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Nearly five decades ago, when I was a student of economics at the Tribhuvan University, all master’s level students had to serve in rural areas of the country—they had to perform social work and teach in schools under the program called National Development Service (NDS). Normally, master’s degree programs took two years to complete, but the NDS component turned into a three-year program.

My assignment was at a lower middle school in Khurkot (Sindhuli district) and I was the first NDS student to be sent to this school, where I received a warm welcome from the teachers and villagers.

Our primary task was to help build a toilet at the school, as there was none. Local people and teachers came together, pooled in necessary resources and built the toilet in three months. In addition, I organized an inter-school quiz competition, launched an awareness campaign encouraging parents to send their daughters to school and worked to reduce anti-social activities.

A bridge between the hills and the Tarai, Khurkot, located at the foot of the Mahabharat range and on the banks of the Sunkoshi river, has been a center for trade and commerce between the people of the hills and the Tarai for centuries. These days, Khurkot, with roads all around it, namely the Dhulikhel-Bardibas road (west), Khurkot-Manthali road (north) and the Khurkot-Katari road (east), has transformed into a bustling small town on the Sunkoshi banks with shops, hotels and lodges.

Despite these changes on the outside, there has not been any marked improvement in the life of its residents. The most visible change, perhaps, is the replacement of thatched roofs with zinc sheets. What struck me was that many of the shops, hotels and lodges that have sprung up in Khurkot do not belong to the local people; they belong to outsiders.

Primarily, Khurkot is home to Chhetri and Bahun (Brahmin) communities, most of whom are farmers, with a handful in civil service. Many youths from these communities have gone abroad for work to support their families, leaving behind the once fertile land near the Sunkoshi that is now home to nearly 1,000 families.

This is a departure from the past when people used to live off less fertile land, particularly on the lap of the Mahabharat range, growing crops like maize, paddy and wheat. In those times, they used to grow crops three times a year.

Close by Khurkot are the fertile farmlands of Jhagajholi, Ratmata, Mulkot and Khalte that support the livelihoods of around 5,000 households. But during my recent visit to Khurkot, I saw a disturbing trend from Ghurmi and beyond: the conversion of fertile farmlands into residential plots everywhere—across the hills, the valleys and the Tarai.

While taking a break from the journey in Khurkot, I had the opportunity to strike a conversation with some locals in a shed, which is a popular hangout. When I took up the issue of loss of farmland through its conversion into residential plots, they acknowledged that the farmlands could have supported a thriving agricultural economy. They lamented that they no longer had fertile land for farming.

Mulkot too has lost its fertile land and turned into a concrete jungle.

In summary, Khurkot and Mulkot point at an alarming rate of loss of fertile land across the country, a phenomenon that has caused a drastic decline in food production and increased our dependence on food imports, exacerbating food insecurity and landlessness.

Time has come to reverse this disturbing trend. 

Political chaos

Governments, whoever is a head to lead in support of different political parties, have frequently been changing in Nepal, thanks to a stubborn will to capture—and remain in—power. Nonetheless, these parties have no concrete plans and programs to make Nepal livable. Ethics, principles and values are what guide us to do something better, but what do the parties do with these ideals? They throw these ideals in the trash box, time and time again. 

Followers of our political parties and their leaders are visionless, political power is what the latter hanker for. And all that these visionless leaders do is misuse the resources at their disposal to fulfill petty interests of a small group at the expense of development agendas that benefit the country and the people. The leaders easily change their colors and ignore guiding principles to gain and remain in power. 

By ‘working’ tirelessly for the sake of power, these leaders have been pushing the country toward a state of lawlessness. 

It is foolish to dream of socio-economic development amid a deepening political instability exacerbated by our leaders, who have neither any rationality to use resources in the gainful sector nor critical thinking to push the development agenda forward.

Economic woes

Nepal’s ailing economic sectors hardly have any job opportunities for the youths. This is a far cry from a not-so-distant past, when the farm sector used to provide seasonal employment to a sizable population. Apart from agriculture, other sectors capable of rejuvenating the national economy, namely cottage industries, tourism and hydropower are also not performing well. 

