CIA reports that the main industries in Nepal are the tourism industry, tapestry and textiles industry, small rice jute factories, sugar, and olive mills as well as cigarettes, cement plants, and brick mills. Besides manufacturing in rice, wheat, and oil processing in the small-scale food industry, the light industry, concentrated in the Southeast of Nepal in particular, comprises jute products, refined sugar, cigarettes, clothing, cotton, and synthetic materials as well as wool, shoes, tanned leather and tea. The carpeting, clothing, and spinning industries are 3 major industrial workers, followed by the manufacturing of structural clay products, sugar, and jute. Production of sugar was 49.227 tons, 20.1870 tons of jute goods in 1995, and 23.477 tons of soap.
Agriculture—mainly rice, maize, and wheat—engages the majority of the population in Nepal and represents well over half of the export income of the country. But the productivity of agriculture is very low. Low yields are the result of fertilizer shortages and improved seeds and the application of inefficient techniques. Because only a small percentage of the cultivated area is irrigated in Nepal, the output is dependent on the weather conditions. Other major crops are potatoes, sugarcane, and millet. The main cattle raised are cattle, buffalo, goats, and sheep.
Agricultural production in Terai has the greatest potential for increases. The potential for increased production is limited in the mid-mountain region. Almost all cultivable land is tilled due to the high population concentration in this region. The increase in cultivated land by forestation compounds erosion and causes a reduction in yields and land losses through landslides. Major projects to stop soil erosion and deforestation have been undertaken.
About one-third of the total area of Nepal is forested, the majority of which is owned by the State. Timber is one of the most valuable resources and the major source of potential revenue despite overcutting and poor management. An important source of Indian rupees is the export of forest products. Nearly every wood is exported to India. The wood-processing facilities of the Timber Corporation in Nepal provide construction and furniture for Kathmandu Valley.
The mineral resources of Nepal are small, disseminated, and barely developed. The deposits of coal (lignite), iron ore, magnesite, copper, cobalt, pyrite, calcareous stones, and mica are known. Nepal's large river systems offer huge potential for the development of hydroelectric power. It may become the main cornerstone of the nation's economy if it is developed and used within the country and exported to India (the main energy market generated in Nepal).
Industrial production is an economic sector that is small but growing. The majority of industries are small, localized, agricultural product processing operations. The jute industry is a major foreign exchange producer, based in Birātnagar. In Birātnagar, Birganj, and Bhairahawā, sugar factories are located. In Hitaura there is a sawmill and a meat production facility, and in Tarai, there are rice and oil mills. The manufacture of steel and tiles; the processing of building materials, paper, food grain; manufacture of cigarettes; cement production; and brewing beer are also industries. There are generally more industrial businesses, although the cottage industry is mostly involved, in the private sector than in the public sector. Birātnagar, the Birganj–Hitaura Corridor, and the Kathmandu Valley are the main areas of manufacturing concentration.
It is a small but growing industry that represents tourism. The Kathmandu valley is the only area equipped with the required hotels, food supply, roads, and international transport service. Furthermore, it is the only one with international services. However, there are many other areas outside the Kathmandu Valley, including Pokharā, the Everest, and the Nârāyani, which can be exploited for tourism (where big game exists).
Most of Nepal's trade is with India for geographical and historical reasons. China and the US are also important trading partners. The efforts have been made in agreements with China, Japan, South Korea, Pakistan, the USA, Germany, and Poland for the diversification of trade. By encouraging the development of commercial enterprise activity the State Trading Agency National Trading Limited has expanded its activities. Until now, large-scale business has been in the hands of foreigners, mainly Indians.
Nepal has experienced a reversal of external trade and balance of payments, with exports not rising sufficiently to pay for imports of consumer goods and basic supplies of goods. Nepal was the cause of periodic frozen relations between the two countries because it was dependent on the Indian market for most of its imports and exports as well as on port Kolkata, because of access to the sea.
In a world of similar size, few independent nations have such little traffic mileage and only very few motor vehicles; transport facilities are very small in Nepal. Aid from India, China, Great Britain, and the United States has been undertaken since the 70s to build new roads. A network of footpaths, which connect the mountains and valleys, was the primary means of transport. Trails have evolved into major commercial routes that are more likely to follow the systems of rivers.
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