Multinational companies operating in Nepal are reporting declining profits as political instability, changes in India’s tax policies, youth migration and currency depreciation continue to affect consumer demand and business costs.
Unilever Nepal, one of the country’s largest fast-moving consumer goods producers, reported a 10 per cent drop in net profit, earning Rs431 million in the second quarter of the current fiscal year. The company also recorded an 8.23 per cent fall in total income during the same period.
The company stated that business was disrupted by political uncertainty, market closures and the slowdown in consumer activity during festival periods. Sales declined across several segments, especially in personal care products. Rising raw material costs and limited ability to adjust prices following India’s revised Goods and Services Tax (GST) structure also affected earnings. Cheaper goods entering Nepal through informal border trade have further weakened the competitiveness of locally produced items.
India introduced its updated GST system in September, placing most goods under either a 5 per cent or 18 per cent tax category. Businesses in Nepal say the change has complicated trade and pricing structures, while policy delays within Nepal have prevented timely adjustments.
Economic conditions have also been influenced by outward migration and weak job creation, reducing domestic spending. Although remittance inflows continue to support the economy, rising inflation and currency depreciation are increasing business costs. The Nepali rupee has weakened from around Rs142 to Rs145 against the US dollar, making imported materials more expensive.
Meanwhile, Bottlers Nepal (Balaju), the producer of popular soft drinks, reported a reduced net loss of Rs290 million, an improvement of nearly 12 per cent from last year. The company credited careful pricing strategies, cost management and strong brand performance for the improvement.