Nepal IT Industry & Digital Economy: The IT Exports Hub

Nepal's information technology (IT) industry has become one of the country's fastest-growing and most talked-about export sectors. Where Nepal has long relied on labour migration remittances, agriculture and tourism for foreign currency, software development and IT-enabled services (ITeS) now generate hundreds of millions of US dollars a year in earnings from clients in the United States, Australia, the United Kingdom and beyond. Industry representatives describe the sector as having crossed a symbolic milestone in 2025, with annual service exports estimated at around US$1 billion.

The most authoritative baseline comes from the Institute for Integrated Development Studies (IIDS), whose 2024 report 'Unleashing IT: Advancing Nepal's Digital Economy' was the first comprehensive nationwide study to map the industry. It valued Nepal's IT service exports at about US$515 million (roughly Rs68 billion) in 2022, a 64.2 percent jump over 2021. In February 2026, the Nepal Association for Software and IT Services Companies (NAS-IT) put the current figure at an estimated Rs145 billion (about US$1 billion) a year, describing it as a 'best estimate' rather than an audited total.

This page mirrors the structure of amarnepal's telecom hub: it walks through the industry's eras and timeline, the split between companies and freelancers, the data problem that keeps IT earnings largely invisible in customs statistics, the leading firms, official targets, and an at-a-glance facts table and FAQ. All figures are cited to their year or fiscal year, because the sector's headline numbers are estimates that change quickly.

Nepal's IT sector grew in loosely defined phases. In the 1990s and early 2000s, the first era was dominated by internet service providers, hardware vendors and system integrators such as Mercantile, which introduced early internet access, hosting and web services for domestic organisations. Software work in this period was mostly for the local market: banking systems, billing software and government computerisation.

A second era, roughly from the mid-2000s, saw the rise of product and outsourcing companies serving foreign clients. F1Soft International (founded 2004) pioneered domestic fintech and later launched eSewa, Nepal's first digital wallet, while firms such as Verisk Nepal (2009), Leapfrog Technology (2010), CloudFactory (2010), Cotiviti Nepal and Fusemachines (2013) built delivery centres in Kathmandu serving insurance, healthcare, data-annotation and artificial-intelligence clients abroad. This established Nepal as a competitive, lower-cost outsourcing destination with strong English skills.

The most recent era, accelerating after the COVID-19 pandemic normalised remote work, has been defined by two parallel engines: registered export companies competing for higher-value contracts, and a large, decentralised base of individual freelancers earning directly on global platforms. Together they moved the sector from a niche into a mainstream source of foreign-exchange earnings, prompting the government to set formal export and job-creation targets.

One of the most distinctive features of Nepal's IT export industry is that a very large share of its earnings comes from individual freelancers rather than incorporated companies. The IIDS 'Unleashing IT' study mapped the 2022 base as over 106 IT service-export companies, about 14,728 IT freelancers working in software development and technology, and about 51,781 ITeS freelancers exporting services such as data processing, virtual assistance, content and design through digital platforms.

The two segments grew at different rates. In 2022 the IIDS report found that IT companies increased their service exports by about 80.5 percent year on year, while freelancers grew by about 55.2 percent. Companies tend to win larger, longer-term contracts and can invest in specialised capabilities like healthcare data analytics or AI, whereas freelancers offer flexibility and scale, absorbing thousands of young workers who might otherwise emigrate for jobs.

Industry leaders estimate that roughly 100,000 people now work in Nepal's IT sector, up from over 70,000 professionals around 2022, with employment heavily concentrated in the Kathmandu Valley. NAS-IT, the main industry body, began with 32 companies and now represents more than 80 large and mid-sized firms, reflecting the maturing of the formal company segment alongside the freelance base.

A recurring puzzle for students, journalists and investors is why Nepal's headline trade statistics, which show a large goods trade deficit, barely register a billion-dollar IT export industry. The answer is that customs data captures only physical goods crossing the border. Software and IT services are intangible: they are delivered over the internet, so they never pass through customs and do not appear in the Department of Customs' import-export figures at all.

