Why is nepal poor?

WHY IS NEPAL POOR?

The concept of poor country can be related as least developed countries (LDCs) which first originated in  1960s. It mainly observes the countries' poverty levels, human resources and economic conditions of the country. This helps categorizing the country in the global framework where Nepal has continuously be considered as the poorest countries as per the groupings. This is clear why Nepal has been categorized as so.

The three criteria includes:

• Poverty: where GNI or Gross National Income is averaged over three years, where GNI should be 1230$ above to graduate and if it's below than 1025$ then the country is LDC,
• Human Resources: various factors such as nutrition, health, education, literacy are considered,
• Economic viability: production of agri. goods, services, exports from the countries and others, 

There are valid reasons to consider Nepal as poor:

* Fourth Nepal Living Standards Survey 2022-23 estimates 20.27% of the population still below the poverty line which was calculated on the revised poverty line of Rs. 72,908 person per year. Luckily, the inflow of remittances have helped coping the poverty in the country. The poverty rate in urban areas stands at 18.34 percent while it is 24.66 percent in rural areas. Province-wise, the poverty rate is the highest (34.16 percent) in Sudurpaschim and lowest in Gandaki Province (11.88 percent).

* Also, the unemployment rate of Nepal climbed up to 12.6 percent in 2022-23 from 11.4 percent in 2017-18. The unemployment rate has risen from 4.9 percent in 1995-96 to 12.6 percent in 2022-23. This has forced the people to migrate to other countries.

* As highlighted by Economic Survey, Till mid-March of the fiscal year 2022/23, remittance inflow has increased by 25.3 percent, reaching Rs. 794.32 billion. Remittance inflow in US dollars has increased by 14.8 percent.  

* As per Economic Survey, there are 1.15 doctors and 2.54 nurses per 1,000 population in the health sector in Nepal as of mid-January of 2023 presenting gloomy picture of health  scenario. 

Although not answered, why Nepal is poor, it presents how Nepal is poor further leading us to ask what is making Nepal poor?

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Why is Nepal Classified as Poor?

The categorization of countries as "poor" aligns with the concept of Least Developed Countries (LDCs), a classification introduced in the 1960s. This framework assesses a nation's poverty levels, human resource development, and economic conditions, providing a structured basis for global comparison. Nepal has consistently been classified as one of the poorest countries under these criteria, reflecting its socio-economic challenges.

Criteria for LDC Classification:

1. Poverty Threshold:
   Gross National Income (GNI) per capita is a primary indicator. To graduate from LDC status, a country's GNI must exceed $1,230. Countries with a GNI below $1,025 are classified as LDCs.

2. Human Resource Development:
   This criterion evaluates key indicators such as nutrition, healthcare access, educational attainment, and literacy rates.

3. Economic Vulnerability:
   Economic stability is assessed based on the production of agricultural goods, service sector performance, export levels, and other economic activities.

Socio-Economic Challenges in Nepal:

1. Poverty Rate:
   According to the Fourth Nepal Living Standards Survey (2022–2023), 20.27% of Nepal's population lives below the poverty line, defined as an annual income of NPR 72,908 per person. Regional disparities are significant, with rural areas facing higher poverty rates (24.66%) compared to urban areas (18.34%). Sudurpaschim Province reports the highest poverty rate (34.16%), while Gandaki Province has the lowest (11.88%). Although remittance inflows have mitigated some poverty, structural challenges remain.

2. Unemployment Trends:
   The unemployment rate increased from 11.4% in 2017–2018 to 12.6% in 2022–2023, a significant rise from 4.9% in 1995–1996. This persistent unemployment has driven significant labor migration, contributing to economic reliance on remittances.

3. Remittance Dependency:
   The Economic Survey (2022–2023) highlights a 25.3% increase in remittance inflows, reaching NPR 794.32 billion by mid-March 2023. In US dollars, this represents a 14.8% increase. While remittances play a crucial role in supporting household incomes, they also underscore Nepal's economic vulnerability and limited domestic opportunities.

4. Healthcare Infrastructure:
   Nepal's healthcare sector faces significant challenges, with only 1.15 doctors and 2.54 nurses per 1,000 population as of mid-January 2023. This inadequate healthcare infrastructure highlights broader issues in human resource development.

5. LDC Threshold Indicators:
   Nepal's classification as a Least Developed Country (LDC) is based on three key thresholds:
   • Per Capita Income: Nepal's GNI per capita is $1,027, below the graduation threshold of $1,222.
   • Human Asset Index (HAI): Nepal scores 74.9, surpassing the threshold of 66, indicating progress in human development metrics.
   • Economic and Environmental Vulnerability Index (EVI): Nepal's score is 24.7, below the threshold of 32, reflecting significant economic and environmental challenges despite moderate resilience.

Conclusion: Structural Factors Behind Nepal's Poverty

While the data illustrate how Nepal is classified as poor, deeper analysis is needed to understand why these conditions persist. Contributing factors likely include political instability, reliance on agriculture, limited industrialization, and challenges in education and healthcare systems. Addressing these underlying issues is crucial for sustainable development and poverty alleviation in Nepal.