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VOLUME 03 ISSUE 10 OCTOBER 2020

Trade deficit impede Nepalese economic growth : an analysis from review perspective
1*Saurav Khanal,2*Saugat Khanal
1Bachelor of Business studies, Tribhuvan University ,Kathmandu, Nepal
2Faculty of Agriculture, Agriculture and Forestry University, Rampur, Chitwan, Nepal
Corresponding Author : *Saugat Khanal
*Faculty of Agriculture, Agriculture and Forestry University, Rampur, Chitwan, Nepal
DOI : https://doi.org/10.47191/ijmra/v3-i10-01

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ABSTRACT:

The current study completely delves into the comprehensive identification, assessment, and mitigation of trade deficit in Nepal. The objective of this article is to study and analyze the growth, composition, and direction of Nepalese foreign trade along with the causes and recommendations of trade deficit. Efforts have been made to sort out the principal sources of the trade deficit in Nepal. Landlockedness, political instability, lack of export diversification, devaluation of domestic currency, lack of resources, etc. are the major causes of the trade deficit in Nepal. Nepal, being not self-reliant on factors of production, consumer goods and capital goods, needs to import goods from abroad. On another hand, Nepal’s exports are heavily concentrated; both in terms of product and destination. Nepal’s major trading partners are India, China, U.A.E, Bangladesh, Germany etc. During the year 2018/19, Nepal exports goods worth RS. 97 Billion And import goods worth RS. 1418 billion leading to a trade deficit of RS.1321 Billion. Nepal mainly exports readymade garments, woolen carpets, pashmina products, jute, juices, etc and imports petroleum products, gold, vehicle, machineries and so on. It is a matter of embarrassing that the value of total exports doesn’t cover even the import of petroleum products. Trade deficit is acting as negative catalyst in the economic growth and GDP of a country. Nepal’s job and wealth are being handed over to other countries that have taken advantage of Nepal since very long. Increased deficit has caused suppressed inflation. Import to export ratio is continuously increasing as demand/consumption is increasing and these demands could not be met by the domestic producers. During the year 2018/19, the contribution of trade on GDP of Nepal is 55%. No doubt, trade is an engine of economic growth. So, after analyzing barriers in the foreign trade, some of the steps to be taken are recommended which includes the development of competitive ability and enhancement of Human Resources, commodity and market diversification, formulation of strong legal framework and trade policy, incentives for the promotion of export and priority in the agricultural and hydropower sectors.

KEYWORDS

Trade deficit, causes, export, impacts, import, Nepal, recommendations

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VOLUME 03 ISSUE 10 OCTOBER 2020

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