What Lies Between Nepal and Economic Growth?

Posted by: on Oct 5, 2012 | 28 Comments

Nepal is among the poorest nations in the world. It ranks 157 out of 187 countries on the Human Development Index, with approximately 25% of its population living below the poverty line. According a World Bank report, the country’s per capita income is about $750. Nepal is also among the least developed nations, as 75% of its population is dependent on agriculture. Despite agriculture providing employment to many, it contributes only about 30% of the country’s GDP.

What’s the Problem?

So, what impedes Nepal’s progress? The country is completely landlocked and is prone to natural disasters. At the same time, Nepal does have the potential to emerge from the chains of poverty. The nation has among the world’s largest untapped hydropower, estimated at 83,000 MW, according to a World Bank report. And its neighbours, India and China, being among the world’s fastest-growing economies, can prove to be huge markets for Nepal’s potential hydropower. Moreover, the tourism industry can do wonders for the country. So the greatest factor hampering the economy is not one unleashed by nature. It is political instability. This backdrop dissuades foreign investments, which could have propelled the economy.

According to International Financial Corporation’s Doing Business rank, Nepal’s status has improved from 110 in 2011 to 107 in 2012. However, this is still very a very low rank for how conducive the Nepalese environment is for doing business. The country has been plagued by political instability for over two decades. During the course of this time, Nepal has witnessed the rise and fall of 20 governments. One step in the positive direction was the declaration of a federal republic. This has experienced a setback, however, with the failure of the Constituent Assembly to concretize the new constitution. With political instability being an inherent feature of Nepal’s economy since 1990, it is not progress but progressive erosion that the nation has been facing.

Where is it Headed?

Nepal’s economy is expected to grow at 4.6% in 2012, with the growth rate likely to be around 5.2% over the forthcoming three years, according to Nepal Economic Outlook 2012, published by the Institute for Integrated Development Studies (IIDS) in June.

For Nepal to accelerate its growth, it needs to focus on the right things. The recent turmoil in the casino industry is an example. It is now illegal to allow Nepal’s citizens to enter the eight casinos in the capital city of Kathmandu. Authorities are cracking down on casinos permitting locals to gamble. Rather than investing so much muscle power into curbing the industry, the government should be seriously considering how to revive it and garner some of the momentum being witnessed in the gambling industry in Macau and Singapore.

If Nepal continues being prudent with fiscal management and focuses on investments into infrastructure and creating a political environment that is supportive for businesses, the country can achieve significant growth in the upcoming years.



  1. Are the Ministries Gambling with Nepal’s Future?
    October 8, 2012

    […] If properly regulated and taxed, just like any other industry, the gaming industry can foster favorable results for the tourism and hospitality industries and obviously the economy as a whole. Can we expect the attitude of those in power to change anytime soon? Can Nepal really afford this kind of uncertainty and instability? Read my next article on Nepal’s economy. […]

  2. Mana Bahadur Bisht
    November 11, 2012

    I enjoyed reading this article dealing with Nepal’s economic development. Mr.Wadhwa has dealt with the present economic condition. It would be appropriate if he could suggest some measures for the rapid development of the economy of Nepal.

  3. Diwakar karki
    November 13, 2012

    The main cause of this problem is politics.
    We are not able to grow the crops and we are dipendent in india for petrol and crops.
    The government has stopped the gambling in the country nepal but some of the people are gambling,
    Our country Nepal is landlocked so should be indipendent to agriculture and the government cannot provide the fertilizer in the time to the farmer if the business man have brought the fertilizer then they will do the black business.
    The total capacity of electricity is 83000 MW but Nepal cannot generate even one percent of the electricity which is 830 MW.
    Electricity can be generated from the thunder but the scientists are not thinking about this.

  4. bhim
    November 14, 2012

    sir , it’s very reality in our country which has been facing the many economics problem for a long time but these all causes are political instability . so Nepalese leader must be understood about this knowledge. Being a student of economics i agree with your article. thank you and keep on your contributes.

  5. Rajesh NEUPANE
    November 14, 2012

    You have wrong data, are you with Nepal government service or getting any benefit from them. I am a Nepali citizen and respect my country. Don’t publish false reports based on govt data. Nepal has more then 60% population below poverty line. Only two times meals is not the indicator of poverty level.The quality of food our people eat is one of the main factor that decides the level. We need to consider the leaving places, capacity to educate our children, approach to initial medical facilities, sanitation etc. I am neither economist nor politician. Simply a retired HMG’ s officer.
    this is the first time I am commenting on it.

