Kathmandu, June 15: The Nepal Rastra Bank’s Economic Activity Study Report shows that the economy saw gradual improvement in the first six months of the current fiscal year, but agriculture remains under pressure while industrial capacity use stays weak.
Overall economic growth is projected at 3.85 per cent, down from 4.33 per cent last year. In GDP, agriculture contributes 24.5 per cent, industry 14 per cent, and services 62 per cent.
Foreign investment proposals worth Rs 55.83 billion were recorded this year. However, the report notes that no industry is operating at full capacity. Average industrial capacity utilization stands at just 42.11 per cent.
Agriculture under stress
Agricultural production has declined sharply, with food and other crops falling by 6.76 per cent. This contrasts with a 1.77 per cent increase last year. Key crops such as rice and maize were affected.
Vegetable and horticulture production rose slightly by 1.02 per cent. The report links the overall agricultural decline mainly to weather and climate change impacts.
At the provincial level, food crop production fell in all provinces except Karnali. Vegetable production increased in Madhesh, Bagmati, and Lumbini but declined elsewhere. Fruit production rose in Madhesh, Gandaki, and Sudurpaschim, while falling in Koshi, Bagmati, Lumbini, and Karnali.
Koshi Province accounts for 25.76 per cent of total rice production, while Karnali contributes just 2.54 per cent.
Agricultural credit declines
Bank and financial institution lending to agriculture fell by 2.49 per cent to Rs 333.11 billion. The largest share of agricultural credit, Rs 6.64 billion, went to livestock farming, while tobacco received the least at Rs 16.89 million.
By province, Bagmati holds 36.88 per cent of agricultural credit, Madhesh 18.30 per cent, Koshi 16.56 per cent, Lumbini 15.14 per cent, Gandaki 6.95 per cent, Sudurpaschim 4.70 per cent, and Karnali 1.47 per cent.
Provincial challenges
In Koshi Province, agriculture remains largely subsistence-based, requiring commercialisation and productivity improvements.
In Madhesh, issues persist in market access, storage, and enforcement of minimum support prices. Farmers also lack access to modern farming methods, insurance, pest control, soil testing, and mechanisation.
Bagmati faces challenges in preserving indigenous seeds and ensuring regular pesticide testing for fruits and vegetables.
Gandaki requires stronger infrastructure for storage, processing, transport, and market linkages.
Lumbini needs coordinated development of irrigation, roads, energy, and agro-industrial systems.
Karnali faces geographic constraints, weak irrigation, and poor market access. The report recommends branding and promoting indigenous crops such as Marsi rice, millet, buckwheat, and barley.
Sudurpaschim struggles with illegal imports from India and needs to strengthen domestic production through better capital and technology use.
Industries operating below capacity
Industrial capacity utilization averages only 42.11 per cent nationwide. Despite rising investment, no sector is operating at full capacity.
During the first six months, 461 new industries were registered, including 363 in Bagmati and only four in Sudurpaschim. These industries attracted Rs 55.83 billion in proposed foreign investment and created 22,885 jobs.
Some sectors show relatively higher utilization: garments at 95.74 per cent, textile production at 90 per cent, hydropower at 82.74 per cent, tyre and tube production at 76.20 per cent, and noodles at 70.06 per cent.
Industrial lending rose by 7.99 per cent to Rs 1.778 trillion, accounting for 30.82 per cent of total credit. Manufacturing and non-food industries hold the largest share.
Service sector improvement
Tourism showed strong growth, with 631,000 foreign tourists arriving in the first six months.
The report concludes that policy improvements, better budget execution, and new programs could gradually boost production, trade, and services. However, inflation control and supply chain stability remain key challenges.
People’s News Monitoring Service
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