Himal Press 
KATHMANDU: Nepal’s manufacturing output grew by a modest 0.86% in the fiscal year 2025/26, with the overall increase driven almost entirely by vegetable oils and fats, while most other industries recorded a decline, according to a study by the National Statistics Office (NSO).
The Manufacturing Production Index (MPI), which uses FY 2014/15 as its base year (100), rose from 127.3 in FY 2024/25 to 128.4 in FY 2025/26, indicating annual manufacturing output growth of 0.86%. Of the 29 industry groups covered by the study, 22 recorded lower output than in the previous fiscal year.
Vegetable oils and fats were the main contributor to the annual growth, adding around 3.1 points to the index. All other industry groups combined reduced the index by approximately 2.1 points.
Iron and steel, cement and other mineral products, plastics, beverages and tobacco were among the major industries weighing on manufacturing performance. The study points to weak construction activity, higher energy costs following disruptions in West Asia, competition from imports and subdued household demand as factors consistent with the weakness.
Pharmaceuticals output recorded a healthy 10% year-on-year growth in the fourth quarter and 5.7% over the full fiscal year. Its fourth-quarter index reached 164.9, the highest level recorded for the group in the study’s data.
The sector’s performance weakened towards the end of the fiscal year. The MPI fell to 126.5 in the fourth quarter from 131.3 in the third quarter, a decline of 3.69%. The index was also 1.03% lower than in the same quarter of the previous fiscal year.
However, much of the quarterly decline was seasonal. Sugar mills do not operate in the fourth quarter, causing the index for the other-food group to plunge 45.2%, from 139.8 to 76.7. The seasonal effect accounted for about 3.9 points of the 4.8-point quarterly decline. Excluding it, the fall would have been around 0.9 points.
The year-on-year decline, however, indicates broader weakness. As many as 24 of the 29 industry groups recorded lower output in the fourth quarter than in the same period a year earlier. It was the first time in four years that fourth-quarter manufacturing output fell below the level recorded in the corresponding quarter of the previous year.
Quarterly figures show that the MPI rose from 126.6 in the first quarter to 129.4 in the second and 131.3 in the third, before dropping to 126.5 in the final quarter. The third quarter typically records higher production because sugar and other seasonal food processing activities are concentrated in that period.
Despite the recent weakness, the annual index increased by 4.6% over the past three years, from 122.8 to 128.4, equivalent to an average annual growth of around 1.5%.