The private sector can play a vital role in speeding up development but what can it do in the absence of a policy to bring it into the mainstream of development? 

For want of employment opportunities at home, youths are flying to foreign shores in search of jobs while about 60m people (roughly 20 percent of the national population) continue to live under absolute poverty. Add to it relative poverty, which roughly accounts for over 60 percent of the national population. 

This grim scenario is forcing young people to head abroad for jobs and become the source of remittance, making it the mainstay of the domestic economy. 

Education flaws

That our education sector has not been firing on all four cylinders (to say the least) is a given. In a sharp contrast, the India education system has been producing highly-skilled human resources not only for the home country but for the whole world. Most of the chief executive officers of global giants are from India. 

Two probable factors ail Nepal’s education system: Lack of a calendar to conduct exams and publish results, and low-quality education. The latter is the result of heavy politicization of institutions responsible for delivering higher education. A conducive environment for learning, teaching and undertaking research is lacking as evidenced by a decline in enrollments. 

Poor governance

Corruption and smuggling scandals come to the surface all too often, presenting a clear proof of weak governance. Probes into these cases show the involvement of politicians and bureaucrats. These cases are the result of politicians using power to divert public money for private gains. 

Bribery, corruption and smuggling are rampant because of poor governance and rent-seeking behavior on the part of our ruling elites. Because of this behavior coupled with favoritism and nepotism, commoners are not getting effective services from relevant state institutions. 

Given this context, the people need to raise their voices and make the ruling elites accountable if they want to make this country livable. 

Modern governments have a primary duty and obligation of providing social protection to their citizens.  Governments around the globe make budgetary allocations for this purpose every year. 

There is a huge gap across regions and countries with respect to budgetary allocations and coverage of population. Europe has the highest level of social security expenditure (nearly 25  percent of its GDP), followed by 21 percent in OECD, 16.6 percent in North America, seven percent in the Asia-Pacific and 4.3 percent in Africa. In sub-Saharan Africa and South Asia, social security coverage ranges from five percent to 10 percent of the population. Middle-income countries have social security coverage ranging from 20 percent to 60 percent of their respective populations, whereas in developed countries the coverage is nearly 100 percent. In the Asia-Pacific, social security schemes cover 44.1 percent of the total population of the region. 

Neighboring countries are ahead of Nepal with respect to coverage of people under social security. China has medical insurance coverage for 95 percent of its population whereas India and Bangladesh have 24.4 percent and 28.4 percent of their populations under their social security nets. But Nepal has a paltry 17 percent of its population under different kinds of social security programs. 

It is important to note here that the expenditure on social security exceeds capital expenditure in Nepal because of a low coverage of its population under social security. A trend over the years shows that the government expenditure on social security exceeds capital expenditure. This was evident in the fiscal 2021-22 and 2022-23, for example. Expenditure on social security in 2021-22 was Rs 252bn whereas capital expenditure was Rs 216bn. Fiscal 2022-23 saw a similar trend whereas in the fiscal 2023-24, Rs 253bn and Rs 234bn have already been spent under the topics of social security and capital expenditure, respectively. 

Both expenditure on social security and capital expenditure are important for Nepal’s entry into the club of middle-income countries, which is easier said than done. If Nepal desires to join the grouping of middle-income countries, its capital expenditure should exceed expenditure on social security. 

This is because capital expenditure helps increase production and productivity of the whole population, which are crucial for achieving targeted economic growth and creating employment opportunities for the masses, thereby driving the country toward prosperity and sustainability. 

Capital expenditure in Nepal leaves much to be desired as most of our rural and urban roads, which are muddy and dusty, show. Air pollution is high in the Kathmandu valley not because of the presence of industries but because of unmanaged traffic movement along highly-congested and dusty roads. Blacktopping these roads means spending capital. 

But funds for such works are hard to come by  with an increased focus on social security for targeted sections. 

Capital expenditure helps create employment opportunities for the masses, including the poor, the downtrodden, unskilled, semi-skilled and skilled youths, among others. 

Whereas expenditure on social security helps increase the consumption of targeted people such as the poor and the downtrodden, elderly citizens, malnourished children and single women. Of course, both capital expenditure and expenditure on social protection are primary duties of a modern government. 

While social protection is a must, it cannot be a substitute for capital expenditure. Thus, it is necessary to maintain discipline while spending money. Transfer of funds from one purpose to another is a common practice of the government of Nepal. 

Summing up, a government committed to social welfare and conducting development activities for sustainable economic growth must make rational decisions when it comes to spending its hard-earned capital.

Our economy is not in the best of shapes as relevant indicators suggest. 

According to the macroeconomic report of ADB, the GDP growth rate was 1.9 percent in 2023, which is lower than the average growth rate of the current decade. Agriculture and manufacturing sectors are going from bad to worse, a far cry from the times when both sectors were booming. In 2023, the growth rate of the agriculture and the manufacturing sector was 2.7 percent and 0.6 percent, respectively.

The country is importing food and grains to meet a growing demand, in urban areas as well as in villages. This points at a large scope for growing crops for consumption in villages, mainly in the hills where farmlands have been lying barren for decades. Reviving the farm sector will require structural transformation through the use of modern methods, including enough investment and incentives.

Despite deepening dependencies, a mid-term evaluation of the budget and monetary policy for the fiscal year 2023-24 shows economic indicators on a positive trend. Among others, Nepal has reasonably healthy foreign currency reserves, providing some relief to the government. 

There will surely be differing views vis-a-vis comfortable forex reserves, but I think it will have stronger negative effects than positive ones. In all likelihood, excess forex reserves will raise both liquid and total debt, pull interest rates down, cause a decline in consumption and move labor to tradable sectors from non-tradable ones.

In this context, it will be relevant to put forth some of the findings of the fourth living standard survey. 

Per the survey, the last 12 years have seen a meager reduction in poverty. 

Estimated on the basis of threshold per capita per year income of Rs 19,261, a quarter of the population (25 percent) was under deprivation in 2011. On the contrary, the poverty rate is being calculated on the basis of the threshold per capita income of Rs 72,908 per year in 2023. This level of income was considered as the minimum income required to fulfill basic needs of the people such as food and non-food items. On the basis of this threshold income, the poverty rate has come down to 20 percent, a  paltry 0.16 percent reduction in 12 years. 

Per the survey, Far-Western and Gandaki provinces have the highest (34.16 percent) and lowest (11.88 percent) poverty rates, respectively. Also, poverty runs deeper in rural areas than in urban areas. The poverty rate in rural areas is 24.66 percent against 18.34 percent in urban areas, according to the findings of the survey. These data stress the need for serious efforts to reduce poverty, which is pervasive and deeply-rooted.

Notably, there is a significant change in consumption expenditures between the third and fourth living standard surveys.The average expenditure on consumption of nonfood and food items was 38 percent and 62 percent, respectively in the third survey. It stands at 47 percent for nonfood items and 53 percent for food items in the fourth survey, showing that people have increased consumption expenditure on nonfood items compared to food items over 12 years. The household consumption expenditure as percentage of GDP in 2023 was 88.2 percent while the same was 85 percent  in 2011, an increase of 3.7 percent. It reveals that Nepal has consumed all of its income rather than making long-run investments for achieving sustainable development goals.

In 2011, remittance inflow stood at $4.22bn while in 2023 it swelled to $9.3bn, marking an increase of a whopping 120 percent in 12 years. In 2011, remittance’s contribution to Nepal’s GDP was 19.54 percent, which soared to 22.7 percent (an increase of 16.1 percent) in 2023. During the 12-year reporting period, the poverty rate has come down to 20 percent from 25 percent. 

Apparently, remittance inflow is behind a marginal reduction in poverty and increased forex reserves. 

