Document Library

Key Text Inclusive Growth in Nepal

Author: Magnus Hatlebakk
Date: 2008
Size: 28 pages

Summary

How can inclusive growth be promoted in Nepal? This paper from the Chr. Michelsen Institute examines pathways out of poverty in Nepal between 1995 and 2003 and proposes ways in which the government, non-governmental organisations and international donors can help foster future inclusive growth. Targeted education and training schemes for the poor and for excluded groups, subsidised health care and investment in infrastructure are key areas of intervention.

Nepal has seen good economic growth since the mid 80s and throughout the 90s. This has led to increased inequality, but in general the poor have also benefited economically. The exception is some ethnic groups of the central and eastern hills, where labour migration has been more limited; labour migration, particularly to India, seems to be a major factor in the decline in poverty. There is a strong link between social exclusion, as defined by the caste-hierarchy, and economic poverty. Even in 2003, the hill and terai Dalits, as well as the hill Janajatis of the central and eastern hills, were the poorest.

The main pathways out of poverty from 1995 to 2003 have been: migration to work in India; landless farm workers becoming subsistence farmers, construction or manufacturing workers; and subsistence farmers supplementing their incomes by working in construction and manufacturing. Whether more households can follow the same pathways out of poverty will depend on the government's economic policy; the provision of social security with competitive markets and secure property rights may foster domestic and foreign investments in productive physical and human capital.

With a successful economic policy the poor are likely to be employed in a more productive agricultural sector, including livestock and high value products, as well as in a growing manufacturing sector
Further labour migration and growth in the sectors of hydropower, tourism, high value agricultural products, and the mobile phone industry, including mobile banking, are likely to benefit the poor and excluded.
Nepal could learn from Kerala's investment in primary education and health, and from the Punjab's investments in agriculture.

Education and training programmes targeted towards the poor and excluded are likely to promote inclusive growth in Nepal, along with subsidised health services to insure people against medical crises. Health risks are for most poor people a major uncertainty and constrain their ability to make profitable investments. Further recommendations are that:

It is important to identify simple measures such as the provision of lunches that can help keep Madhesi Dalit children in primary school, as this group still has a literacy rate of below 10 percent.
Targeted training programmes could involve the production and marketing of new products, or vocational training in emerging sectors, for example.
International donors could play a major role in supporting regional hospitals, for example, to help make quality health care affordable
Investments in physical capital, like electrical transmission lines, roads and irrigation, are necessary for economic growth
A broad-based tax system is needed to finance infrastructure development and the provision of other public goods
Some targeted programmes such as land redistribution to landless Dalits in remote villages of the Terai, and experiments with a rural employment guarantee in the same areas, are also likely to be beneficial.

Access full text: available online

Source: Hatlebakk M., 2008, 'Inclusive Growth in Nepal', Chr. Michelsen Institute, Bergen, Norway
Author: Magnus Hatlebakk , Magnus.Hatlebakk[at]cmi.no
Organisation: Chr. Michelsen Institute (CMI), http://www.cmi.no