    November 15, 2012

    We need a spirit of victory ,a spirit that will carry us to rightful place.
    Progress in every practical field depends upon having capacities that schooling can educate,Education is a means to foster future development and prosperity.
    Vishal Basnet
    Birtamode jhapa

  7. Loday Chomphel Sherpa
    November 21, 2012

    Political instability is just one factor hampering economic growth in Nepal. Whatever condition Nepal is in today is continue process since the reign ranas, monarches, and political leaders who were/are tremendous power hungry. Their misrule has culminated Nepal to this pathetic condition and I just wonder why we are still not consider as failed state.
    Some kind of revolution is only way to rescue Nepal from its present state else with same leaders, I would like remain a pessimist.

  8. rupesh pokharel
    November 22, 2012

    What shall we do? ,due to political significance, open border system and many more , we r depressed by our neighbouging countries..no doubt we are poor ,we can be rich by utilizing our water resourses(83000 mw)…,natural resources and supply to all asian country, but India and China are the obstracles of making poor and poorest………..

  9. Jeet Tamang
    November 22, 2012

    No body does anything for the country because every one is busy in making their own life.

  10. sirjan
    November 23, 2012

    A truth that’s told with bad intent beats all the lies you can invent.

  11. Naba Raj Khatiewoda
    November 26, 2012

    okay, u v written an expensive evaluation about yr topics that u v chosen, it’s on of the best book i appriciate
    and i agree yr views that India can overtake the USa, but to win the rest world India has to win herself first of all, that are if behavior to neighbors and have to learn respect them like Nepal, Bhutan and Pakistan. their help is necessary for Indias’ progress.
    and it shuldn’t follow Greate China as an Enemy but good friend
    .last but n’t least, her democracy should be widened to the grass-root level of it’s nation, leaving the periphery of so-called middle class Democracy or Mubaiwale ko Prajatantra,

  12. Mahamad Neyaj Alam
    November 27, 2012

    It’s true & need to think abt it

  13. dip
    November 28, 2012

    i strongly agree political instability is the major obstructing cause in the development of nepal.

  14. Hari Sharma
    November 28, 2012

    Rajesh Neupane is a literate idiot who worked with HMG and where does he get information that 60 percent of the population live under poverty line? Open your eyes and travel across the country. The poverty level has gone way down thanks to the urbanisation and especially road expansion, which has helped to increase market access even in the rural areas. Today’s poverty is manageable unlike in the past when there were no roads and when migration for work within the country was also not possible. The only problem is today is not even poverty but the corruption and recklessness of a handful of power hungry and greedy politicians.

  15. kamana
    November 28, 2012

    As you told that Nepal is among the poorest nations in the world but i think its not true we are rich in socio-culture and nature.Naturally Nepal is one of the best destination of the world. Super power and multinational agencies have no right to say that Nepal is poorest country. Their measurement tools are not appropriate. we are happy being good neighbor of two economically emerging countries.so our foundation is strong. FDI is not sustainable resources so we have to develop our country our self. Thanks a lot!

  16. nirmal
    November 28, 2012

    Kam kuro Eka tira Kumlo Boki Thimi Tira………. Bichar dhark jiuu

  17. anshul
    November 29, 2012

    1..i dont think that landlocking is any problem——u may say Japan is not landlocked so it is developed,,,but what about TAIWAN….truth is that it has been the furious work culture of japanese which lead to their prosperity…work culture is lacking to its depths in Nepal.
    2…Who say hydro power electricity is a source?????????do you know how much money is needed for even constructing one single dam?????from where that money would come????even united states got show proudly its hydro power works.Indian and Chinese are fastly developing economies with very strong base….they have to toil for years before starting a multi billion doller hydro project….nobody is going to donate a hydro project unless very small scale,,and in near future Nepal govt has not got enough dollers.
    3.Below poverty line according to which index,,compare with guidlines of U.N.O
    A well wisher

    • Aishwarya Shrestha
      June 10, 2017

      Well said.
      Totally agree on the work culture issue that you raised.

