In the 1950s, Nepal's export trade was mainly dominated by carpets, ready-made garments, and pashmina. Ready-made garments were in second place. Garment exports were also encouraging due to the quota system provided by the United States.

After the change in 2046, due to the open market economy adopted by the government, the industry was started by investing in bank loans.

Momentos Apparels ready-made clothing (garment) industry was established in Jhapa at a cost of 250 million. The industry was inaugurated by the then Prime Minister Girija Prasad Koirala on 18 Jestha 2051. Hundreds of people were employed in Momentos alone.

In the fiscal year 2050/051, garments produced in Nepal accounted for about 31 percent of the total export trade. Garments worth 5.94 billion 32 million rupees were exported in that fiscal year. In the fiscal year 2050/051, the United States alone purchased garments worth 3.25 billion 83 million rupees. While at that time, the total annual budget of Nepal presented by the Finance Minister in Parliament was around 40 to 45 billion.

Garments not only earned foreign exchange but also created a large number of jobs. But there were concerns that the readymade garment industry would gradually collapse due to bank guarantees, increased facilities for workers, and lack of customs exemption on equipment required by the industry. In addition, preparations were being made to remove the quota system given by the US since 2005. Preparations were being made to completely remove the facilities received under the Multi-Fiber Agreement (AFA).

All these reasons had created a situation where garments produced in Nepal would be expensive in the world market. Chandiraj Dhakal, President of the Nepal Readymade Garment Industry Association, had said that if the government did not protect Nepali products, they would be 25 percent more expensive. The General Agreement on Tariffs and Trade (GATT) had been implemented in garments since the fiscal year 2051/052.

It was estimated that the production cost of garment fabrics in South Asian countries was increasing by 15 to 16 percent at that time. In addition, Nepali entrepreneurs were seeking protection from the government due to government policies, international markets, treaties/conventions and reductions in facilities given under various headings. Industrialists were demanding the development of infrastructure for pre-GATT markets and price competition to protect the garment industry.

The National Bank had agreed to open revolving bank guarantees and dollar LCs as per the demands of the industrialists to protect the industry. Industrialists, on the other hand, had said that India had also arranged infrastructure management by providing government facilities to protect its industry.

Another reason for the garment industry being in crisis was that Nepali products had to compete with India in the global market. Industrialists had been saying that although there was potential for the production and export of traditional Nepali garments in Nepal, there was a shortage of raw materials.