Nepal | November 18, 2019

Nepal’s export to India takes a steep dive

Himalayan News Service

Kathmandu, January 18

The country’s export to India slowed to a crawl in the first five months (mid-July to mid-December) of this fiscal as major export items recorded negative growth in the review period.

According to macroeconomic data of the first five months unveiled by Nepal Rastra Bank (NRB), while India’s share in total import of Nepal is increasing, export to India in terms of total export has been falling gradually over the months of this fiscal after the southern neighbour enforced goods and services tax (GST) on July 1.

As per the central bank’s report, exports to India stood at 53.3 per cent of total exports in first five months of this fiscal against 55.6 per cent in corresponding period of previous fiscal.

The country exported goods worth Rs 17.96 billion to India in the review period. Export growth to India was just 5.5 per cent in the first five months compared to 22.6 per cent growth in first five months of last fiscal compared to the same period of 2015-16, according to NRB.

Export of major export items like juice, cardamom, plastic utensils, GI pipes, among others, plunged heavily after the integrated GST increased the tariff to export to India.

Export of cardamom plummeted by 68.4 per cent to Rs 393.5 million in the first five months of this fiscal compared to the corresponding period of the previous fiscal. The country had exported cardamom worth Rs 1.25 billion in the first five months of last fiscal 2016-17.

Commerce Secretary Chandra Kumar Ghimire said that exporters need to diversify the market of their products to minimise the risk of market concentration.

“As per the principle of not putting all the eggs in the same basket, exporters should pay attention to market diversification. For instance, Gulf countries, Pakistan and other nations could be the potential export markets for cardamom,” he said.

However, exporters have said that lack of market predictability had affected the investment in the country. Mainly, India is a huge market for Nepali primary goods. “To tap the market potential, processing of products, value addition, branding and marketing are must,” said Ghimire.

In contrast to the belief that multinational companies and foreign direct investment companies can crack the barrier in the concerned countries, export of juice plummeted considerably in the review period even as the Indian multinational, Dabur Nepal, has been exporting juice to India.

Experts have said that trade concentration in a single country can create huge problems like the Nepali exporters have been facing in export to India in the GST regime. India’s import tariff increased on juices, cardamom, processed foods, GI pipes and footwear, among others, in the current tax regime.

Imports from India have not been affected because there is zero GST in export of goods and services from India.

When GST was enforced, India had considered service export only if the service supplier received payment in convertible foreign currency. However, considering the request of landlocked Nepal and Bhutan, which use Indian transit for third-country trade, India has provided special provision for Nepal and Bhutan that payment in Indian rupee would also be considered as service export in the case of these two countries.


Scenario in first five months

Product  2016-17 2017-18 Change
Juice Rs 2,106.9m Rs 344.3m -83.70%
Cardamom Rs 1,246.5m Rs 393.5m -68.40%
GI pipes Rs 459.8m Rs 45.8m -90.00%
Copper wire rods Rs 354.0m Rs 97.5m -72.50%
Noodles Rs 267.7m Rs 206.6m -22.80%
Ginger Rs 131.9m Rs 27.7m -79.00%
Readymade garments Rs 110.5m Rs 75.8m -31.30%
Plastic utensils Rs 78.9m Rs 16.8m -78.70%
Vegetables Rs 65.4m Rs 54.9m -16.00%
Fruits Rs 16.9m Rs 9.6m -43.30%

A version of this article appears in print on January 19, 2018 of The Himalayan Times.


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