Country Profile

Nepal is a small landlocked country sandwiched between the two modern economic giants, India
and China. It is a beautiIul country with lots oI natural beauty. Eight out oI the world`s ten
highest mountain peaks lie in Nepal including the highest peak in the world, Mt. Everest
(between Nepal and China). The total area oI Nepal is 147,181 square kilometers, stretching
about 800 km Irom east to west and 90 to 230 km north to south. More than 13,000 square
kilometers oI area is protected Ior wildliIe conservation. Nepal is blessed with a unique
topography ranging Irom lowlands with sub-tropical jungles to arctic conditions in the
Himalayan highlands. Within a distance oI mere 150 kilometers the land rises Irom near sea level
in the south to over 8000 meters in the North. Nepal is divided into 14 administrative areas
(zones) which contain 75 districts in total. The new constitution oI Nepal due in 2011 seeks to
alter this division.

Fig: Topographic Map oI Nepal showing district headquarters and some Iamous mountain peaks.
(Source: World oI Maps
1
)

Nepal has a population oI about 28 million. Most oI the population, about 80, lives in the rural
areas. The capital city oI Nepal is Kathmandu which is by Iar the biggest city in Nepal. Almost a
million people live in Kathmandu city and about 1.8 million in the Kathmandu valley including
the districts oI Patan and Bhaktapur.

1
World oI Maps, Map oI Nepal (Topographic Map), http://www.worldoImaps.net/en/asia/map-nepal/topographic-
map-nepal.htm

Nepalese economy is agriculture based with almost 73.9 (as oI 2008) oI the total population
dependent on agriculture Ior livelihood
2
. Remittance Irom workers abroad (mainly Irom the gulI
countries) is the biggest source oI Ioreign capital and contributed 25.2 oI the GDP in 2008.
Tourism is another main source oI Ioreign capital in Nepal Iollowed by carpets, textiles and other
handicraIts export
3
. Nepal is one oI the poorest countries in Asia and the Iourteenth poorest
country in the world with estimated Gross National Income (GNI) per capita oI USD 490 (2010)
and 30.9 (2004) oI people living below the line oI poverty
4
.

istory
Nepal has been mentioned in Hindu mythology tracing its roots to thousands oI years BC. It is
worth noting that it was the Kathmandu valley that was known as Nepal. According to Buddhist
scriptures, Kathmandu valley was a lake and a sage named Manjushree drained it with his
'khadga (a kind oI sword) enabling habitation by humans. The Neolithic tools Iound in the
Kathmandu valley provide the prooI oI human existence well beIore 9,000 BC. However, the
history oI the modern state oI Nepal dates back a little more than two centuries to 1768 when
king Prithvi Narayan Bir Bikram Shah (NBBS) Dev oI the Gorkha principality conquered the
Kathmandu valley (by now divided in to three principalities oI Kathmandu, Patan and
Bhaktapur).

1786: Modern boundaries of Nepal take shape
Prior to uniIication, Nepal was divided into many small kingdoms which engaged in warIare
among each other. Aware oI this, King Prithvi NBBS Dev started his campaign oI expansion. He
was aware that the Kathmandu valley was strategically the most important place Ior the success
oI his campaign. The Kathmandu valley (then known as Nepal) was the most aIIluent oI the
kingdoms with Ilourishing trade, Iertile land and vibrant culture. His conquest Ior Kathmandu
began in 1767 with the capture oI Kirtipur, located about 10 km Irom Kathmandu. The kingdom
oI Kathmandu was attacked while the people were celebrating a religious Iestival and easily

2
Central Bureau oI Statistics, Report On The Nepal Labour Force Survey 2008, p. ii, (Kathmandu, 2009)
3
Nepal Rastra Bank, Economic Report 2008/09, (Kathmandu, 2010),
http://red.nrb.org.np/publications/economicreports/EconomicReports--2008-09-NEW.pdI
4
The World Bank, Data, http://data.worldbank.org/country/nepal
captured in 1768. Soon, the kingdoms oI Patan and Bhaktapur were also captured. King Prtihvi
NBBS Dev made Kathmandu the capital oI his now large kingdom and renamed his kingdom
Nepal. He continued to expand rapidly capturing many western and eastern states and also the
kingdom oI Sikkim until his death in 1775. The expansion continued aIter his death as well but
his death led to power struggle within the royals. The Nepalese troops had taken control oI
Almora and Kangara in India by 1809. The Nepalese troops had also invaded Tibet in 1788 and
1791. Nepal had signed a trade treaty with the British India to counter the Chinese threat.
However, British India did not help Nepal when the Chinese attack came as they did not want to
irritate China resulting in loss oI Nepalese land to Tibet in 1792. The expansion campaign in the
terai (plains) to the south had been long and costly Ior Nepal. The inIighting in the palace had led
to ineIIicient leadership and economic downturn. It got worse Ior Nepal in 1814 when it engaged
in a Iierce battle with the British India that lasted Ior two years and in 1816, it was Iorced to sign
the Sugauli treaty oI 1816 that led to Nepal losing almost third oI its territory and allowing the
British to recruit Nepalese soldiers.

