Building a $100 billion economy: A call for bold reforms

KATHMANDU: For more than two decades, the Confederation of Nepalese Industries (CNI) has served as a strong and credible partner in Nepal’s economic development. Representing productive and service-oriented industries across all provinces and districts, CNI has actively advocated for policy, legal, and institutional reforms essential for national economic transformation.

Working closely with large, medium, small, and micro enterprises, CNI continues to play a pivotal role in facilitating collaboration between the private sector and the government to implement economic plans and development strategies.

CNI has also been conducting the Nepal Infrastructure Summit biennially since 2014, driven by the understanding that infrastructure is the backbone of economic development. The fifth edition of the summit, held in collaboration with the Ministry of Physical Infrastructure and Transport, focused on attracting both domestic and international investments into infrastructure. Recommendations collected from international experts have been submitted to the government for further action.

Recognizing the growing importance of the information technology sector in economic development, CNI has been actively promoting Nepal’s digital economy. Events like the Digital Nepal Conclave and the first-ever IT Roadshow in the United States have successfully introduced Nepal’s ICT investment potential to global audiences.

To support women’s economic empowerment, CNI has hosted both regional and international leadership summits in partnership with its Women Leadership Forum. These conferences brought together women leaders and policymakers to deliberate on gender-inclusive policies, and their recommendations have been submitted to the Government of Nepal.

CNI’s “Make in Nepal – Swadeshi” campaign, conducted in partnership with the Ministry of Industry, Commerce and Supplies, aims to build a self-reliant economy through import substitution. Focused on promoting domestic industries, the campaign has also presented policy recommendations through national forums and has been recognized as an impactful initiative to boost local production.

In all these efforts, CNI has prioritized research-based advocacy. Through its Research and Development Unit, the organization regularly publishes economic insights and policy papers, including quarterly and monthly reports, to inform both government and private sector stakeholders.

Nepal’s current macroeconomic indicators present a mixed picture. On one hand, foreign exchange reserves have reached USD 18.4 billion, sufficient to cover more than 14 months of imports. Inflation remains low, and remittances have reached an all-time high.

The banking sector has ample liquidity, and interest rates have fallen to single digits. However, despite this monetary space, credit demand remains subdued. Industries are not borrowing or investing, and production has not recovered. Irregular electricity supply is also contributing to increased production costs.

One of the fundamental challenges today is the mismatch between available investible funds and actual investment activity. Regulatory restrictions and past policy missteps have dampened investor confidence. As I previously stated, Nepal is in a “policy-induced recession.” The economic slowdown is no longer theoretical—it is reflected in balance sheets and operational challenges across sectors.

Capital expenditure from the government, which plays a crucial role in stimulating economic activity, continues to remain dismally low. Without effective capital spending, private investment will not scale up, and economic growth will remain sluggish.

However, recent reforms offer some optimism. Legislative changes and new policies aimed at improving the business climate, promoting domestic products in public procurement, and streamlining governance have created a sense of hope in the private sector. The government’s FY 2082/83 budget includes provisions to allow Nepali businesses to invest abroad—up to 25% of their export income—which reflects a much-needed shift from conservative economic thinking to outward-looking industrial policy.

CNI welcomes these developments but underscores that effective implementation is essential. We have already submitted detailed recommendations for legal reform, identifying outdated laws, suggesting necessary amendments, and proposing new legislations. We urge the government to prioritize these legal updates.

CNI also reiterates its appeal for several key reforms:

– Introduce monetary penalties instead of imprisonment for economic offenses, as practiced in neighboring and developed countries.
– Enact advance bail provisions for the protection of citizens, civil servants, and business leaders alike.
– Pass a Payment Protection Act to shield producers and suppliers from default amid weakening demand.
– Curb illegal cross-border trade, particularly with India, which undermines domestic industries and reduces government revenue.
– Amend Sections 57 and 95Ka of the Income Tax Act, which currently result in double taxation and disincentivize investment.

Nepal can achieve double-digit growth and transform into a $100 billion economy within a decade—but this requires bold reforms, clear direction, and coordinated action. The 16th Five-Year Plan has projected that over NPR 11.18 trillion in investment will be necessary to maintain an average 7.1% growth rate. This underscores the need for large-scale investment, both public and private.

To move toward this target, several priorities must be addressed:

– Promote rapid growth and integration of the information technology sector.
– Harness the demographic dividend by developing youth skills and expanding technical and vocational education.
– Foster sustainable tourism and utilize natural resources responsibly.
– Attract private investment in renewable energy, simplify administrative processes, and ensure energy security.
– Strengthen climate resilience through multi-sector cooperation and inclusive policies.
– Create a stable political and regulatory environment to attract and safeguard foreign investment.
– Expand digital financial access and formalize the savings base to boost private sector capital formation.
– Enhance regional connectivity by advancing economic corridors like the Bangladesh–India–Nepal initiative.
– Position Nepal as an investment destination for multinational corporations by leveraging its strategic location, just as India and Vietnam have done.

If we can collectively address these priorities, Nepal’s $44 billion economy can be expanded to $100 billion. Let us make that pledge—not merely as a goal, but as a national commitment. If we do not act now, the aspiration of a prosperous Nepal and happy Nepalis may remain unfulfilled.

The private sector stands ready. We are committed to expanding domestic and foreign investment, increasing production, and creating jobs. Now, it is time for the government, legislature, and all stakeholders to act decisively and lead with vision.

(This is excerpted from the address delivered by President Rajesh Kumar Agrawal at the inauguration ceremony of the 22nd Annual General Meeting of the Confederation of Nepalese Industries (CNI).