Nepal’s Agriculture Sector Remains Traditional with Low Productivity

The Ministry of Finance’s recently released economic statement highlights that Nepal’s agriculture sector remains largely traditional and exhibits lower productivity compared to other South Asian countries. Although 62 percent of the population is engaged in agriculture, the sector’s contribution to GDP has declined from 28.4 percent to 25.2 percent. The statement emphasizes the urgent need to prioritize the modernization and commercialization of agriculture to boost production, income, and exports.

April 26, Kathmandu—According to the economic statement, the annual average growth rate of the agriculture sector over the past decade has been a modest 3 percent. While the sector contributed 28.4 percent to GDP in the 2015/16 fiscal year, this figure dropped to 25.2 percent by 2024/25. The report also notes that economic expansion has progressed more through the service sector than through industrialization based on agriculture.

In terms of productivity, Nepal lags behind the South Asian average. Data indicates that rice yields are only 4.19 tons per hectare, wheat at 3 tons, and maize at 3.46 tons per hectare. Low productivity of arable land and reliance on traditional farming practices have been identified as major challenges. To address these issues, the Ministry of Finance has underlined the priority to modernize and commercialize agriculture.

The ministry asserts that strengthening the integration among agriculture, industry, and tourism is crucial to increasing productive employment. The economic statement points to significant potential for expanding production, income, and exports through agricultural modernization. In particular, investment in high-value crops, livestock farming, horticulture, agricultural processing industries, utilization of geographic diversity, and development of rural industries to replace imports are seen as promising areas. The statement stresses that due to high dependency on imported raw materials and low technology use, the industrial sector remains weak, making it essential to enhance productivity through agricultural modernization and commercialization.