Fig: An illustration oI the historical map oI Nepal with areas ceded to the British India.

Amidst the political chaos caused by inIighting among the royals and the ruling elites, an
ambitious man rose to the pinnacle oI power in Nepal and started a century long dictatorial rule.

1846-1950: The Rana Regime
Jung Bahadur Rana had joined the army in 1832 at the age oI 16 and by 1841 had become a
bodyguard Ior the king but he had greater ambitions. Taking advantage oI the volatile political
situation in the country, he quickly increased his inIluence and swiItly rose to power. On the
background oI his striIe with the queen Rajendra Lakshmi, he orchestrated the inIamous Kot
massacre in 1846 in which 40 members oI the palace court were killed including the then prime
minister. He then exiled the queen and the king, Rajendra BBS Dev to India and elevated their
son Surendra BBS Dev to the throne. He quickly promoted his brothers and allies to important
posts and concentrated the major administrative decisions to himselI as the prime minister oI the
country. Jung Bahadur Rana helped stabilize Nepal. He visited the Great Britian and France in
1850-51 via Calcutta in India. This trip made him realize that good relations with the British
were essential in ensuring independence oI Nepal. The trip also broadened his mind and he
started many reIorms. He introduced the Iirst 'Muluki Ain (a collection oI administrative
procedures and legal Irameworks) oI Nepal in 1854 to structure the system oI governance. It
limited the scope oI corporal punishment among other things. It also limited the power oI the
king and established the king only as a Iigurative head oI the country. He re-established good
relations with Tibet and in 1856, initiated the signing oI a trade treaty which provided Nepal
duty-Iree access to Tibet. He gained more British support by personally heading a military
campaign to crush the sepoy revolt in 1857 in north India.

However, he also initiated hereditary lineage Ior prime minister with his brothers being
immediate successors. AIter his death in 1877, the same problem oI inIighting that had plagued
the royals plagued the Ranas. However, they continued to hold on to power Ior another 73 years.
The Rana rulers that Iollowed continued the dictatorial rule without continuation oI the reIorms
initiated by Jung Bahadur. Though, there were some who stood out Ior their attempt at reIorms,
the most noticeable being Dev Shumsher who introduced reIorms like Ireeing the Iemale slaves,
establishing schools and starting the publication oI the Iirst newspaper oI Nepal, Gorkhapatra.
Iron ore mining was started in Thosay Bazar, 15 km north oI Manthali (headquarters oI
Ramecchap district) during his reign. Sadly, he was ousted Irom his post due to his reIorms. The
Rana rulers that Iollowed continued to rule with iron Iist denying access oI education, Iree
speech to general public. The power and wealth was largely concentrated in the hands oI the
Ranas.

There were other reIorms carried out during the reign oI Chandra Shumsher Jung Bahadur (SJB)
Rana Irom 1901-1929. Tri-chandra college, the Iirst college oI Nepal was established in 1918
and slavery was abolished in 1920. However it is said that Chandra Shamsher had lamented that
the opening oI the college was the ultimate death knell to Rana rule in Nepal. Sati pratha (a
Hindu ritual where a widow had to burn herselI to death on her dead husband`s Iuneral pyre) was
also abolished. The Iirst hydropower station in Nepal, the 500 KW Pharping hydropower station
was constructed by the British on his initiation. However, most oI people were untouched by the
reIorms. The Ranas held on to power and most oI the development did not touch the majority oI
the Nepalese who lived outside Kathmandu.

The growing disenchantment oI the people against the Rana rule and the Indian Ireedom
movement oI 1947 inspired a Ireedom movement in Nepal with the support oI the then king
Tribhuvan BBS Dev. In 1947, the Nepali National Congress was established through the merger
All-India Nepali National Congress, Nepalese Society oI Banaras and Gorkha Congress oI
Calcutta. In 1950, the Nepali National Congress merged with Nepal Democratic Congress to
Iorm the Nepali Congress (NC) in 1950. NC led the movement against the Rana regime through
armed struggle and mass movement. The Iirst identiIied political party however was the Praja
Parishad (People`s Council) Iormed in 1935 by the Nepalese exiles in India to struggle against
the Rana regime. In 1949, the Communist Party oI Nepal (CPN) was Iormed in Calcutta (now
Kolkata) in India. The CPN also played an important role in the movement.

