Nepal's Capital Market Emerges as a 77% Economic Pillar, Fueling Hydropower Revolution and National Prosperity

Nepal's capital market is rapidly solidifying its position as the backbone of the nation's economy, a sentiment strongly articulated by capital market analyst Pratibha Ghimire. Speaking at a dialogue program titled 'Nepal's Capital Market: The Foundation of Economic Investment,' organized by the Nepali Congress, Ghimire presented a compelling case for the market's indispensable role, citing the crucial ratio between the country's Gross Domestic Product (GDP) and market capitalization.

According to Ghimire, Nepal's current GDP stands at approximately NPR 60 trillion, while the stock market's capitalization has reached an impressive NPR 46 trillion. This striking statistic reveals that the capital market now accounts for a substantial 77 percent of Nepal's total economy. This significant share underscores the market's growing influence and its capacity to mobilize substantial financial resources for national development. Beyond merely providing essential long-term capital, the capital market plays a pivotal role in fostering 'economic democracy' by enabling ordinary citizens to acquire ownership stakes in companies, thereby democratizing wealth creation and participation in economic growth.

Delving into the structure of market capitalization, Ghimire highlighted that banks and financial institutions collectively hold the largest share, accounting for 51 percent of the total market. The burgeoning hydropower sector commands a respectable 16 percent, while other diverse sectors make up the remaining 33 percent. Ghimire particularly emphasized that the remarkable success achieved in the energy sector, a critical area for Nepal's development, can be largely attributed to the robust support and capital infusion facilitated by the capital market.

Recalling a not-so-distant past, Ghimire noted, "There was a time when we were forced to endure up to 18 hours of load shedding daily. Today, Nepal has transformed into an energy-surplus nation, producing 4,000 megawatts of electricity and even exporting 600 megawatts." This monumental shift, she asserted, has been primarily driven by the private sector, which contributes an overwhelming 85 percent to the nation's total production. The capital market has been instrumental in this transformation, effectively channeling public investment towards critical national infrastructure projects, particularly in hydropower, thereby bridging the gap between individual savings and large-scale development needs.

Furthermore, the capital market has emerged as a significant source of both employment generation and state revenue collection. Ghimire presented data from the last fiscal year, indicating that the state collected an average of NPR 1 billion monthly in capital gains tax from the market. This figure represents approximately 1.5 percent of the country's total national revenue, highlighting the market's direct contribution to the national exchequer. By directly and indirectly creating thousands of jobs and contributing billions in taxes, the capital market is actively propelling the nation towards prosperity, making it a fundamental pillar for development and infrastructure growth.

Supporting this narrative of growth, the hydropower sector, a major beneficiary of capital market investments, demonstrated exceptional performance in the fourth quarter of the last fiscal year. An analysis of the financial statements of 111 hydropower companies revealed an average net profit increase of over 471 percent. Out of these, 91 companies reported net profits, while only 20 continued to operate at a loss. This strong financial performance underscores the viability and growth potential of the sector, further validating the capital market's role in fostering sustainable economic development and investor confidence in Nepal's energy future.