.0 billion in 2017-18 which was expected to increase in the last completed fiscal. India’s major constituents of exports are petroleum products motor vehicles and auto component, M. S. billet; rice & paddy; other machinery & parts; medicine; hot-rolled sheet in coil; electrical equipment; cement; agricultural equipment & parts and coal among others.
Indian firms are among the largest investors in Nepal, accounting for about 30% of the total approved foreign direct investments. As on 15 September 2018, Indian ventures lead foreign investment with FDI commitments of INR 5942.68 crores.
Engineering trade between India and Nepal:
Nepal is the largest importer of Indian engineering products at present. Engineering trade between India and Nepal surged by around 72 percent between 2015-16 and 2018-19 (first ten months only). Trade deficit was in favour of India as Nepal’s export to India was insignificant at US$ 58 million only. Trade of ‘Medical and Scientific Instruments’ was low at around US$ 25 million and once again, import from Nepal was negligible.
Scope for Indian Engineering products & services in Nepal:
The economy of Nepal is set to see a sustainable growth over the medium term with growth projected at around 6 percent. India is the richest economy of South Asia which is far ahead of other nations in terms of size of the economy. Nepal for its economic growth is therefore largely dependent on India as a rich and emerging economy. Investment statistics showed the influence of Indian investors on the economic development of Nepal. Nepal is the largest destination for India’s engineering exports among the South Asian nations. The opportunity for Indian traders and investors is most likely to increase rapidly as Nepal is poised to see surge in economic activities in the years ahead.