The movement led to the end oI Rana regime in 1951 and establishment oI democracy with
constitutional monarchy in Nepal.

1951-1960: First Tryst with Democracy
AIter the abolition oI Rana regime, Nepal became a democratic country with constitutional
monarch. The then king Tribhuvan Bir Bikram Shah Dev had supported the political parties in
their struggle against the Rana regime. It is worthwhile to mention that the important political
Iigures oI that time and the king himselI had taken reIuge in India and organized themselves
against the Ranas. Attempts were made to Irame a new constitution and introduce the British
style oI parliamentary democracy in Nepal.

Nepal`s Iirst attempt at democracy did not go well though. In 1952, the CPN was banned aIter a
revolt by Raksha Dal (Nepal`s home guards Iormed by the NC) demanding an all-party
government including the CPN
5
. The ban was liIted in 1956 but led to larger political striIe
which would remain Ior many years to come. King Tribhuvan passed away in 1955 and his son
king Mahendra ascended the throne. He promulgated Nepal`s Iirst constitution based on
multiparty democracy under which the Iirst general elections were held in 1959. The Nepali
Congress party won the elections and B.P. Koirala became the Iirst elected prime minister oI
Nepal in 1960. However, these years were also marked by power struggles between the king and
the political parties. In 1960, king Mahendra with the help oI the army suspended the parliament,
constitution and party politics and initiated a party-less Panchayat system oI governance that
would last another thirty years. A Iaction oI the CPN led by then general secretary, Keshar Jung
Rayamajhi supported the king`s move.

1961-1990: Panchayat Era
Party less Panchayat system oI governance oIIicially began in 1961. All the political parties were
banned and King Mahendra became the administrative as well as the constitutional head oI the
country. The National Planning Council was already introduced in 1960 aIter the dissolution oI
the parliament. Its decisions were on par with the decisions oI the cabinet and as such it was
viewed as the highest authority in the area oI economic planning and policies. King Mahendra
was a nationalist and envisioned state sponsored economy with state control on natural resource
development.


5
Australian Associated Press, 'Quelled Revolt in Nepal, The Examiner, January 25, 1952, Front Page,
http://trove.nla.gov.au/ndp/del/article/52845412/4689036?zoomLevel3
The Iirst act to directly address hydropower development was introduced in 1961. Many reIorms
and development activities were initiated during this period. Priority was given to malaria
eradication in the terai, construction oI highways, hydropower development, and expanding
irrigation Iacilities. Improvements in banking systems and industries were promoted. A land
reIorm program was introduced which reduced the large holdings oI land by the Ranas. The
Muluki Ain was Iinally replaced by a new legal code in 1963.

But this period was also marked by oppression and Irustration among large portion oI the people
cut oII Irom the development. By 1990, the road density had only reached 5 km/100 sq. km. The
percentage oI population having access to electricity was only 6 in 1985 which increased
marginally to 8 by 1991. The educated youth were particularly Irustrated by the state oI things.
This resulted to the student protests in 1979 which Iorced then King Birendra to initiate
constitutional reIorms and hold a national reIerendum in 1980. King Birendra had succeeded his
Iather King Mahendra aIter his death in 1972. King Birendra was viewed as being more liberal
and reIorm minded than his Iather. The reIerendum asked the people to choose between a
multiparty system and a reIormed Panchayat system. Although the results are viewed as
controversial to-date, the reIormed Panchayat system gathered more votes. The constitution was
amended in 1980 and administrative powers were ceded to a king nominated government and
Rastriya Panchayat, a Parliament comprising oI 111 members. Quick to access the growing
Irustration, King Birendra allowed some restoration oI Ireedom oI speech and political activities.
However, the system was unable to deliver on its promises and in 1990 the king was Iorced to
compromise with the political parties on the back oI a popular uprising. The king was retained as
constitutional monarch but had to concede his administrative powers to the parliament. However,
he remained the head oI the army.

1990-2002: Second Coming of Democracy:
AIter the successIul movement oI 1990 led by the coalition between the NC and United LeIt
Front (ULF, an joint Iront oI seven communist parties), a new transitional government was
Iormed under the leadership oI NC leader Krishna Prasad Bhattarai. General elections were held
in 1991 in which NC secured a majority and Iormed the government with Girija Pd. Koirala as
the Prime minister. Communist Party oI Nepal, United Marxist and Leninist (CPNUML)
emerged as the second largest party and another communist party, Snayukta Janamorcha (SJM)
emerged as the third largest party. The more radical Iaction oI SJM would later split Irom the
party and go on to Iorm the Communist Party oI Nepal, Maoists (CPNM) which would start the
armed insurgency 'People`s War in 1996 leading to a decade long armed conIlict causing death
oI 13,347 people.

