Nepal’s Textiles and Clothing Exports

Nepal's textiles and clothing sector, particularly readymade garments and hand-knotted woollen carpets, remains a key export earner despite structural constraints and a decline in manufacturing's share of GDP. While the sector leverages unique craftsmanship and LDC-based preferential market access, it faces high logistics costs, skilled labour shortages, and a 25% higher unit cost compared to competitors like Bangladesh and India. LDC graduation threatens this competitiveness through potential tariff increases and stricter rules of origin. The authors argue that the government should move away from ineffective ad-valorem subsidies and poorly located special economic zones, instead focusing on market intelligence, inter-agency coordination, and productivity improvements to adapt to a changing global trade landscape.

• Textiles and clothing are a major component of Nepal's merchandise exports, accounting for 31.5% in 2022, with readymade garments and hand-knotted woollen carpets as the primary subsectors.
• Nepal's garment and carpet exports face significant cost disadvantages, with unit costs estimated to be at least 25% higher than those of competitors in Bangladesh and India.
• Competitiveness is hindered by high logistics costs due to Nepal's landlocked status and reliance on air freight, as well as a shortage of skilled labour driven by high turnover and migration.
• The sector survives by focusing on niche branding, high-quality craftsmanship, and preferential market access granted by Nepal's LDC status, particularly in the European market.
• LDC graduation is expected to negatively impact the clothing sector through increased tariffs and more stringent rules of origin, such as requiring double transformation (yarn to fabric to clothing) instead of single transformation.
• Current government interventions, such as special economic zones (SEZs) and ad-valorem export subsidies, are deemed ineffective due to poor infrastructure, administrative hurdles, and a lack of alignment with industry needs.
• The authors recommend replacing direct subsidies with support for market intelligence, business development services, and improved inter-agency coordination, citing Ethiopia's national export coordination council as a successful model.

APA

Kharel, P., Dahal, K., & Singh, D. (2025). Nepal’s Textiles and Clothing Exports. International Institute for Sustainable Development. https://www.iisd.org/articles/policy-analysis/nepal-textiles-clothing-exports

Chicago

Kharel, Paras, Kshitiz Dahal, and Dikshya Singh. Nepal’s Textiles and Clothing Exports. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/policy-analysis/nepal-textiles-clothing-exports.

Wikipedia

{{cite report |last1=Kharel |first1=Paras |last2=Dahal |first2=Kshitiz |last3=Singh |first3=Dikshya |title=Nepal’s Textiles and Clothing Exports |publisher=International Institute for Sustainable Development |date=8 December 2025 |url=https://www.iisd.org/articles/policy-analysis/nepal-textiles-clothing-exports |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kharel2025nepals, author = {Kharel, Paras and Dahal, Kshitiz and Singh, Dikshya}, title = {{Nepal’s Textiles and Clothing Exports}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = dec, url = {https://www.iisd.org/articles/policy-analysis/nepal-textiles-clothing-exports}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }