To what extent does FDI contribute to the GDP growth in Nepal, and what are the main challenges that limit its impact?
Key Points Research suggests a positive but limited relationship between FDI and GDP in Nepal. FDI's impact on GDP growth is constrained by low investment levels and structural challenges. Political instability and poor infrastructure seem to hinder FDI effectiveness. Evidence leans toward FDI contributing to sectors like hydropower, but with modest GDP impact. Overview Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) in Nepal show a complex relationship, where FDI can support economic growth, but its overall effect is not as strong as in other countries. Studies indicate a long-term positive correlation, yet the low scale of FDI and various internal issues limit its contribution to Nepal's economy. Trends and Data FDI as a percentage of GDP in Nepal has been low, typically around 0.1-0.2% in recent years, with a high of 0.5% in 2012 and a low of -0.1% in 2006. Challenges Factors like political instability, ou...