Karnali Province Economy Projected to Grow 4.74 Percent; Industrial Capacity Use at Only 46 Percent

Karnali Province’s Gross Domestic Product (at consumer prices) is projected to reach Rs 256 billion in the fiscal year 2024/25, according to the Nepal Rastra Bank’s recently published Provincial Economic Activity Report. The province’s economy is expected to grow by 4.74 percent during the review period.

The report estimates that agriculture, industry, and services contributed 31.50 percent, 9.58 percent, and 58.91 percent, respectively, to the province’s total output in the previous fiscal year. Karnali’s share in the national GDP is expected to decline slightly to 4.19 percent from 4.29 percent a year earlier.

Preliminary data show Karnali contributed 5.24 percent to the national agriculture sector, 3.13 percent to industry, and 3.98 percent to services last fiscal year.

Industrial performance indicators remain weak. The average capacity utilization of sampled industries stood at only 46.52 percent, underscoring the fragile state of the province’s productive sector. Industries producing electric wires and cables recorded the highest capacity utilization at 90 percent, while carpet industries operated at just 23.8 percent.

Industrial productivity showed mixed results. Production of carpets, traditional woolen garments (radi-pakhi), and leather shoes declined by 25 percent, 50 percent, and 7.69 percent, respectively. In contrast, dairy products, grains and animal feed, textiles, timber, paper, and electrical wire and cable industries recorded double-digit growth. Instant noodle production remained stable.

Industrial lending in the province has also declined. Industrial credit that stood at Rs 4.1186 billion in the previous fiscal year fell by 1.94 percent to Rs 4.0387 billion in the review year. Lending to metal products, machinery, and electronics industries rose by 21.16 percent, while loans to mining industries dropped by 29.98 percent. District-wise, Surkhet received the highest industrial credit at Rs 2.489 billion, while Dolpa received the lowest at Rs 129 million.

In the overall industrial loan portfolio, non-food manufacturing accounted for 28.87 percent, construction industries 28.69 percent, agriculture-forestry and beverages 23.89 percent, metal and machinery 12.14 percent, and electricity-gas-water 5.09 percent.

Despite a positive economic growth outlook, low capacity utilization, declining industrial credit, and falling output in traditional industries highlight persistent weaknesses in Karnali Province’s industrial base.

Read: Agricultural Land Area Declines in Karnali Province: NRB Report