Economy and Social data

Nepal is the poorest country in South Asia and the 17th poorest in the world. Approximately 25 percent of Nepalis live below the poverty line.

There is a substantial difference in poverty levels among Nepal’s various ethnic and caste groups, and between different regions of the country. An unemployment rate of 42 percent has created a sense of vulnerability and hopelessness in many parts of rural Nepal. More than half of the country’s population is under the age of 35, and each year, more than 300,000 of these young people join the ranks of those looking for work, with many either striving to go abroad as unskilled labour or languishing as part of the unproductive workforce.

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According to figures from international organisations, up to three million Nepalese aged between 5 and 14 and 7 million under the age of 18 work in conditions of serious exploitation. They include a million unpaid workers – including many working in conditions of real slavery, sometimes in order to repay debts contracted by their families – in the mines, in domestic work, in manufacturing, in carpet factories, in brick kilns and in construction. An estimated 30,000 young workers are employed in the country’s 1,600 stone quarries. Most young workers come from mountainous areas and those parts of the country with a less favourable environment; however, there are also around 5,000 street children living in the major cities. Girls make up 60% of child-workers and they work on average longer hours. Of particular concern are the thousands of young women sent to work as prostitutes in India and Pakistan. In Nepal 20% of prostitutes of both sexes are under the age of 16. The literacy rate is 54% – a cause and also a consequence of poverty – putting Nepal at 15th place among the least educated countries in the world, with a huge gap between men and women.

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Nepal’s economy is predominantly based on agriculture which contributes 35.68% of GDP and 75% of employment. Five percent of families own 37% of land, while the poorest 47% of the population owns only 15% and 29% of families are landless. Nepal struggles to produce an adequate supply of food for its citizens. Farmers have limited access to improved seeds, new technologies, and market opportunities. Declining agricultural production has depressed rural economies and increased widespread hunger and urban migration. Industry accounts for 14.02% of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. The mainstay of Nepal’s economy is remittances from the estimated 3 million Nepalese working overseas. According to the World Bank, these accounted for 28.8% of GDP in 2013, making Nepal the world’s third biggest recipient of remittances as a share of GDP. The services sector accounts for almost 50.30% of GDP and is mainly driven by remittance income. Infrastructure in Nepal is poor. According to the World Bank, only 43% of the population have access to all-weather roads. Power outages of up to 16 hours per day during the dry season (October-May) limit economic development. Nepal’s potential in hydropower is estimated at 42,000 MW, but current installed hydropower capacity is only 700 MW. Only 2 per cent of Nepal’s micro-hydro potential has been developed to date.

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Only 26% of the population has access to banking services, which are only available in cities. Worse still, the concentration of the credit sector in the hands of just a few, the inability of the government to increase the money in circulation and the flight of capital not only prevent further economic growth, but also lead to dramatic social, economic and environmental consequences for the poor. Deindustrialisation, deregulation of state control, cuts in agricultural subsidies and dismissals have forced the Nepalese to emigrate en masse and three million people are now living in around 100 countries worldwide. The decline of industry reduces the possibility of finding work for the 300,000 Nepalese entering the workforce every year and also the competitiveness of the country’s exports. Taxes cover the equivalent of 12% of GDP, which is totally inadequate for the efficient running of the country and to meet its social needs. The result has been the growth of private initiatives which, due to their cost and elitist nature, are currently inaccessible to most Nepalese. Dualism within the service sector and the fragmentation of resources create unequal opportunities. In this context foreign aid is not insignificant; though accounting for ‘only’ 4.7% of GDP, it finances about 30% of the annual budget and roughly half of government expenditure. However foreign economic relations are also the greatest source of concern for the fragile Nepalese economy. Foreign debt has exceeded $3 billion, which is more than the country can afford to repay.


The real problems facing the country are therefore poor infrastructure, the segregation of domestic markets, limited production, the inability to secure sufficient and timely supplies for production and the poor quality of products.

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Consequently the markets are flooded with Indian and, increasingly, with Chinese products.
The value of imports is six times greater than that of exports and international aid has become essential in reducing the deficit, as well as in giving social policies and administrative capacity a minimum of sustainability. Looking ahead, qualified observers believe the country is heading towards its own version of a ‘social’ market economy, a ‘third way’ between a liberal development strategy according to the Anglo-Saxon model and an economy under state control as in China; an independent path that is less tied to minority interests and integrates the Nepalese economy into a broader international context, in addition to providing common ground for politics that remain divided between right, linked to the aristocracy and to the interests of a distracted minority that fails to see the reality of the country’s problems, and left, which is strongly ideological and has in turn created its own ‘fiefdoms’ of local and national power.
The Nepalese economist Rameshore Prasad Khanal insists that, in spite of the many difficulties, the growth of the global economy gives countries such as Nepal numerous opportunities for growth. Further, the difficult cohabitation with the economic and demographic giants China and India also presents important openings that, with the right policies, the country could grasp. Not now, but in the future; today Nepal is led by big business linked to old and new privileges that are often tied to a perpetual caste system and its discriminatory effects. (S.V.)


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