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 Inclusive Growth and Sustainable
Development: Nepal’s Difficult
Mahesh Banskota*
*Currently Dean, School of Arts, Kathmandu University
Opinions expressed are solely those of the author.
 Optimism was high for the country to move
quickly to a peaceful development after the
Comprehensive Peace Accord (2006) and
the historic CA elections (2007).
 Instead of being a mandate for peaceful ,
Inclusive and sustainable development, this
is looking like a recipe for deadlock,
insecurity, and political and economic
uncertainty – eventually further turmoil ???
 Threat of all previous gains quickly dissipating
down the drain
 A disturbing reality - inability to not only form a
government but also to make it functioning- not
even able to have a proper budget
 Daily load shedding of 14 hours and increasing ,
exports have stagnated, real estate bubble has
cooled, interest rates have gone up, inflation is an
all time high ,many private sector industries
 Migration has become the only alternative for
most young people
 remittances - 20 % of GDP
 Villages left to women and elders and children –
managing agriculture in most parts of the hills in
rural Nepal
 Labor shortage slowly emerging as a major issue
 Business confidence -never been so low
 Militant worker unions of most political parties,
insecurity, kidnapping and killing of business
 Lack of consensus among the key political players
 Integrating the two armies –Nepal government’s
and the Maoist’s
 deciding on a federal structure in a manner
acceptable to most.
 Debate between Presidential and Parliamentary
 Displaced people, Returning property seized by
 Rapid erosion of trust between political players
 Longer the delay in the resolution of the
contentious issues and finalization of the
constitution, the greater is the likelihood that
radical opinions will succeed in further polarizing
the parties and silencing the peaceful voices in the
respective parties.
Exclusion in Nepal: Constraints for
Inclusive Growth
 three main dimensions of exclusion in Nepal are
gender, ethnic and regional
 According to the Human Development Report 2009,
overall GDI (499) was lower than overall HDI (509).
GDI is as low as 0.423 for mountain ecological belt and
0.441 for the Mid Western Mountains. Although
gender inequality has decreased in all the regions
between 2001 and 2006, the gap between GDI and HDI
has remained
Poverty as a barrier to Inclusion
 HPI was higher for rural than in urban areas. It was
also higher for mountains as compared with the hills
and the Terai. HPI was 1.6 times higher for Far West
Mountains than for the Central Hills where it was the
 By ethnic groups HPI was the highest for Dalits and
Janajatis – almost 40 % higher than for the Newars and
Brahman and Chhetri groups.
Policies Aggravating Exclusion
 Many past policies have aggravated exclusion and
 Only 37 % of the households were 30 minutes away
from a road.
 total road network and density of roads is very low in
Nepal compared to other South Asian countries.
 43 % of the population has access to all weather roads
and 60 % of this is in the lowlands
 highest quintile groups were relatively closer to road
than the lower quintile which suggests their influence
in road location.
 76 % of the highest quintiles had access to electricity
while it was only 10 % for the lowest quintiles
 Access to loans from Banks has decreased after the
conflict as most banks relocated to urban areas.
Because of this, 54 % of the households say that they
have to borrow from family and friends
 54 % of all household reported using some irrigation
in 1995/96 and this increased to 67 % in 2003/04.
However the disparities between large and small
farmers were significant. In 2003/04 80 % of the large
farmers said they had irrigation while for the small
farmers it was 65 %.
 In 2003/04 77% of the population owned land.
Between 1995 /96 and 2003/04 average land
holdings dropped from 1.04ha to 0.79 ha.
 reduction was the highest for the poorest
expenditure quintiles.
 Land owned by the poorest is only half as much as
that owned by the richest groups.
 Poor own poorer quality land
 1990 Changes did not go far enough
 10 years of armed conflict 2006 Peace Accord open the
door for many changes
 With 33 % representation of women, it also has
participation of most of the leading ethnic and
indigenous groups as well as the minorities.
 Removal of only Nepali language inside the Assembly
has also helped in greater ownership of the political
forum as well as in articulation of positions of different
Debate on the Federal Structure
 alternative models - ethnic, geographical, linguistic or
some combined considerations
 81 % of the revenue is currently coming from four
districts only and 94 % of the revenue is accessed from
only 12 districts.
 VAT, customs and income tax and the base for
generating these resources is very limited to a few key
locations in the country
Slow Growth
 Nepal has the slowest growing economy in South Asia.
 At a time, when all other S. Asian countries were
experiencing unprecedented high economic growth
rates, Nepal barely crawled ahead.
 The current forecast for Nepal and other countries is
not different from the past. Even after the crises, most
South Asian countries have growth rates that are
almost double that of Nepal
 Agriculture growth jumped from 1% in between
2005/06 and 2006/07 to 5.7 percent from 2006/07 to
2007/08. The latest growth estimate for agriculture
sector shows an increase of 2.2 percent for 2008/09,
 The Non-agricultural sector grew at 4.8 percent during
2008/09. The low growth has been attributed to the
acute shortage of energy in the country as well as to
frequent closures and disruptions of industries,
transport and services in the country on account of
frequent labor strikes, protests and closures.
Impact Global Warming ?
 Water related excesses and stresses have become the
new reality
 Farmers especially in the hills are beginning to voice
serious concerns - Temperature changes is
perpetuating droughts , shifting cropping patterns and
creating new challenges of pests and diseases
 New challenges for any government and must be part
of any Inclusive Development Agenda
Inclusive Growth Agenda
 Governance Factor -----Restoration of Trust, Peace ,
law and order ,boost the levels and quality of
investments in physical and social infrastructures
 People Factor -----fundamental human rights, social
justice , business confidence, economic growth ,
access to gainful employment, opportunities , services
and infrastructures,
 Planet factor – shared responsibility to do more and
especially for - small countries like Nepal for no fault
of theirs are disproportionately impacted-