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Nepal is a developing country with an agricultural economy. in recent years, the country's efforts to expand into manufacturing industries and other technological sectors have achieved much progress. Farming is the main economic activity followed by manufacturing, trade and tourism. The chief sources of foreign currency earnings are merchandise export, services, tourism and Gurkha remittances. The annual Gross Domestic Product (GDP) is about US$ 4.3 billion.
Eight out of 10 Nepalese are engaged in farming and it accounts for more than 40% of the GDP. Rolling fields and neat terraces can be seen hills all over the Terai flatlands and the hills of Nepal. Even in the highly urbanized Kathmandu Valley, large tracts of land outside the city areas are devoted to farming. Rice is the staple diet in Nepal and around three million tons are produced annually. Other major crops are maize, wheat, millet and barley. Besides food grains, cash crops like sugarcane, oil seeds, tobacco, jute and tea are also cultivated in large quantities.
Manufacturing is still at the developmental stage and it represents less than 10% of the GDP. Major industries are woolen carpets, garments, textiles, leather products, paper and cement. Other products made in Nepal are steel utensils, cigarettes, beverages and sugar. There are many modern large-scale factories but the majority are cottage or small-scale operations. Most of Nepal's industry is based in the Kathmandu Valley and a string of small towns in the southern Terai plains.
Commerce has been a major occupation in Nepal since early times. Being situated at the crossroads of the ancient Trans-Himalayan trade route, trading is second nature to the Nepalese people. Foreign trade is characterized mainly by import of manufactured products and export of agricultural raw materials. Nepal imports manufactured goods and petroleum products worth about US$ 1 billion annually. The value of exports is abut US$ 315 million. Wooden carpets are Nepal's largest export, earning the country over US$ 135 million per year. Garment exports account for more than US$ 74 million and handicraft goods bring in about US$ 1 million. Others important exports are pulses, hide and skins, jute and medicinal herbs.
In 1998, a total of 463, 684 tourists visited Nepal, making tourism one of the largest industries in the Kingdom. This sector has been expanding rapidly since its inception in the 1950s, thanks to Nepal's natural beauty, rich cultural heritage and the diversity of sightseeing and adventure opportunities available. At one time, tourism used to be the biggest foreign currency earner for the country. Nepal earned over US$ 152 million from tourism in 1998.