What is the Reason for Nepal’s Poverty?

Nepal is among the world’s poorest countries. Poverty in this small nation is not only persistent, but is widespread. According to the 2010 Nepal Living Standards Survey, conducted by the Central Bureau of Statistics and the World Bank, 25.2% of the country’s population lives below the poverty line.

Moreover, the World Bank reported that everyone in Nepal, leaving a handful of professionals, businessman and large farmers, is poor. Today, more than 9 million people in the country are projected to be living on an income of less than $1 a day.

Why is Nepal Shackled by Poverty?

Low agricultural productivity is one of the principal reasons for Nepal’s financial weakness. The nation’s economy relies heavily on agricultural activities, which employ approximately 80 percent of the country’s labor force. It is estimated that the over-dependence on agriculture has prevailed despite a decrease in the consumption levels. Production of chief food grains in the country has increased only marginally in the last two decades.
If Nepal has to progress it must see a rapid exodus of Nepalese citizens from agriculture to industries and services. Before 1800 the US also had an overwhelming percentage of it’s population in agriculture. Today less than 30% of the people of US are employed on farms and supply grains and other produce to many parts of the world. The government allowed industry to thrive with business friendly policies. Nepal must do likewise.
Some other reasons for Nepal’s dismal economic state are:
Inadequate infrastructural facilities: People in Nepal, particularly those who live in rural areas, suffer from sub-standard and inefficient health services. The cost of medical treatment in the country is also fairly high. The public expenditure in education is very low and wasted. Finally, there is limited accessibility to basic infrastructure like roads. As a result, people living in the remote areas in the mountain districts struggle to gain economic independence. The government has neither the resources nor the expertise to develop infrastructure. It should allow private sector – domestic and international to fill this gap.
The economic situation in Nepal is unlikely to show progress without government policies that are ‘pro-business’. There is also a serious need for the government to create sufficient employment opportunities, which is only possible by encouraging new industries to flourish in the country. How does it encourage industry? Eliminate curbs on foreign investment, end the income tax. Lower taxes on imports and production and free the trade in goods and foreign exchange.