Despite a surge in trade with China, India continues to dominate as Nepal’s largest trading partner, owing to geographic proximity, duty-free access for many goods, and seamless land connectivity.

According to Nepal’s embassy, bilateral trade with India crossed $8 billion in 2022–23. Imports exceeded $7 billion, while exports to India were valued at around $755 million. In comparison, Nepal’s trade with China was estimated at just $724 million in the same period.

Recent data, however, shows a shift in trade trends. In the first nine months of 2023–24, Nepal’s total exports declined by 3.7 percent compared to the previous fiscal year. Exports to India dropped by 6.2 percent, while shipments to China surged by 232 percent, albeit from a small base. Imports also fell by 2.8 percent overall, with Indian supplies decreasing by 3.2 percent, while imports from China rose by 33.4 percent.

Observers note that Nepal’s tilt toward China coincided with Communist leadership in Kathmandu, marked by former Prime Minister K. P. Sharma Oli’s state visit to Beijing in 2024—a break from tradition, as Nepali leaders typically prioritize India for first official visits. Analysts view this as part of Kathmandu’s evolving foreign policy.

Economists, however, warn that Nepal’s trade potential remains underutilized. Once an exporter of paddy, sugarcane, and lentils, Nepal now imports staples such as wheat, sugar, and cooking oil. Structural bottlenecks—including fragmented landholdings, poor storage, lack of irrigation, and weak agro-processing—have stalled agricultural exports, while Indian and Chinese goods dominate local markets.

The World Bank projects Nepal’s economy to grow 4.5 percent in FY2025, up from 3.9 percent in FY2024, supported by hydropower, paddy output, and domestic trade. Yet political instability and protests continue to cast uncertainty on future trade strategies.