In 2025, the global apparel industry is experiencing a significant shift in sourcing strategies. Garment sourcing in Nepal has emerged as a viable alternative to India for international brands, driven by rising U.S. tariffs on Indian apparel, competitive trade benefits for Nepal, and an increasing demand for ethically produced garments. For brands like Nike, Puma, Gap, and Zara, the combination of lower import duties, skilled artisans, and sustainable practices is making Nepal a compelling option.
While India has long been the dominant apparel manufacturing hub in South Asia, recent geopolitical and economic changes have prompted brands to explore smaller, agile alternatives. Nepal’s garment industry, though smaller in scale, offers several strategic advantages that directly affect cost, quality, and brand reputation.
One of the most compelling reasons for sourcing garments from Nepal is the country’s favorable trade status:
U.S. tariffs: Indian apparel now faces approximately 50% tariffs, a steep increase driven by trade policy. In contrast, Nepali-made garments are subject to only 10% duties, significantly lowering landed costs for U.S. importers.
EU access: Nepal, classified as a least-developed country (LDC), enjoys duty-free access to the European Union under the Everything But Arms (EBA) program. Apparel shipments from Nepal enter the EU without import tariffs or quotas. Indian apparel, by comparison, is subject to standard MFN duties (~9%), increasing costs for European buyers.
Diversification advantage: By sourcing from Nepal, brands can mitigate geopolitical risks associated with concentrated supply chains in India or China.
Key takeaway: Tariff differentials directly improve profit margins and make Nepal a strategic sourcing alternative for international retailers.
Cost considerations are central to any sourcing decision. While Nepali labor costs are higher than India’s, Nepal offers several operational advantages:
Labor cost: Nepali garment workers earn approximately $125 per month, compared to around $56 in India. Though more expensive, Nepali factories provide higher-quality outputs and often more flexibility.
Worker skill sets: Nepal has a long tradition of textiles and handicrafts, producing high-quality handwoven fabrics, Dhaka cloth, and felt wool garments. Factories combine artisanal techniques with industrial production methods.
Production flexibility: Many Nepali manufacturers specialize in mid-sized orders, allowing brands to test designs without committing to large quantities. Minimum order quantities (MOQs) are often just a few hundred pieces.
Better craftsmanship for high-end or niche products.
Ethical and fair-trade compliance, appealing to conscious consumers.
Strong attention to detail in finishing and quality control.
| Factor | Nepal | India |
|---|---|---|
| U.S. Import Tariff | 10% | 50% |
| EU Import Tariff | 0% (LDC duty-free) | ~9% MFN rate |
| Monthly Apparel Wage | ~$125 | ~$56 |
| Number of Factories | ~100 (small/medium) | ~40,000 (diverse) |
| Typical MOQ | Low (hundreds) | High (thousands) |
| Sustainability Focus | High (fair-trade, hydroelectric) | Mixed |
| Production Flexibility | High | Medium |
| Infrastructure & Logistics | Landlocked; relies on India/China ports | Established export hubs |
| Export Incentives | 4% cash subsidy; tax benefits | Varied; mostly scale-focused |
Insights: Nepal is ideal for premium, artisanal, and sustainable products, while India excels in large-scale volume orders at lower base labor costs.
Suppose a U.S. brand imports $500,000 worth of shirts:
From India: 50% tariff → $250,000 additional cost
From Nepal: 10% tariff → $50,000 additional cost
This difference alone can determine whether a brand sources from Nepal or India. Even with slightly higher labor costs, the overall landed cost from Nepal is more favorable under current trade policies.
Modern consumers increasingly demand transparency and sustainability in fashion. Nepal offers several advantages:
Factories frequently use hydroelectric power, reducing carbon footprints.
Ethical labor practices, fair wages, and adherence to safety standards are common.
Artisanal techniques create unique products, adding value to the final garment.
Example: Small-batch felt wool jackets and handwoven Dhaka cloth scarves cater to niche markets that value authenticity and sustainable sourcing.
Nepal’s geography presents both challenges and opportunities:
Landlocked location: Goods are shipped via Indian or Chinese ports, which may add lead time.
Transport costs: Slightly higher compared to coastal manufacturing hubs, but offset by tariff savings.
Infrastructure improvements: Investments in road and rail connectivity are ongoing, improving export reliability.
Brands must account for these factors during production planning to ensure timely delivery.
Engage industry associations: Contact the Nepal Garment Association for a list of verified suppliers.
Request samples and small-batch orders: Utilize Nepal’s low MOQs to test quality.
Verify factory certifications: Confirm compliance with labor standards, fire safety, and environmental guidelines.
Plan logistics: Include extra lead time for transit through India or China.
Negotiate contracts: Take advantage of trade incentives, subsidies, and flexible order sizes.
Scale gradually: Increase order volume as supplier reliability is confirmed.
Nike and Puma: Recently sourced limited editions from Nepalese factories, leveraging artisan skills for niche products.
Gap Inc.: Tested small-batch collections in Nepal to evaluate quality and delivery efficiency.
European luxury brands: Ordered handwoven textiles to differentiate products in a crowded market, benefiting from duty-free EU access.
Limited production scale: Only around 100 factories exist; very large orders may require multiple suppliers.
Landlocked logistics: Shipping is slower compared to Indian ports.
Infrastructure constraints: Power outages or delays may affect timelines.
Transshipment risk: Brands must verify origin; illegal transshipment of Indian goods through Nepal has been reported.
Despite these challenges, Nepal remains a strong alternative for brands prioritizing tariff advantages, sustainability, and artisanal craftsmanship.
1. Why are brands moving garment sourcing from India to Nepal?
Nepal offers lower U.S. tariffs (10% vs. 50% for Indian imports) and duty-free EU access, making it more cost-effective.
2. Are Nepali garments cheaper than Indian ones?
Base production costs are slightly higher due to labor, but tariff savings and ethical production make Nepal competitive for many international buyers.
3. What fabrics or products are unique to Nepal?
Handwoven Dhaka cloth, felt wool garments, and small-batch artisanal textiles stand out in global markets.
4. How do logistics impact sourcing from Nepal?
Being landlocked, shipments move through India or China, potentially adding lead time. Careful planning mitigates delays.
5. What risks should brands consider?
Limited scale, infrastructure challenges, and illegal transshipment of Indian goods are key considerations. Verification of suppliers is critical.