In 1994, aIter a massive uproar regarding the MOU signed by then PM Girija Prasad Koirala
with India on the border river oI Mahakali, the government resigned leading to mid-term
elections in 1994. The CPNUML emerged as the largest party but was unable to secure two-third
majority. It Iormed a minority government and introduced rural community centered
development programs like 'AIno Gaun AIai Banau (Develop Your Village YourselI). Under
the program village committees were allocated the budget and the committees would then
mobilize the required resources including manpower (mostly voluntary Irom the villagers) to
build roads, schools etc. The government was however dissolved within nine months through a
controversial ruling oI the supreme-court. This led to the Iormation oI six governments until the
elections were held again in 1999. This period in Nepal`s political history was marked by
massive wrangling Ior power, accusation oI large corruptions and degradation oI political
integrity. The pro-democracy parties, specially the two biggest ones, NC and CPNUMML
Iormed open alliances with the pro-monarchy parties. They even let the pro-monarchs lead the
government to stop each other Irom Iorming a government.

By the time the elections were held in 1999, the CPNUML had split into two and CPNM`s armed
struggle had started spreading. The NC secured majority in the elections and Iormed the
government under the leadership oI Krishna Prasad Bhattarai. But inIighting within the party led
to him being replaced by Girija Prasad Koirala in 2000.

On June 1, 2001, all the members oI the ruling royal Iamily including the king Birendra were
massacred in a shooting spree. The then crown prince Dipendra BBS Dev was oIIicially alleged
oI carrying out the massacre over a Ieud over his lover. This led to the coronation oI Gyanendra
BBS Dev, who also in 1950-51 was appointed the king Iollowing the selI-imposed exile oI his
grandIather Tribhuvan BBS Dev.

Further inIighting within the NC led to Sher Bahadur Deuba replacing Girija Prasad Koirala as
the PM in 2001. On 3 August, 2001 aIter Iive years oI armed struggle between the government
and CPNM, peace talks began. But on November 23 the peace talks collapsed when CPNM
withdrew and launched a Ierocious attack on police and army posts in 42 districts. 186 army and
police personnel and, 21 Maoists were killed in the attacks. Until then, Nepalese army had not
been deployed against the Maoists. But on November 26, 2001, the government led by Sher
Bahadur Deuba declared a nationwide state oI emergency and deployed the army Ior the Iirst
time.

2002-2005: Pretext to Royal takeover
In 2002, PM Sher Bahadur Deuba oI NC, recommended the dissolution oI the parliament to help
him tackle the Maoist threat. This was accepted by king Gyanendra BBS Dev on May 22, 2002
and mid-term elections were announced Ior November. PM Deuba was accused oI taking the
drastic measures without consulting the party and expelled Irom the party. Deuba reacted by
vertically splitting the party into two and Iormed the Nepali Congress Party (Democratic) in
June, 2002. The November elections were also called oII citing security concerns resulting Irom
increased Maoist insurgency. He was replaced by staunch royalist Lokendra Bahadur Chand in
2002. He came back to power again in 2004 with the promise oI holding elections.

2005-2006: King`s Direct Rule
On February 1, 2005, king Gyanendra dismissed the government oI Sher Bhadur Deuba accusing
it oI being incompetent and Iailing to make arrangements Ior parliamentary elections, and
restoring peace in the country. King Gyanendra took Iull control as the executive head oI the
country promising to restore peace and eIIective democracy to the country within 3 years. This
period was marked by curtailment oI civil liberties and Ireedom oI the press.

However, the king was unable to bring order in the country and the armed struggle with the
Maoists reached a stalemate. The economic condition did not improve and development works
took a backseat to security concerns. With neither the government nor the Maoists able to make
any progress, the CPNM agreed on a peace agreement with six major political parties oI Nepal
and a 12 point peace agreement was signed on November 22, 2005. Starting April 6, 2006,
thousands oI protestors Ilooded the streets oI Kathmandu and all other major cities oI Nepal.
Unable to quell the uprising, on April 24, 2006, king Gyanendra reinstated the old parliament he
had dissolved. On May 18, 2006, the parliament stripped the king oI his powers and put the army
under the parliament control. On May 29, 2008, the new constitution oI Nepal was endorsed by
the parliament which disposed the monarchy and Nepal oIIicially became a secular Iederal
democratic nation.

1996-2006: The Maoist Insurgency
In a decade long armed conIlict between the government Iorces and the CPNM, 13,347 people
were killed. 8,377 oI them were killed by the government Iorces whereas 4,970 were killed by
the Maoists
6
. The armed conIlict Iormally began on Feb 13, 1996 when the CPNM declared an
armed struggle against the government denouncing parliamentary politics and demanding
abolition oI monarchy, and vouched Ior establishment oI a 'new democracy.

