Nepal's decision to ban import of non-essential items may hit India hard

Nepal’s decision to ban the import of non-essential items amid depleting forex reserves may hit Indian exports.

The country’s central bank — Nepal Rastra Bank — last week instructed commercial banks not to open letters of credit (LCs) for importing non-essential items.

This is to prevent further decline of the country’s foreign exchange reserves. However, it has not issued any formal communication yet.

Letter of credit is a financial contract or a document that guarantees a buyer’s payments to sellers.

Nepal is India’s ninth largest export destination with $9.6 billion of exports to the landlocked country in calendar year 2021.

India is Nepal’s largest trading