Signs of economic recovery have begun to emerge, with Nepal's industrial sector showing improved capacity utilization and income in the second quarter of the current fiscal year (FY 2024/25).

According to a recent report by the Confederation of Nepalese Industries (CNI), based on a survey of 64 manufacturing and service-related firms, overall capacity utilization rose to 62.35 percent in Q2—up from 60.26 percent in the previous quarter. This uptick was driven largely by gains in the manufacturing sector, although service sector utilization slightly declined. Service industries accounted for 53.12 percent of the survey sample.

Alongside improved utilization, industry income also climbed, with businesses reporting a 12.33 percent rise in revenue in Q2, compared to a 10.26 percent increase in Q1.

These improvements align with a projection by the National Statistics Office, which estimates a 5.1 percent year-on-year growth in the economy during the second quarter. The data offers a positive contrast to previous concerns about stagnant industrial output due to weak market demand.

In fact, the CNI report highlights a 19.67 percent increase in demand compared to the previous quarter, with the manufacturing sector alone experiencing a 12.93 percent rise. This comes after the High-Level Economic Reforms Advisory Commission stated that sluggish demand had hindered recovery over the past two fiscal years.

Despite these encouraging trends, industrialists remain cautious about the future. Most of those surveyed do not expect further improvement in business conditions in the upcoming third quarter. Notably, manufacturing industry operators expressed particularly low expectations for short-term gains.

Still, optimism remains in terms of investment. The report reveals that 62.5 percent of the surveyed industrialists plan to make new investments in the next quarter, indicating long-term confidence in the sector's recovery.

The findings suggest that while challenges remain—especially around sustained demand and sector-specific performance—the upward trends in capacity use, revenue, and planned investment reflect a cautiously improving economic landscape.