Poverty

 

Poverty

With an average per capita Gross Domestic Product (GDP) of US$260 (2004), Nepal is the poorest country in South Asia and ranks as the twelfth poorest country in the world.

Causes

Poverty has persisted in Nepal because of low economic growth, inadequate social and economic

infrastructure, relatively high population growth, low access to land, low access to non-agricultural

income, and deep-rooted cultural and historical practices. In addition, institutional weaknesses at

both the government (central and local) and non-government level, lack of good governance is a

major reason for the perpetuation of poverty.

Low economic growth

The main characteristics of economic growth that directly impact poverty in Nepal are: a low

growth rate low agricultural growth; growth that is urban biased; and low redistribute capacity.

Over the last three decades, economic growth has averaged about 4 percent only marginally

exceeding the population growth rate of 2.37 percent. Growth rate in the agriculture sector has

been even lower less than 2.5 percent and very inconsistent throughout these 30 years.

Low agricultural productivity

Nepal's economy centres on agriculture: 86 percent of the country's households cultivate some

land; 80 percent of the labour force relies mainly on agriculture for employment.

Low levels of social and economic infrastructure

Even by South Asian standards, Nepal's level of social and economic infrastructure is low. The

NLSS data suggest that the rural poor suffer from insufficient and sub-standard health services

and the relatively high cost of medical treatment.

High population growth and adverse impact on environment

Since Nepal's economic growth has not been high or sustainable during the last two and half

decades, high population growth has meant that the absolute number of people below the poverty

line has doubled from 4.7 million in 1976 to close to nine million.

Social and cultural factors

In Nepal, many groups of poor people stay poor because of social and cultural factors, notably

historic inequalities in the distribution of social and economic power. Caste-related biases have

confined the so-called "untouchable castes" to the lowest-paying menial jobs, restricted or

blocked their access to common resources, and limited or denied their access to government and

public services.

Poverty Reduction

However, over the last decade the country has made considerable progress reducing poverty. Poverty rates declined across all of Nepal’s development regions and ecological belts:

• Headcount poverty rate declined from 42% to 31% between FY95/96 and FY03/04
• Urban poverty declined from 22% to 10%
• Rural poverty declined from 43% to 35% (although it remains higher than in urban areas)

The standard of living improved between FY95/96 and FY03/04:

• Agricultural wages and in ownership of durables increased
• The actual consumption of 'luxury’ foods rose
• The proportion of households reporting inadequate food consumption declined
• Self-assessments of adequacy of housing, clothing, health care and children’s schooling improved