Armed political struggle was not new in Nepal. NC had resorted to armed struggle against the
Rana regime in 1950. Even aIter the Iall oI Rana regime, there were Iew armed uprisings but one
oI particular interest is that led by Bhim Dutta Panta. Born in 1926, he had participated in the
Indian independence movement and later led the NC armed struggle in the western part oI the
country. AIter the Iall oI Rana regime in 1951, he was made the governor oI Mahakali zone in
western Nepal. However, he continued with his anti-Ieudal movement and organized armed
peasant uprising in the west. Ironically, he was killed by Indian army in 1953 that were requested
Ior help by the NC led government. Around the same time, the Communist Party oI Nepal
(CPN) which was Iormed in 1949 and had participated in the struggle against the Rana regime
started small peasant uprising in some districts oI Nepal. A ban had been imposed on CPN in
1952 which was liIted in 1956. But in 1960, the then secretary oI CPN, Keshar Jung Rayamajhi
supported the royal takeover oI 1960 and the uprising was quelled. Another armed struggle oI
importance was the armed struggle led by CPN during 1972-73 in the Jhapa district oI western
Nepal. But aIter that struggle, the CPN transIormed itselI into a social democratic party adhering

6
InIormal Sector Service Center (INSEC), No. oI Victims Killed by State and Maoist in Connection with the
"People's War", http://insec.org.np/pics/1247467500.pdI
to non-violent protests. However, there were many communist parties in the country by that
time.

Seven communist parties Iormed a United LeIt Front (ULF) in 1990 and organized a joint
movement Ior democracy with the NC. Other communist groups Iormed the United National
People`s Movement (UNPM). The UNPM denounced the compromise made by the ULF and NC
in settling Ior constitutional monarchy. With the key constituents oI the UNPM, in November,
1990, the Communist Party oI Nepal, Unity Center (CPNUC) was Iormed. In its Iirst convention,
the CPNUC adopted the strategy oI pursuing a 'protracted armed struggle Ior a new democratic
revolution and remaining underground. Simultaneously it also Iormed Samyukta Janamorcha
(SJ) as its open Iront which contested in the parliamentary elections oI 1991 and emerged as the
third largest party with nine seats. The SJ was headed by radical leader. Dr. Baburam Bhattarai
who along with some others wanted to launch immediate armed struggle but the senior leaders
like Nirmal Lama argued that Nepal was not ripe Ior armed struggle. In this background, the two
Iactions split in 1994, with the radical Iaction Iorming the CPNM.

The armed struggle Iormally began on February 13, 1996 with attack on a police station in the
remote district oI western Nepal, Rolpa Iollowed by attacks on other police stations in Rukum.
This was preceded by now inIamous police operation code-named 'Operation Romeo in
Novemeber, 1995 aimed at Ilushing out the Maoists Irom Rolpa district, their stronghold. This
operation actually helped the Maoists in garnering greater support Irom the rural population
disenchanted with the rulers in Kathmandu. Another operation, codenamed 'Kilo Sera II was
carried out in 1998 in the western and mid-western regions oI Nepal. Contrary to the
government`s objective, these operations strengthened and emboldened the Maoists. In both oI
these operations, there were allegations oI gross violation oI human rights by the police Iorce as
mentioned by Amnesty International reports
7

8
.


7
Amnesty International, Nepal: Human rights violations in the context oI a Maoist "people's war", (1997),
http://www.amnesty.org/en/library/asset/ASA31/001/1997/en/03I8c91a-eabc-11dd-9I63-
e5716d3a1485/asa310011997en.pdI
8
Amnesty International, Nepal:A spiralling human rights crisis, p. 13, (2002),
http://www.amnesty.org/en/library/asset/ASA31/016/2002/en/b8c8c0e5-d88I-11dd-ad8c-
I3d4445c118e/asa310162002en.pdI
The violence escalated in 2001 when the Maoists aIter withdrawing Irom the peace talks with the
government attacked several police posts and Ior the Iirst time, army posts. This led to the army
being deployed Ior the Iirst time since the conIlict started. The bloodiest year oI the conIlict
Iollowed with 4,603 people killed in 2002, 1,337 oI them by the Maoists and the rest by the state.

The armed conIlict came to an end in 2006 with the success oI the non-violent movement
organized by the mainstream political parties oI Nepal (NC, CPNUML and others) with the
support oI the Maoists.