Without a doubt, a constant inflow of remittances over the past 2-3 decades has been keeping the Nepali economy afloat.

Beginning 1956, Nepal has had 15 periodic plans, or five-year plans. The 16th plan (Fiscal Year 2024/25-2028/29) is set to commence, with the slogan of good governance, social justice and prosperity. It has set a priority of achieving prosperity for the great majority of people.

Nepal has neither had good governance nor social justice for decades. In the absence of good governance, corruption, bribery and smuggling are rife from the center to the local level. Social, political and economic inequality is rising. Prosperity has become a hollow buzzword, a slogan to impress a layman.

The 16th five-year plan has given utmost priority to develop hydropower. Nepal possesses hydropower potential of about 45,000 megawatts, which surpasses the domestic need. In other words, Nepal stands at a good position to export electricity. Export market of electricity is large, viable and positive. Considering the wider scope of export to neighboring countries, the upcoming periodic plan has set a target of producing electricity to the extent of 11,769 megawatts in five years. Half of this will be exported to India, Bangladesh and China. However, there are no ready-made transmission lines for export electricity to China or India or Bangladesh. Nepal aims to conduct a bilateral trade treaty with India, China and Bangladesh to export electricity on a large scale. Subsequently, it also sets a plan to construct and expand in-country and inter-country transmission lines. Currently Nepal has an electricity output of  2,855 megawatts, of which only a tiny part is exported to India seasonally. There is a larger possibility to export electricity to Bangladesh, provided India grants the permission to use its transmission line.

In the previous fiscal year, 98 percent of the total population had access to electricity. The 16th five-year plan aims to cover the rest of the population with electricity. Similarly, the plan has set a target of reducing electricity loss from 13.46 percent to 10.80 percent. Within the plan period the per capita electricity consumption will increase from a mere 380 KWh to 700 KWh. This sector aims to create job opportunities for 0.4m people. Currently it provides employment to less than 0.1m people. 

In order to realize its hydropower ambitions, Nepal requires a huge amount of money. For this, the government plans to mobilize internal and external capital, both from the public and the private sector. Private sector producers can construct hydropower projects in partnership with foreign investors. They can also export electricity to India and elsewhere on their own initiative. Similarly, the government will grant permits for particular projects to develop for foreign investors under the model of build, own, operate and transfer (BOOT) system.

This shows that internal as well as external capital would be poured to develop this sector to meet the target of generating electricity in the plan period of five years. It definitely helps to create jobs for those who are unemployed, and provides opportunity for both unskilled and skilled manpower. Electricity is essential to increase production capacity of other economic and social sectors such as manufacturing, agriculture, tourism, health, education and the rest of the sectors of the Nepali economy. Along with this, investment in equal footing for all of these sectors to develop side by side is essential. However, hydropower is a capital intensive sector. It requires a huge amount of money to develop. This sector would attract more internal and foreign investment to meet the growing demand of electricity in both the domestic and foreign markets. Resources in hand could be diverted for the development of the hydropower sector. But if this approach is continued over a long period of time, there is a risk of the economy losing its balance. Overemphasis given to allocating resources to develop this sector could harm the overall economy. The rest of the sectors of the economy will suffer and paralyze badly in the absence of due attention and adequate investment. Production and productivity will diminish. Supply chain will be broken. Supply of essential goods will depend on the import and in turn import depends on the income generated through electricity export. It would create the gravest effect that the Nepalese economy has never seen. So it is crucial to aim for a uniform growth of all key sectors, rather than pouring all the resources and capital into one sector.

The agriculture sector, the backbone of the Nepali economy for eons, has been receiving less attention than it deserves. The industrial sector has not been flourishing, either. The private sector is mainly involved in risk-free and unproductive ventures such as real estate and auto business sectors whereas the public sector remains mired in corruption, bribery and smuggling scandals. 

Thanks to the lack of stability, the economy has not even taken off with potential economic sectors capable of boosting the economy unexploited. Reeling under unemployment, an increasing number of people have been leaving the country over the years.  

