Trade Diversification in Nepal

The process of expanding trade or different items to different countries by not being limited only to specific goods and countries is called trade diversification.Many different factors can lead to trade diversification. A business may, for instance, become quite successful with one product and use its success to launch another product under the same brand. The development of new technology can also lead to diversification as technological advancements often allow for the development of new products. In some cases, diversification can lead a business to further success, thereby setting the foundation for further diversification.Trade can be diversified in two ways they are :

• Regional or Country wise diversification
• Goods wise diversification

Regional or country wise diversification:

The expansion of the trade of a particular product or country to a more geographical area is called Regional/country wise diversificationThey produce certain goods according to the available natural resources,technologies and manpower for their local market as well as the world market as far they can.It grows up the financial speed of a county.Such diversification helps a lot to flourish the trade.Nepal's foreign trade as limited only to India since the past.After the trade relation was made between Nepal and Tibet,import and export initiated with Tibet also .Nepal used to import salt,wool,sheep,goats etc from Tibet.Similarly, Nepal used to export rice,flour,chilies,sugar etc to Tibet.The fourth-five plan had adopted the principle of trade diversification.Nepal has now started to produce export quality goods and earns foreign currency by exporting them to many countries in the world.

Goods wise diversification:

Good wise diversification is the process of including different items for export.Territorialdiversification may not be enough for the promotion of trade so that every country tries to expand the variety of its export items also.This helps to increase the total volume of exports and the total income.Foreign trade should not be limited only to the production and sale of few goods and should produce and sell new goods according to the demand of world market.If we see Nepal's foreign trend we can find the good wise diversification increasing more than before.Nepal has export like oil cake,wood,maize,rice,pulse etc but nowadays it has been exporting handicrafts,woolen materials,readymade leather goods,silver jewellery,tea,carpet,leather,medicinal herbs,pulse,cardamom etc to India.Because of it,a kind of positive sign has been seen in Nepal's foreign trade.It would be better to earn more foreign currency if we could export readymade items rather than raw materials.