Wholesale‚ retail sector outpace manufacturing

KATHMANDU: Fuelled by higher inflow of remittance, shops and their suppliers are outrunning the turtle-paced growth of factories and manufacturers.

The annual growth rate of wholesale and retail industry is double the rate of growth of gross domestic product, as purchasing power of most Nepalis is steadily on the rise.

In the past fiscal year, wholesale and retail sector grew by 6.79 per cent and is expected to grow by 8.83 per cent in current fiscal, according to Central Bureau of Statistics (CBS) data. On the other hand, the growth of agriculture, that has the biggest share on the country’s total output and employs a majority of the population, registered a mere growth of 1.07 per cent. A better monsoon is expected to push the sector’s growth by 4.72 per cent by the end of the current fiscal year.

Whereas more people are leaving the country to work as migrant workers in Gulf countries and Malaysia, the purchasing power of their

families back home has increased significantly. This has resulted in shops, even in remotest corners, thriving.

“In the short run, the country can progress on the back of one single sector, but for a sustained growth, production-oriented growth is

imperative,” said Senior Economist Bishwambher Pyakuryal.

Manufacturing sector is considered to be the job creator for the mass. However, here in Nepal, wholesale and retail sector has outpaced it in terms of employment as well.

According to the recently released Annual Budget Survey, retail and wholesale sector is employing 6.8 per cent of total population, while manufacturing is engaging 5.2 per cent.

“People need to buy items ranging from cereals to automobiles, but here most of the goods being sold by the retailers are imported with few produced within the country,” pointed out Pyakuryal, adding, “Our growth will be sustainable only if most of the goods being sold in the

local shops are produced within the country itself.”

With heavy reliance on imports, Pyakuryal stressed that the money being sent from abroad is once again directed outward. “However, it has caused the trading sector to undergo a boom,” he added.

Nepal is receiving an average of Rs 1.5 billion as remittance income daily, with about 450,000 Nepalis going to foreign countries seeking jobs annually. Of the total remittance, the families spend 79 per cent of the amount they receive, according to National Migration Survey. The

increased appetite for spending has contributed to the growth of the businesses involved in selling products.

Moreover, in another indication of dominance of the sector in the economy, the retail and wholesale businesses are also the largest borrowers from the financial institutions.

As of mid-April, banks have extended loans worth Rs 234.7 million to retailers and wholesalers, while production sector that includes most of the manufacturing industries have obtained loans worth Rs 220 billion.

Of the total lending by the financial sector, loans floated to wholesale and retail sector is the highest among other sectors. At 21.71 per cent, lending to the wholesale and retail sector is the highest among the 13 sectors classified by the government, as of the third quarter of the current fiscal year. Meanwhile, sectors such as production and construction that are considered relatively more capital intensive have lagged.

Crunching numbers

• Annual growth rate of wholesale and retail industry double the rate of GDP growth

• Wholesale and retail sector expected to grow by 8.83pc in current fiscal

• Retail and wholesale sector employing 6.8pc of total population

• As of mid-April, banks have extended loans worth Rs 234.7m to retailers and wholesalers

Source: THT