It can be surmised that a majority of the 0.75m people, who left the country in the fiscal 2022-23, did so in search of employment opportunities. Their destinations included countries in the Middle East such as Qatar, Saudi Arabia, the UAE and Israel, and Malaysia, Japan and South Korea in East Asia. 

According to estimates, about 50,000 Nepali people migrate to developed countries annually for permanent residence. In 2023, 1.6m people flew abroad for different purposes, including for permanent settlement in developed countries like the United States, Australia, the United Kingdom and Canada. In 2022, according to the Immigration Department, 71,000 people flew out of the country for permanent residence. 

The migration of Nepalis to the United States started in the 20th century. In the beginning, the outmigration was nominal. For the first time in  1974, Nepali living in the US were categorized under a separate ethnic group with the recognition of 56 people as Nepali Americans, a marked shift from the practice of putting Nepalis under the Other Asians category.

Despite a surge in the number of migrants, not even 100 Nepalis used to migrate to the global superpower and economic powerhouse annually until 1996, the year Diversified visa (DV) program was launched in Nepal. Since then, an increasing number of Nepali people have been migrating annually for permanent settlement in the US.

According to  the Pew Research Center, the population of Nepali Americans in 2019 was 198,000, which reached 206,000 in 2020, marking a 4 percent increase in the Nepali population in the US. 

Among them, 78,000 are living in different metropolitan cities of America. Dallas is home to 15,000 Nepali Americans, followed by New York (12,000), Washington (10,000), San Francisco (7,000), Baltimore (7,000), Boston (6,000), Atlanta (5,000), Pittsburgh (5,000), Acron (5,000) and Chicago (5,000).

Nepalis with modest means dream of leading prosperous lives in America. While some are indeed growing rich, a majority of Nepali Americans remain under deprivation. The annual median income (which divides the people in two equal parts on the basis of income distribution above and below median income) of Nepali Americans is  $55,000, far less than the annual median income of all Asian Americans ($85,800) and the median income of all Americans ($68,000). 

Seventeen percent of Nepali Americans are living under economic deprivation, holding low-paying jobs. The percentage of Nepali Americans living below the poverty line is more  than the percentage of Asian Americans (10 percent) and of all Americans (11 percent) below the line. What’s more, only 33 percent of Nepali Americans have their own occupancy, while others are living in rented accommodations. Only 22 percent of Nepali Americans are college graduates against 30 percent Asian Americans. A majority of Nepali Americans are living in relative poverty, near poverty and absolute poverty.

There was a time when agriculture was the booming sector on which the livelihood of rural people depended. Returns were promising and increasing back then. 

In recent years, however, returns from this sector have been diminishing alarmingly despite encroachment upon forests,  pastures and marginal parcels for cultivation. Unable to make a living by relying solely on the farms, rural people have begun looking for alternatives. 

With youths leaving the villages in droves for abroad, farmlands have fallen fallow, mainly in hilly areas. Instead of agriculture, remittance is fast becoming the source of  livelihood for rural people.

Food imports have gone up in recent years, thanks to an increase in uncultivated land and increased flow of remittance resulting from a growing exodus of village youths. 

This article seeks to examine the factors turning agriculture into an unattractive sector and triggering youth exodus, and prescribes ways to revive the sector. 

The farmer needs a number of things to maximize returns from agriculture in this day and age. A large parcel of land, access to bank credit, irrigation facilities, a reliable supply of fertilizers as well as electricity and an easy access to the market are some of the prerequisites. 

But these things are hard to get in our country. Farmlands are shrinking, thanks to ownership transfer from one heir to another. Even these parcels are located in remote parts where it is quite difficult to apply modern methods of cultivation for improving both production and productivity.

With the aim of helping small farmers improve farm production and productivity, the government as well as banks have launched various microfinance schemes/programs. 

