The industries of Nepal are reeling under the effects of economic recession, interest rate instability, falling demand in the domestic market and price hike of raw materials, resulting in a decline in industrial production. The recently published 'Economic Activity Study Annual Report' of Nepal Rastra Bank shows that the average capacity utilization of Nepal's industries in the last fiscal year (FY) 2079/80 was limited to 49.8 percent. In the previous year (FY 2078/79), the capacity utilization of the industries was 52.2 percent.

The central bank's report also backs a recent report released by the private sector organization Confederation of Nepalese Industries(CNI). The report published by the confederation stated that there has not been any improvement in the country’s overall economy. The report of the central bank mentions that the capacity utilization of the electricity generating industry was the highest at 86.2 percent last year. The capacity utilization of vegetable ghee production industry was the lowest (2.6 percent). Similarly, despite the cement industries of Nepal starting export to India, the capacity utilization of the cement industry declined due to the slowdown in the domestic construction sector.

The capacity utilization of the cement industry, which was 46.06 percent in the year 2078/79, decreased to 44.44 percent in the last fiscal year. Dhurba Thapa, president of Nepal Cement Producers Association, the umbrella organization of cement industries, said that the capacity utilization has decreased due to the stalled construction work and the inability of the government to spend the budget. Soybean oil industry, which was 82.33 percent in the year 2078/79, dropped to 47.61 percent in the last fiscal year. Similarly, the report states that the capacity utilization of vegetable ghee industry was limited to 2.59 percent last year.

Similarly, the average capacity utilization of industries in Gandaki, Karnali and Sudurpaschim provinces has increased, while the average capacity utilization of industries in Koshi, Madhesh, Bagmati and Lumbini provinces has decreased.