Looking at Nepal's economic indicators, the situation for development has probably never been so easy. Inflation is historically low. While the developed countries of Britain and the United States have inflation rates of 3.6 percent and 3 percent, Nepal has inflation rates of only 1.47 percent.

Nepal has low inflation due to negligible inflation in neighboring India. On the one hand, inflation is low, and on the other hand, we have foreign exchange reserves worth $21.21 billion. These reserves seem to be enough to cover 16.4 months of imports based on Nepal's current imports of goods and services. Similarly, the weighted average interest rate on bank loans is 7.5 percent. Looking at the data available for the last 13 years, this is the first time that interest rates have come to such a low level. The fact that inflation and interest rates have reached a low point simultaneously indicates that economic activity is sluggish. If we take the latest report of the World Bank as a basis, the economic growth is estimated to be only 2.1 percent in the current fiscal year.

Both government and private investment have declined in the past few years. While fixed capital formation, or fixed investment, has been around 30 percent of the gross domestic product for a long time, such investment has been limited to 24 percent for the last three consecutive years. The growth rate of credit flowing from the banking sector to the private sector has averaged only 6.3 percent in the past three years. Despite foreign loan assistance, the country has a significant current account surplus, which is needed to advance infrastructure construction. However, such a surplus cannot be sustained for a long time. Foreign direct investment inflows, which could be a sustainable means of resource mobilization, are also low. Net foreign direct investment inflows from 1996 to 2024 are only around 0.30 percent of the gross domestic product. What is the warning that all these figures are giving us? Are we not going to get stuck in a cycle of low economic growth for a long time? After all, our economic growth in the past five decades is only 4.3 percent. This economic growth is only around the Hindu growth rate, which is discussed in India based on India's economic growth data from 1950 to 1980. However, India's average economic growth rate from 1992 to 2024 is 6.3 percent. Nepal's biggest concern today is whether we will have to go through a state of 'secular stagnation'. If we go into 'stagnation', our development pace is certain to be pushed back even further. At the same time, in such a situation, there is a fear that the country will plunge into conflict and chaos.

Now let's go back a little. In the fiscal year 2056/57, the share of the industrial sector in the gross domestic product was 21.5 percent, the share of the agricultural sector was 39.6 percent, and the share of the service sector was 38.9 percent. By the fiscal year 2081/82, the share of the industrial sector had shrunk to 12.8 percent. As the economy takes a leap, it may be natural for the share of a sector in the gross domestic product to shrink in absolute terms. But the issue of the production and productivity of the relevant sector not increasing and only the share shrinking is a matter of concern. In fact, industrialization expanded in Nepal in the 1990s with the participation of the private sector. Not being able to keep up with that pace of industrialization proved to be a big setback for the Nepalese economy.

Now let's look at another example. Nepal was exporting rice and paddy until 2040 BS. For this, a rice and paddy export company was established earlier. But ironically, the share of food imports in our total imports has now reached a significant level. In just four months of the current fiscal year, more rice has been imported than in four months of the previous year. If the country lags behind in food production, which can be important from the perspective of self-reliance, there is a risk that issues such as national independence will be affected. The global experience of supply chain disruptions that began with the Covid crisis in 2020 has made the issue of protecting strategic industries and promoting domestic production serious for every country.

The most important question is what to do now for the sustainable upliftment of Nepal's economy, which has not been industrialized, is being promoted by speculation, food imports are increasing, and youth are migrating. Deep thinking is needed on what more we can do in areas such as tourism, hydropower, agriculture, forestry, small and medium-sized cottage industries, and information technology. India receives 10 million foreign tourists in a year alone. If we can bring even ten percent of the tourists coming to India to Nepal, it can be a big opportunity for our tourism sector. Tourism is playing a significant role in increasing employment and earning foreign exchange. More than just its direct contribution to the economy, tourism's contribution to sectors such as agriculture, transportation, wholesale and retail trade, and handicraft exports is even greater. For the sustainable development of the economy, we also need to work on some innovative areas that we can do fundamentally. Activities such as herbal processing, animal husbandry, and cash crop production should be given high priority. For this, we should make efforts from all angles, whether through collective farming, private-public partnerships, or through the leadership role of the local level.

In recent years, the practice of emphasizing industrial policy has begun again around the world. After the global financial crisis of 2008, the US's announcement of removing the expansionary policies taken during the financial crisis, the 'taper tantrum' around 2013, and the US election of 2016, the world has moved towards 'deglobalization', i.e. an inward-looking policy. Economists including Danny Rodrick have noted that the number of industrial policy interventions worldwide has increased from 56 in 2012 to 1,568 in 2022. After the Covid crisis, industrial policy is actively being revived around the world. In most countries, industrial policy is focusing on energy security. Global disruptions in supply chains due to natural disasters, geopolitical tensions, and the race to weaponize resources remain. This means that we need to develop an environment that allows us to become self-reliant in essential goods and services, help promote the agricultural sector, and create jobs. Occasional trade disruptions have also taught us that a certain level of industrialization is necessary from the perspective of sovereignty and national security.

The arguments that our development model was incomplete when we jumped from agriculture to the service sector without industrialization are equally important. But we must also put the private sector at the forefront of industrial policy revival. The International Monetary Fund has presented the examples of Brazil and South Korea, which pursued massive industrialization in the 1970s, in its World Economic Outlook of October 2025. Korea's industrial policy, which promoted exports and increased competitiveness by putting the private sector first, worked wonders for the economy. In contrast, Brazil's policy, which relied on government corporations and emphasized import substitution, did not work as well. In today's era of industrial policy renaissance, we need to adopt market-friendly and more targeted policies in areas such as energy, tourism, agro-based industries, artificial intelligence and information technology. 

We need to think deeply about whether we can develop Nepal as an international educational and medical hub. Our debate needs to focus on what policy and promotional measures should be adopted to attract international investment in this sector. Instead of making Nepal an international destination for technical education, a large number of students are going abroad to pursue medical education every year. How did it come to be that Nepalis have to go not only to old destinations like China and Bangladesh but also to new destinations like the Philippines, Kyrgyzstan, and Uzbekistan to pursue medical education? Why have we not been able to become serious about such issues? Both the private and government sectors should make efforts to make Nepal an educational hub like Qatar and Abu Dhabi by coordinating with world-renowned educational institutions.

Our neighboring country, India, is moving forward with the aim of achieving the status of a developed country as it celebrates its 100th Independence Day in 2047. In the international arena, India is playing a leading role in ‘South-South Cooperation’ by showing a strong presence in forums such as G-20 and BRICS. In the last decade, while most countries in the world have not been able to benefit from productivity growth, only India and the US have been able to increase productivity. On the other hand, China and the US, which are considered the most powerful countries in the world today, are competing in areas such as artificial intelligence and digital trade. In a global environment of uncertainty, how to work in the country’s interest by increasing international coordination and cooperation is also a matter of main concern. Nepal's sensitive geographical presence is equally necessary to create an environment where it can benefit from various dimensions of international relations by understanding and promoting economic diplomacy.