Electricity consumption and the use of digital technologies remain low in Nepal’s manufacturing sector, mainly due to limited growth and weak infrastructure, according to a report of World Bank

In its recently published report, Nepal National Economic Outlook: Unveiling the Potential for Economic Growth in Nepal , the World Bank states that electricity demand from Nepal's industrial sector has not increased significantly because the manufacturing base has not expanded.

The report highlights that the sector also trails behind peer countries in adopting digital technology. The manufacturing sector’s contribution to Nepal’s GDP declined to 6 percent in 2022—lower than in other South Asian countries and even below the levels of economies at a similar stage of development.

In 2022, Nepal’s industrial sector consumed only 12,800 terajoules (over 3.55 billion units) of electricity, whereas Bangladesh’s industrial sector consumed 147,000 terajoules in the same year. One terajoule is equal to 277,777 units of electricity. While electricity consumption in Nepal’s manufacturing sector has doubled over the past decade, it remains low compared to peer economies.

This trend poses a challenge for Nepal’s goal of increasing domestic consumption of hydropower. The report notes that manufacturing’s share of GDP—7.3 percent even during the civil war—has now dropped to just 5.7 percent. Meanwhile, the construction sector has overtaken manufacturing in terms of economic contribution.

Although Nepal officially ended load-shedding on May 31, 2018, the report states that 76 percent of industrial firms still face frequent power outages. This has eroded trust in the electricity supply, largely due to the country’s weak transmission and distribution infrastructure, including limited substations and grid networks.

“Unreliable power supply has significantly affected firms’ production and profits. In 2022, over 13 percent of firms reported losing more than 10 percent of their annual sales due to power disruptions,” the report states.

Economist Gyanendra Adhikari echoed these findings, saying that most industries still lack access to reliable electricity because of poor infrastructure. He noted that electricity consumption in manufacturing is likely even lower than in the service sector due to these constraints. The report adds that both manufacturing and services have low electricity usage overall.

The World Bank also pointed out that the adoption of digital payment systems in manufacturing is extremely low. Only 10 percent of firms used digital payments in 2023. The sector also lags in digital skills, competitiveness, and the use of advanced technologies.

Adhikari suggested that hesitation to adopt digital payments may stem from concerns that greater financial transparency could expose informal practices in the industry.