Status of Poverty and Standard of Living of Nepal

Every country has their own identity to be recognized in the international forum. In addition to the beautiful Himalayan nation Nepal is also recognized as a small undeveloped country. As per the economic survey of Nepal 2019/20 the absolute poverty, those living less than $1.90 per day as per the classification of World Bank, of Nepal at the end of fiscal year 2017/18 was 18.7 percent where

the multidimensional poverty remained 28.6 percent. Multidimensional poverty index is calculated using a weighted average index of health, education and standard of living. As per UN Human development index Nepal is ranked 147th out of 189 countries (2019), making some progress as compared to its previous own record. The fifteenth five year development plan has targeted to reduce absolute poverty level at 5 percent by 2030 and eradicate it by 2043. 

Eradication of extreme poverty remained the major challenge of Nepal fueled by natural disasters including massive earthquake of 2015, flooding of every year and now a coronavirus outbreak. As per the World Bank South Asia has made remarkable progress on reducing absolute poverty including Bhutan who has reduced the same to 1.5 percent as of 2017. Nepal is also performing well thanks to the foreign employment and inflow of huge remittance to GDP. Again the large dependency on foreign job market is making the Nepalese economy vulnerable as a great recession and major international events could force large populations to fall under the poverty line. UNICEF with reference to Nepal Government has estimated some 1.5 million people are vulnerable to poverty because of the global coronavirus pandemic with 2 million job loss for Nepalese in the international job market. The report of UNDP (May 2020) is even worse as three out of five laborers (both formal and informal) are supposed to lose their jobs in 2020. 

The World Bank has classified the world economies into four groups in terms of Gross National Income Per Capita. The updated classification of July 1, 2020 is as follow.

Group	GNI Per Capita	No of Countries (as of 1st July, 2020)
Low Income Country	Less than $1036	29
Lower Middle Income Country	$1036 to $4045	50
Upper Middle Income Country	$4046 to $12,535	56
High Income	Above $12,536	83

Nepal has jumped to the lower middle income country in the year of 2019 with GNI per capita of $1090 from $990 of the previous year. As per the data of the World Bank, Nepal is at 167th position out of 192 countries in terms of GNI per capita (in US Dollar) with GNI per capita $1090 and 160th position in terms of purchasing power parity. Nepal is in 7th position in South Asia ahead of Afghanistan.

Country	Rank	GNP Per capita (in 2019)
Afghanistan	185	$ 540
Bangladesh	149	$ 1940
Bhutan	137	$ 2970
India	145	$ 2130
Nepal	160	$ 1090
Maldives	76	$ 9650
Pakistan	156	$ 1530
Sri-Lanka	119	$ 4020

Poverty reinforcing poverty known as vicious circle of poverty has to be broken to get rid of this problem. The experts unanimously agree that poor capital formation is the common problem of the poor countries. Vicious circles of poverty are promoted by both demand side and supply side constraints. From a supply point of view, lower income means lower saving, lower saving means lower investment and lower investment means lower production and income. Same is true from the demand side as lower income means lower purchasing power and demand, lower demand results in lower investment, and lower investment means lower production and income. 

Nepalese agriculture has become a productive place for promoting poverty thanks to subsistence based farming practices. More than 60 percent of people are engaged in agriculture but the production is not even sufficient to feed our own population. Every year a total of five hundred thousands of people are supposed to enter the job market. As per UN Human development report percentage of skilled labor force to total labor forces is marginally low i.e., 41.9 percent (19th July, 2020). Our resources are severely underutilized, one perfect example is Hydropower. Installed hydro power capacity of Nepal up to the end of fiscal year 2018/19 was 1182 MW (ADB 2020) and imported energy of 2813.07 GWh from India against the nominal export of 34.74GWh in the fiscal year 2018/19 (Annual Report, NEA). Whereas the story of Bhutan is encouraging as their hydro power potential is almost half that of Nepal. As per International Hydropower Association Bhutan has produced 2326 MW of Hydropower as of 2018/19. Hydropower contributes 30 percent of Bhutan's GDP and 20 percent of export and domestic revenue as of 2018/19 (World Bank Group). 

Nepal has made remarkable progress in reducing extreme poverty over the decade but national income and standard of living indicators are not encouraging. The reasons behind the same are not new but poor industrialization, extreme dependency on agriculture, lack of entrepreneurship, poor capital expenditure and capital formation, lack of saving, poor attitudes towards work and lack of visionary leaders, including others. 30 million of the population can provide the huge market opportunity especially to the consumer goods. Our efforts to invite FDI is not satisfactory, as the climate of investment is still questionable thanks to our unstable policies. If we walk in the same pace and way we will make natural progress but will remain backward in relation to others. Thus, we should not delay intervene and break the vicious cycle of poverty and income.