Instead, service exports are supposed to be captured in the balance of payments (BoP) compiled by Nepal Rastra Bank (NRB), the central bank, under categories such as 'computer services', 'telecommunication services' and 'information services'. NRB data indicate meaningful and rising flows: in the first four months of fiscal year 2024/25 (mid-July to mid-November 2024, or roughly Shrawan-Kartik 2081 BS), Nepal earned about Rs6.69 billion from these IT services, including roughly Rs4.96 billion from computer services and Rs1.72 billion from telecommunication services, a 20.28 percent increase over the same period a year earlier.

Even the BoP, however, undercounts the true total. Industry figures such as NAS-IT president Gaurav Raj Pandey note that a large share of freelancer and small-company earnings arrives through remittance channels or informal transfers and is recorded as 'remittance' rather than as an IT service export. This makes it difficult to separate genuine IT earnings from personal remittances, which is why the widely quoted US$1 billion figure remains an industry estimate rather than an official audited number.

The clearest verified data points trace a steep upward curve. IIDS recorded IT service exports of about US$303.9 million in 2021 and about US$515.4 million in 2022, the latter equal to roughly Rs68 billion and representing 64.2 percent growth. NAS-IT's 2026 estimate of about Rs145 billion (around US$1 billion) implies the industry has more than doubled in the three years since the last comprehensive study, consistent with industry claims of roughly 20 percent annual growth.

The sector's macroeconomic weight has grown alongside. According to IIDS analysis, IT service exports rose from about 1 percent of gross domestic product (GDP) in 2020 to about 1.4 percent in 2022, while their contribution to foreign-exchange reserves climbed from about 2.9 percent in 2020 to about 5.5 percent in 2022. For a small economy heavily dependent on remittances, that makes IT one of the few diversified, high-skill sources of hard currency.

Readers should treat the post-2022 line on any growth chart as an estimated trend rather than measured data. Because no formal nationwide study has been completed since the IIDS report, figures for 2023, 2024 and 2025 come from a mix of NRB balance-of-payments records (which capture only formally routed payments) and industry projections. The direction of travel is well established; the precise level is not.

Nepal's digital-economy policy is anchored by the Digital Nepal Framework 2019, prepared by the Ministry of Communication and Information Technology. It is built on a '1-8-80' model: one country, eight priority sectors (digital foundation, agriculture, health, education, energy, tourism, finance and urban infrastructure) and 80 digital initiatives intended to accelerate socioeconomic growth through technology. The framework provides the broad roadmap within which IT-export promotion sits.

The government has since set explicit export ambitions. In May 2024, then Finance Minister Barshaman Pun announced a target for Nepal to export IT services worth about Rs3 trillion over the following decade and to create around 500,000 direct and 1 million indirect jobs (about 1.5 million in total), positioning Nepal as a regional IT hub. He also pledged policy stability and a plan to develop, promote and regulate artificial intelligence.

Reaching those targets depends on unglamorous fundamentals: reliable electricity and internet, easier and cheaper ways to receive foreign payments, tax and regulatory clarity for exporters and freelancers, and a steady pipeline of skilled graduates. The sector has grown largely on private initiative and diaspora networks rather than state support, so the credibility of official targets will hinge on whether promised policy stability actually materialises.

The industry faces several structural constraints. Skills supply is the most cited: universities produce fewer job-ready graduates than the sector can absorb, and the strongest talent is often recruited abroad. Frequent policy changes, payment-gateway limitations (including the unavailability of PayPal withdrawals), and the absence of a clear legal category for exporting freelancers all raise friction. Concentration in the Kathmandu Valley also leaves the sector exposed to local infrastructure and disaster risks.

Opportunities are equally real. Nepal offers a large, young, English-capable and comparatively low-cost workforce, a widening base of firms moving up the value chain into AI, product engineering and specialised analytics, and a proven track record with demanding US and Australian clients. If the sector can keep growing at high double-digit rates while formalising more of its earnings through the banking system, it could become one of Nepal's top foreign-currency earners within the decade.

For now, the honest summary is that Nepal's IT export industry is large, fast-growing and genuinely competitive, but under-measured. The US$1 billion figure is a credible industry estimate; the official, fully tracked number is smaller because much of the money moves through informal and remittance channels. Closing that measurement gap, alongside investment in skills and stable policy, is the key to turning today's momentum into a durable digital economy.