But even this intervention has failed to make meaningful changes in the farmers’ lives. First and foremost, these programs/schemes have failed to bring back the farmer into farming. What’s more, most of the beneficiaries have not been able to pay interest, leave alone the principal. Contrary to Nepal’s experience, Bangladesh has been implementing a similar program/scheme with great success. 

The way out

The need of the hour is to turn farmlands lying fallow into cultivable land and make Nepal a food-sufficient country by thinking albeit differently. 

The government in particular needs to take a number of steps, to begin with. 

First of all, it needs to go for community farming. 

How to bring parcels of land lying fallow under community farming? What should be the basis for cost and benefit sharing? 

Leasing could be one of the options. A group of persons, including entrepreneurs, can lease parcels belonging to a large number of land-holders by paying them a certain amount annually. Such groups can maximize both production and productivity in those swathes by employing modern methods of farming. This will enable food-insecure communities living close by to buy locally-grown foodstuffs at reasonable rates apart from giving sustainable agricultural practices a great boost. Large farms also mean jobs for members of local communities. All in all, such farms can bring great dividends to rural Nepal. 

However, the government has to have political will to opt for community farming. First and foremost, it needs a huge budget to lease parcels of land before leasing it out to large-scale growers. Also, the government needs to invest in the development of necessary infrastructure and provide legal, technical and financial support to the growers. 

At a time when farmlands are shrinking, the government needs to move ahead with a sense of urgency if it is serious about averting a grave food crisis. 

Nepal, predominantly characterized by its hilly terrain, with hills covering 80.7 percent of the land, boasts numerous valleys and lakes, resembling natural view towers.

During my recent visit to Los Angeles, situated at the foothills of California, specifically Norwalk and Riverside, I marveled at the landscapes. Riverside, nestled at the base of hills, offers well-constructed trails that allow people to ascend and enjoy panoramic views of various cities. From atop one of these hills, I beheld the picturesque landscapes of Riverside, Moreno Valley, San Diego, Ontario, Los Angeles, and beyond. These cities, surrounded by hills on one side and the Pacific Ocean on the other, create a captivating spectacle.

Similarly, in Nepal, regions such as Kathmandu Valley, Pokhara, Surkhet, and Dang are embraced by hills, presenting a tremendous opportunity for the tourism industry. Nepal has the potential to develop trails providing access to these hills. By investing in road construction and cable cars, millions of visitors could be enticed to explore these elevated terrains. The breathtaking views of cities and the Himalayas from these natural view towers can be a significant attraction, much like the view towers of southern California. Constructing hiking trails on these hills can be achieved at a minimal cost, exemplified by the natural view towers in Pokhara, offering stunning vistas of the lake city.

However, the challenge lies in the lack of awareness and vision among Nepali rulers and decision-makers regarding how and where to allocate scarce resources. Random decision-making appears to be the norm, with little role for expert input. Political leaders often operate with self-interest, leading to decisions that benefit a select few. The absence of a coherent national agenda for development is evident, and questioning the actions of political parties seems futile.

Nepal can draw inspiration from iconic landmarks like the Hollywood Gate, which serves as a view tower for Los Angeles. Similarly, a hill in San Diego, housing an army camp, functions as a view tower offering stunning perspectives of the city and the Pacific Ocean.

Nepal is in a learning phase, acknowledging imperfections and seeking improvement. While mistakes are inevitable, the ability to learn from them is paramount. The prevailing egoism among rulers takes precedence over self-sacrifice, a fundamental quality for fostering a healthy and prosperous economy. Unfortunately, self-interest permeates Nepalese society, giving rise to nepotism, favoritism, and corruption. Policy decisions often legitimize these practices, hindering positive progress.

In contrast to constructing view towers, Nepal could invest in an eight-foot-wide road along the hills, facilitating trekking to hilltops. Redirecting resources from constructing towers to building footpaths around the hills of Kathmandu Valley could create a network of accessible viewpoints. Numerous spots could serve as small view towers, allowing people to appreciate the scenic beauty of the Kathmandu Valley hills. This strategic approach could offer a more sustainable and immersive experience for both locals and tourists.