2006-: Nepal becomes a Republic
In 2006, aIter the success oI the people`s movement to end the king`s direct rule, a transitional
government was Iormed under the leadership oI Girija Prasad Koirala and elections Ior
constitutional assembly were held on April 10, 2008. But it was not a smooth sailing as there
were many diIIerences, mainly between CPNM and other political parties. In Janurary, 2007,
there was a massive uprising in the terai (plains oI Nepal) demanding that the whole oI the terai
belt on the southern part be declared a uniIied Iederal region. This was in response to the long
standing demands oI CPNM oI dividing Nepal in to about 20 Iederal states with the terai being
divided into 7 states. The government bowed down to the pressure and Iinally elections could be
held. The election results reIlected the people`s aspiration Ior change. CPNM emerged as the
largest single party in the 601 member constitutional assembly (which was also to Iunction as a
parliament) with 220 seats double that oI NC with 110 seats and more than double oI their
moderate communist rivals CPNUML with 103 seats. The terai based parties Iared pretty well
with 81 seats combined.

AIter months oI wrangling among the political parties, government was Iinally Iormed on Aug
22, 2008. Being the largest party in the assembly, CPNM Iormed the government with the
support oI CPNUML and the largest terai based party Madhesi People Rights Forum (MRPF). A
month earlier, the assembly had elected the Iirst president oI Federal Democratic Republic oI
Nepal, Dr. Ram Baran Yadav. However, the government did not last long as the president
reIused to authorize the sacking oI then ChieI oI Army, Rukmangat Katuwal and prime minister
Puspa Kamal Dahal aka Prachanda resigned on May 4, 2009 over this issue.

A new government was Iormed headed by Madhav Kumar Nepal oI CPNUML and supported by
NC among other Iringe parties. This was again replaced by a new government headed by
Jhalanath Khanal oI CPNUML with the support oI CPNM and other Iringe parties on February,
2011.

Although the mandate was to Iinish writing the new constitution within 2 years Irom the
elections, the deadline could not be met and was extended by a year to May 28, 2011. However,
it could not be met even on the extended deadline and was extended Iurther by three months. As
oI Aug 11, 2011, a new constitution was still not on the oIIing.

eography
Nepal is a small landlocked country sandwiched between two modern economic giants, India and
China. Nepal`s topography is comprised oI the terai lowlands to the sounth, the mountains in the
north and the hills in the middle. Almost halI oI the population, 47 lives in the Iertile lowlands
oI terai which occupies only 20 oI the total area oI the country. Only about 8 oI the
population resides in the mountains.

Nepal is shaped almost like a trapezoid with a length oI 800 kilometres and width oI 200
kilometers. Nepal has a total area oI 147,181 km
2
. The terai which border India on the south are
part oI the northern rim oI the Indo-Gangetic plains and rise Irom about 300m above the sea
level to 1,000 m at its limit at the Ioothills oI the Siwalik range. They are believed to have been
Iormed by the three major rivers oI Nepal, Koshi, Narayani (known as Gandak in India) and
Karnali. This region has hot and humid climate and reIlect the tropical to subtropical climate.

The hills oI Nepal range in altitude Irom about 800 m to 4,000 m with climates varying Irom
subtropical below 1,200 m to alpine above 3,600 m. At the southern limit oI the hill region lies
the Mahabarat range with its altitude ranging Irom 1,500 m to 3,000 m. To the north oI this
region lie subtropical valleys and hills. The valleys are usually the area with largest population
density.

The mountain region lies at the northern part oI the country and borders China. The altitude oI
this region rises Irom 4,000 m to 8,848 m, peak oI Mt. Everest, the tallest mountain peak in the
world. This region is made up mostly by the Himalayas and constitutes eight oI the ten highest
mountain peaks in the world. The climate resembles the subarctic to arctic zone climates with
extremely cold winters. The terrain is harsh and rugged. Only small tracts oI Iertile land exist,
mainly in the low-lying valleys and river basins. Not surprisingly, only about 8 oI the
population oI Nepal resides in this region, many oI whom move Iurther down to the hills during
winter.

Education
The adult literacy rate (people above the age oI 15 who can read and write) oI Nepal at the end oI
2008 was 57.9. The percentage oI population with higher education is assumed to be much less
though. According to the 'Country Summary oI Higher Education published by the World Bank
(WB), the gross enrolment ratio Ior higher education is a mere 6. The overall quality oI
education is poor with only a handIul oI exceptions.


Fig: Adult literacy rate (1984-2008)

The Iirst modern school oI Nepal, Durbar High School was opened in 1892. Only the members
oI the ruling Iamily were enrolled in the school. There were other schools beIore that Iollowed
Sanskrit-based teaching methods. The teachings were based on Hindu scriptures and religious
texts. The Iirst higher education institution oI Nepal, Tri-chandra campus was established in
1918 and was aIIiliated to Patna University oI India. The Iirst university oI Nepal, Tribhuvan
University was established only in 1959. Adult literacy rate was 5 in the 1950s and around
33 in 1990.