  18. Jeet Tamang
    November 29, 2012

    By uploading things on FB, is not a bad thing ,but as per my point of view some people are doing this just to show how much they care about the country,but the fact is, they do not even contiubute a zero % for the growth of the Counrty.They are just doing for the public show off.So all people who are commenting on this website lets really plan something to develop the country.Education is the most important through which country can be developed & Education is not really good in our Country.

  19. devendra jung
    December 1, 2012

    i would have loved to read same article from Nepalese economist of Scholar. but they are busy somewhere in being called Civil Society. no use of article yes it is good article about bad thing. but has no use because it will be red and forgotten or people who were suppose to read will never read. so in a sense a wasted article……………

  20. devendra jung
    December 1, 2012

    i would have loved to read same article from Nepalese economist or Scholar. but they are busy somewhere in being called Civil Society. no use of article yes it is good article about bad thing. but has no use because it will be red and forgotten or people who were suppose to read will never read. so in a sense a wasted article……………

  21. Shree Krishna Adhikari
    December 2, 2012

    ya JEET TAMANG is right. we should be actful not only thoughtful and speaker. nobody could bypass the speakers of nepal but they are just the speakers and there is shortage of actor that acts upon such speaks and thought to make it on action.
    ya it is obvious that nepali are not thinking about development of country but of their own because they do not sight any option of countries development due to such dirty politics that lead down the country. so cut off these leaders and give the chance for the youth with +ve opinion and vision.

  22. Yogesh shrestha
    December 2, 2012

    The main problem of Nepal is Politicians without brain. These are some suggsetions for development
    focus on
    1. hydropower
    2. tourism
    3. Agriculture
    the main weakness and problem of Nepal is open border with India it should be closed and monitored by the Royal Nepal Army.

  23. B. P.Prasai (Bishnu)
    December 3, 2012

    The development of Nepal’s economic growth is like the pace of tortoise. Development paradigm is not just for nation’s growth but it should be the growth happiness for the people. The doer for the development activists are the politicians in Nepalese tradition, but most of them are unaware and controlled by their hiding vested interest.
    There is mostly lacking to assure the economic, political and foreign diplomacy in Nepal is others dependency since the Nation’s freed from self controlled by interest not for democracy, autonomous and decentralize with dignity and equality. Latest census report also shows still there are some error factors to cover into the main stream of the people to bring them in to the development opportunities, more than 25 percent people are still lying under poverty line, but when it is taking independent survey, it will be raise to 40 percent of poverty line in the high hill,mountains and in the far western and mid-west region’s rural women are in inhumane situation.

    Mr. Wadhwa’s statement is very important, but it needs to more floor discussion among the policy makers, specialists in each sector and most necessarily to make a roster for development discourse time to time, which should a path way for future guide line for the government.

  24. Binita Sotang
    December 3, 2012

    First let us change our attitude. Then we come to the floor for discussion.

  25. Ashish J. Karki
    April 13, 2013

    The main problem of Nepal are many. First we arent able to convince to the world that even there a country lies in the world called Nepal. But whatever to say, the reason of headache to Nepal is India. We are India-locked. I have attempted to prescribed others problems pointwise,
    1. Lack of sea access
    2. Indian ‘isolations’
    3. Rise of un-national dictators
    4. Rana’s blockage of education
    5.Failed to operate nuclear program
    6. Difficult topographies
    7. Lost territories

    Auctually we Nepalese are like the thirsty dying man voyaging on the sea. We have everything abundant in our country itself but we arent or dont know to use it. And further message to worldwide Nepalese brothers aside me is “daju bhai haru desh ko lagi dherai sochne vanda thorai vaye pani kehi garau ”. One day Nepal will be People’s Republica and leading nation of the world. Jay Nepal.

  26. Binod
    October 17, 2013

    First we must change ourselves so we can change our country and give it a new start..every politician must be loyal n work for the nations development not for their own..making some positive impact.

  27. Ramesh Thapa
    November 5, 2015

    Thank you for your resourceful article regarding Nepal’s Economic Development. However you did not mention that what are the road map of Nepal’s economic development. Your all most words mentioned the problem of Nepal’s Economy but did not write what are the solution behind it. I have been waiting for your next article regarding the clear-cut road-map of Nepal’s economic development.


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