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Nepal is one of the poorest and least developed countries in the world, with 42% of its population living below the poverty line (based on US$ 1.00/day). Nepal has a Human Development Index (HDI) of 0.499 ranking it 143 out of 175 countries listed by the United Nations ([UNDP 2003]) . There has been a very slow, gradual improvement in the HDI in all years excepting 1993, but the current level is low even by South Asian standards.

The economy is very closely bound to the natural resources (agricultural land, wetlands, forests and protected areas). Agriculture is the mainstay of the economy providing a livelihood for over 80% of the population and accounting for nearly 42% of GDP. Tourism and exports of carpets and textiles are key sources of foreign exchange (respectively 11% and 70%). Tourist arrivals in 1999 numbered over 420,000, but the expected annual growth rate of 8-10% has suffered greatly during the ongoing civil unrest.

In 2002 (NBS 2002) land use was estimated as:

Forests: 29% (4.27 m hectares), average annual deforestation rate 1.7%

Scrubland and degraded forest: 10.6% (1.56 million hectares)

Grassland: 12% (1.7 m hectares)

Cultivated farmland: 21% (3.2 m hectares), principal crops rice, maize, wheat, millet and potatoes

Uncultivated land: 7% (1.0 m hectares)

Others: 20.3% (4.72 m hectares)

Of the agricultural land 55.7% is in Terai, 37.3% in the Hills, and 6.9% in the Mountains.