As oI 2008, there were 575 higher education institutions in Nepal with 6 universities, 2
institutions and 567 colleges.

Economy
Nepal is one oI the poorest countries in the world. It had largely been an agro-based economy
since time immemorial. But there was trade with Tibet on the north and India on the South.
However, it was mostly the Newars oI Nepal (the present day Kathmandu valley) who were
more active in trade. The Kathmandu valley was much more aIIluent than the rest oI the
principalities in other parts oI Nepal due to its Iertile soil and Ilourishing trade. The exquisite
architecture oI ancient temples, palaces and buildings are a testament to that prosperity.
However, Nepal on a whole was a subsistence economy and with the British East India Company
expanding to the South, the traditional trade route was being aIIected. King Prithvi BBS Dev, the
uniIier oI Nepal encouraged his subjects to be selI-suIIicient. He asked his people not to use
Ioreign clothes and stop Ioreign traders at the borders. However, he encouraged Nepalese to
export herbs and other products to Ioreigners, and try to earn Irom Ioreign trade. He discouraged
the system oI contract and encouraged the system oI wages Ior works.

The Iirst modern industry oI Nepal, Biratnagar Jute Mills was established in the city oI
Biratnagar in 1936. The next year the Iirst bank oI Nepal, Nepal Rastra Bank was established.
Systematic economic and development planning started in 1956 with the Iirst Iive year plan.
GDP growth data is available Irom 1969 and the chart below shows the real GDP growth in
percentage over the period 1969-2009. As can be seen Irom the chart, the GDP growth in Nepal
has been very inconsistent. By the end oI FY 2006/07, there were only 3,446 manuIacturing
establishments in Nepal employing 169,891 people.

Fig: Real GDP growth () oI Nepal Irom 1969-2006 (Source: United States Department oI
Agriculture, USDA)
9


Fig: Percentage oI contribution oI agriculture and non-agriculture sector to the GDP
10


Agriculture is the main stay oI Nepalese economy. In the Iiscal year (FY) 2008/09, it employed
73.9 oI the workIorce but contributed only 35.5 oI the GDP with the industry sector
contributing a lowly 15.5 and the services sector contributing the rest.
10



9
USDA, 'Real GDP (2005 dollars) Historical in Historical Data Files, International Macroeconomic Data Set,
http://www.ers.usda.gov/Data/Macroeconomics/#HistoricalMacroTables
10
Nepal Rastra Bank, Economic Report 2008/09, p. 8, (Kathmandu, 2010),
http://red.nrb.org.np/publications/economicreports/EconomicReports--2008-09-NEW.pdI
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nonagrlculLure
AgrlculLure
Nepal relies heavily on Ioreign aid and loans to meet its annual expenditures. The outstanding
Ioreign loan was Rs 220 billion in FY 2001/02 and it increased to Rs 236 billion by 2004/05.
There was an annual growth oI 2.4 in nominal term. During the FY 2001/02, the ratio oI net
outstanding loan to GDP was 52 but this decreased to 45 in 2004/5, caused by the decrease
in development expenditure due to the armed conIlict.
ear 2003/06 2006/07 2007/08 2008/09
Foreign rants 13,827.50 15,800.80 20,320.70 34,570.40
Bilateral 7,617.80 8,399.00 9,575.60 14,395.80
Multilateral 6,209.70 7,401.80 10,745.10 20,174.70
Foreign Loans, net 1,226.80 2,514.70 1,110.50 500.60
Foreign Loans 8,214.3 1,53.5 8,979.9 1,45.4
Bilateral 40.60 1,048.90 632.10 740.00
Multilateral 8,173.70 9,004.60 8,347.80 9,665.40
Principal Repayments ,987.5 7,538.8 7,89.4 9,94.8
Total Foreign Aid, net 15,054.30 18,315.60 21,431.20 35,071.00
Interest Payment 2,163.90 2,055.70 2,145.30 2,797.80
Table: Foreign Aid and Debt Servicing
11


2010/2011 2009/10 2008/09
Projected Actual Actual
Expenditure Rs, in billion Rs, in billion Rs, in billion
Recurrent 190.24 151.24 127.74
Capital 129.42 89.47 73.09
Principal repayment 18.25 18.43 18.83
Total expenditure 337.90 259.15 219.66

Revenue
Revenue 216.64 179.94 143.47
Foreign grants 65.34 37.12 26.38
Projected total revenue 281.99 217.06 169.86
DeIicit 55.91 42.09 49.80

Deficit financing 55.91 42.09 49.80
Foreign loans 22.23 11.49 9.97
Internal borrowing 33.68 29.914 18.42
Cash Balance -0.68 -21.42
Table: Budget DeIicit and coverage
12

