Trade diversification in Nepal
What is trade diversification?
Simply, 'diversity' indicates to bring change in something to introduce variety. It means to make something diverse or varied. In the economic sense, it refers to develop a wider range of product or market by adding some varieties to the existing entity. Trade diversification is the process by which a business offers a range of different products or services. It opposes specialization in just one product or entity. In the state of being restricted to one place or country, trade diversification enables us to consider different places or country for the purposes of the trade. This is good for nation as it reduces the nation reliance on a specification economic sector. Trade diversification can be carried out in two ways.
- Region/Country wise diversification
- Commodity wise diversification
Region/Country wise diversification
Region/Country wise diversification means the expansion of trade of a product or a country to more geographical areas. It is an action of supplying and selling the goods produced in a region or a country to another region or country. It helps in the promotion of trade by minimizing trade deficit or loss. Goods can be imported or exported from many countries rather than relying on a particular country.
The trade is likely to yield better fostering the economy of a nation if it can afford to import or export goods from many countries instead of specializing in one. Nepal as a landlocked country was dependent almost entirely on India for trading. Partially, it had trade-ties with Tibet too. Landlockedness, open border, resembles in terms of culture, tradition and historical connection with India etc. are some major factors that contributed to limit our trade. The trade with overseas was almost nil. Having realized the fact that extravagant trade dependency on our neighbours prevented us taking from international trade, Nepal started showing concern about trade diversification from 3rd economic plan. Then Nepal started to extend it's foreign trade to overseas. In this process, Nepal tried to implement this concept from 2021/2022 BS. Nepal took stiffer principle of trade diversification from 4th five year plan. Nepal has been exporting goods to many countries in the world and earning foreign currencies nowadays.
The popularity of Nepalese goods grew rapidly in international market. Recently, Nepal is exporting its production to many countries in addition to India and earning foreign currency.
Commodity wise diversification
A country has to concentrate on commodity diversification in order to promote its foreign trade. It should not be limited with the production of new goods and sale as per the demand of the world market will promote the foreign trade. If we see the trend of foreign trade of Nepal, in the past, Nepal used to expert limited goods. However, the commodity-wise diversification has been found to be increasing these days. Nepal used to export pulse, maize, wood, rice, etc. But nowadays, it has been exporting readymade garments, carpet, pulses, handicraft, leather, medicinal herbs, paper products, silver jewellery, tea, cardamom etc. It is the positive symptom of Nepal's foreign trade which has contributed to change the direction of trade. However, more has to be done to sparkle the possibilities of betterment.
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