Agriculture accounts to the major portion of Nepal’s total GDP. With 40 percent contribution to the GDP, Nepal is 80 percent reliant on cultivation of various crops ranging from rice to Jute, tea and tobacco; rice being the staple food. Terai belt (the low lands of Nepal) has the most terraced flat lands ideal for cultivation. Hilly region including the Kathmandu Valley also has fertile lands and can be seen teeming with various crops throughout the year.
Though Nepal’s principal economy is based on agriculture, efforts to boost the economy through various other means like manufacturing industries, tourism and trade have also been upped in recent times. However, foreign remittance has been the most foreign currency earning source lately with thousands of Nepalese workers going abroad for employment day in day out.
A long-standing economic agreement underpins a close relationship with India. The country receives foreign aid from India, Japan, the UK, the US, the EU, China, Switzerland, and Scandinavian countries. Poverty is acute; per-capita income is around $1,000. The distribution of wealth among the Nepalis is consistent with that in many developed and developing countries: the highest 10% of households control 39.1% of the national wealth and the lowest 10% control only 2.6%.
The government’s budget is about $1.153 billion, with expenditure of $1.789 billion (FY05/06). The Nepalese rupee has been tied to the Indian Rupee at an exchange rate of 1.6 for many years. Since the loosening of exchange rate controls in the early 1990s, the black market for foreign exchange has all but disappeared. The inflation rate has dropped to 2.9% after a period of higher inflation during the 1990s.
Nepal’s exports of mainly carpets, clothing, leather goods, jute goods and grain total $822 million. Import commodities of mainly gold, machinery and equipment, petroleum products and fertilizer total US$2 bn. India (53.7%), the US (17.4%), and Germany (7.1%) are its main export partners. Nepal’s import partners include India (47.5%), the United Arab Emirates (11.2%), China (10.7%), Saudi Arabia (4.9%), and Singapore (4%).