Nepal received Rs. 37.12 billion in Ioreign grants and Rs. 11.49 in Ioreign loans in the FY
2009/10 which were 14.32 and 4.43 oI the total expenditure. In the FY 2008/09, these

11
Nepal Rastra Bank, Economic Report 2008/09, Table 25, (Kathmandu, 2010),
http://red.nrb.org.np/publications/economicreports/EconomicReports--2008-09-NEW.pdI
12
Pandey, Surendra, 'Annex-1: Summary oI Income and Expenditur in Public Statement On Income and
Expenditure oI Fiscal Year 201011, p.1. (Kathmandu: Ministry oI Finance, GoN, 2001)
Iigures were 12.01 and 4.54 respectively. Nepal had cash deIicit oI Rs. 21.42 billion by the
end oI the FY 2008/09 and that oI Rs. 0.68 by the end oI FY 2009/10.

Nepal has been Iacing trade deIicits since 1965. With Iew exceptions, Nepal`s trade deIicit has
been widening considerably. Nepal has huge trade deIicits with India. In the FY 2009/10, the
share oI India in Nepal's total trade was 58.2 down Irom 64.3 in the previous year but
imports Irom India rose by 15.1 to Rs. 163.89 billion. The imports had increased by 22.9 in
the preceding year. The total trade deIicit Ior FY 2008/09 was Rs. 209.32 billion, an increase oI
34.2 Irom the previous year. In FY 2007/08, the trade deIicit had increased by 21.


Fig: Nepal`s trade Balance (1965-2004)
(Source: World Bank(WB), 'World Development Indicators (WDI)-2007`)

Infrastructure
Nepal has a very poor inIrastructure. Nepal has low total road network and density (as oI 2007,
18,828.01 km and 12.79 km/100 sq. km respectively
13
). As oI 2007, only 43 oI the population
had access to all-weather roads. The other mode oI transport is air transport. As oI 2010, Nepal
had 47 airports but only 11 airports had paved runways and only one oI them was an

13
Department oI Road, Ministry oI Physical Planning and Works, GoN, 'Annex 4.1: Comparative Chart oI Total
Road Length, InIluenced Population and Density (1951 - 2006/2007) in Road Statistics 2006-2007, (Kathmandu,
2007)
international airport
14
. Nepal does not have a rail network. Janakpur is the only city with access
to railways with the Indian Railways operating a narrow gauge line Irom Jaynagar, a border town
in India.


Total Length of
Road (km)
Influenced Population
(no. per km)
Road Density
(Km./100 sq.km)
Year Description
1951
376.00 21,250.00 0.30
1956 1st (Iive year) plan
624.00 13,609.00 0.40
1962 2nd (Iive year) plan
1,193.00 7,970.00 0.80
1965 3rd (Iive year) plan
2,049.00 5,130.00 1.40
1970 4th (Iive year) plan
2,504.00 4,600.00 1.70
1975 5th (Iive year) plan
3,173.00 3,800.00 2.20
1980 6th (Iive year) plan
4,940.00 2,844.00 3.40
1985
7th (Iive year) plan
(2042) 5,925.00 2,840.00 4.00
1990
7,330.00 2,579.00 5.00
1991
8th (Iive year) plan
(2047) 8,328.00 2,217.00 5.70
1993
9,534.00 1,939.00 6.50
1995
10,724.00 1,741.00 7.30
1998
9th (Iive year) plan
(2054) 13,223.00 1,398.00 9.00
2000
15,905.00 11,637.00 10.80
2002
10th (Iive year) plan
(2058) 16,834.00 1,375.00 11.40
2004
17,280.60 1,340.00 11.70
2006/07
18,828.01 2,463.00 12.79
Fig: Comparative Chart oI Total Road Length, InIluenced Population and Density
11

(1951 - 2006/2007)
Only about 25 oI the population has access to mobile communication. There is roughly one
main line telephone Ior every 34 people. The percentage oI population with access to internet is a
paltry 2.2 (souce: International Telecommunications Union).

Only 40 oI the population has access to any electricity. But the supply is irregular and
unreliable. Nepal has been Iacing electricity shortages Ior years now with planned power outages

14
Central Intelligence Agency (CIA), The World Factbook, https://www.cia.gov/library/publications/the-world-
Iactbook/geos/np.html
reaching as high as 16 hours a day. The transmission and distribution oI electricity through the
national grid is managed by Nepal Electricity Authority (NEA), a government monopoly. The
major source oI electricity is hydropower. NEA owns and manages the majority oI hydropower
stations in the country but the share oI hydropower stations owned and managed by private
sector is growing.