Current Trends and Status of Informal Cross-Border Trade in Eastern Nepal

Abstract

Cross-border trade is a defining feature of Nepal’s border economy, particularly in the Nepal-India border. A large share of this trade operates informally outside official customs procedures and remains central to local livelihoods and the local economy. This study examines the current trends and status, nature, scale, modes of operation, and implications of informal cross-border trade in Eastern Nepal, drawing on primary survey data from 145 respondents in border-adjacent communities, as well as interviews, observations, and secondary sources. The research adopts a descriptive and analytical approach to explore socio-demographic characteristics, border-crossing patterns, traded goods, causes of informality, border-related challenges, and perceived income effects. The findings reveal that the local community's cross-border trade is predominantly small-scale and occasional, with most respondents reporting monthly trade values below NPR 50,000. In informal trade, household goods predominate, and nearly three-quarters of respondents reported engaging in or being exposed to trade without customs clearance. Informality is driven mainly by small trade volumes, high taxes, and complex customs procedures. While informal trade also contributes positively to income for some households, its overall impact on the respondents' livelihoods is mixed. The study concludes that simplified customs procedures, reduced taxes, and trader-friendly border governance are essential to promote inclusive and sustainable cross-border trade in Eastern Nepal.