Nepal removes upper cap on automatic route FDI approval; energy, IT, tourism and manufacturing sectors set to benefit

KATHMANDU: The Government of Nepal has removed the upper investment ceiling for foreign direct investment (FDI) approvals under the automatic route, a move expected to accelerate investment inflows, simplify procedures, and boost investor confidence across multiple sectors of the economy.

The decision, endorsed by the Cabinet and implemented through a gazette notice issued by the Ministry of Industry, Commerce and Supplies, eliminates the previous maximum limit while retaining the minimum investment threshold of Rs 20 million. However, the notice clarifies that even this minimum requirement will not apply to information technology-based industries.

Officials say the policy change is aimed at promoting paperless approvals, faster company registration, investment-friendly reforms, and digital governance, while making Nepal more competitive in attracting global capital.

Wide range of sectors eligible for automatic FDI entry

According to the ministry, the removal of the ceiling will benefit a broad range of industries.

Energy sector
Projects generating energy from wind, solar, natural oil and fuel, gas, biogas and other alternative sources will now be eligible for automatic approval. Energy produced as a by-product in sugar industries and investments linked to feasibility studies will also receive facilitation.

Agriculture and agro-processing
Foreign investment will be eased in fruit and vegetable processing, food production and storage, animal feed industries, silk processing, tea and coffee processing, herbal industries, rubber and cotton processing, cold storage facilities, and wood-based industries including furniture manufacturing.

Infrastructure and logistics
Investors will be able to enter automatically in projects such as convention centres, parking facilities, export processing zones, cargo complexes, water treatment plants, film cities, commercial complexes and private warehouses.

Tourism and hospitality
The automatic route will facilitate investment in motels, hotels, resorts, restaurants, wellness and healing centres, conference tourism, sports tourism, amusement parks and water parks — sectors seen as key for foreign exchange earnings and job creation.

Information technology and digital economy
The policy gives special priority to the digital sector, including technology parks, IT parks, biotech parks, software development, data processing, digital mapping, and data centres. Officials say easing entry for IT investors is expected to support Nepal’s push toward a digital economy, outsourcing industry growth, and tech-enabled services exports.

Service industries
Construction services, printing, photography, hospitals, fitness and sports centres, waste management, veterinary services, infrastructure operation services, cargo handling, advertising, electricity surveys and mineral studies are also included.

Manufacturing sector
The reform extends to a wide range of industrial activities, including animal and fish feed production, chemical fertiliser factories, cement plants, brick and tile production, electric wire manufacturing, beverage industries, bakeries, plastic and rubber goods production, and dozens of other industrial categories.

Policy intended to attract larger foreign projects

The government had previously fixed the automatic route threshold in 2023 to make FDI approvals easier. Officials now say removing the upper cap signals a stronger commitment to investment liberalisation, industrial expansion, export promotion, and private-sector-led growth.

Economists note that the reform could help Nepal attract large-scale infrastructure investors, renewable energy developers, technology firms, logistics companies and tourism operators, particularly as global investors increasingly seek emerging markets with simplified approval processes.

Officials believe the new policy framework will reduce bureaucratic hurdles, shorten approval timelines, and improve Nepal’s standing as an investment destination in South Asia.