Economic pillars for FY 2083-2092
N epal’s future will be decided not by remittances, but by the courage to confront corruption, reform political party governance, and unlock its immense endowments in energy, tourism, farm forestry-livestock, education and digital innovation. Only through transparent institutions and accountable leadership can Nepal shift from dependency to resilience, transforming potential into inclusive prosperity for FY 2083–2092.
OPENING UP
Nepal has repeatedly missed opportunities for prosperity, while countries such as China have advanced to global leadership. China’s journey illustrates how leadership, knowledge, technology, and strategic investment can transform a nation into the world’s second-largest economy. Its reforms since 1979 defy simple categories of capitalism versus socialism, instead embodying a pragmatic synthesis of market dynamism and state direction. This model demonstrates that prosperity requires strong leadership, policy continuity, and institutional resilience. Nepal’s experience, by contrast, has been constrained by governance weaknesses. Corruption, fragile institutions, and political volatility have eroded public and investment confidence and stalled reforms. Remittances have repeatedly cushioned the economy during crisis, yet they have
deep-rooted dependency and discouraged structural transformation. The nation’s vast potential in hydropower, tourism, farm forestry, and digital services remains unrealised, largely due to mismanagement and fragmented within policies and political party systems. This opinion is prepared on the foundation of decades of research, development practice, and policy engagement within Nepal, complemented by international experience. It draws upon credible sources such as the Economic Survey, Nepal Rastra Bank, and the National Statistical Office, ensuring reliability and independence from political bias. Nepal’s path forward lies in transparent governance, accountable
institutions, and strategic investment in innovation. Reforming political party’s governance, enforcing anti-corruption measures, and strengthening institutional capacity are prerequisites for unlocking growth. By moving beyond remittance dependency and harnessing its natural and human capital, Nepal can build resilience, achieve inclusive prosperity, and secure a sustainable economic future.
REVISIT
2046-47– Democratic Restoration and Structural Reforms
The People’s Movement of 2046-47 ended the partyless Panchayat system and
restored multiparty democracy. A new constitution established a constitutional monarchy and parliamentary democracy, marking a historic political transition. In the economic sphere, Asian Development Bank, International Monetary Fund and World Bank backed reforms introduced trade liberalisation, exchange rate unification, tariff rationalisation, and investment promotion. These reforms were intended to reduce poverty and expand employment, yet they largely failed to deliver inclusive growth. Poverty and unemployment remained stubbornly high, while dependence on foreign aid deepened. Soon after, Nepal was engulfed in a deadly Maoist insurgency. The conflict consumed valuable time, resources, and human lives, while weakening institutions and eroding public trust. Corruption and lawlessness spread across the political system, undermining governance and stability. This mode of governance collapsed the foundations of the economy, leaving remittances as the primary lifeline and fuelling social unrest.
2062-2063 – Maoist Insurgency Settlement and Transition
Nepal’s political transformation was shaped by a decade-long Maoist insurgency that culminated in the Comprehensive Peace Agreement. The monarchy’s authority diminished, opening the path to a federal democratic republic. Yet, the abolition of monarchy and declaration of secularism occurred without referendum, bypassing the people’s verdict in matters of state restructuring. This omission left a lingering sense of political illegitimacy. Economically, the insurgency devastated the nation. Growth collapsed to below 2% in 2062/63 as production, industry, infrastructure, tourism, transport, and education were paralysed. State institutions were crippled, while Maoist forces looted, burned, and destroyed public and private property, leaving thousands of innocent citizens
dead. With livelihoods shattered, youth and workers were compelled to migrate to India or abroad. Exports dwindled, revenue sources dried up, and the government struggled to finance basic expenditures. Safety nets were scarce, and development initiatives virtually nonexistent. In this vacuum, remittances emerged as the country’s lifeline. They stabilised the balance of payments and sustained essential imports, but also entrenched dependency on external labour markets. The peace process created space for reform, yet weak governance, donor reliance, and fragile institutions prevented structural transformation. Instead of ushering in stability, the post-conflict era deepened chaos, leaving both the state and its citizens to bear the heavy costs of insurgency. Nepal’s experience underscores a sobering lesson: political settlements without genuine public mandate, coupled with fragile economic foundations, risk perpetuating instability rather than delivering inclusive progress.
2072 – Constitution, Earthquake, and Trade Blockade
Nepal’s constitutional journey reached a milestone in Ashoj 2072 with the promulgation of a new constitution that institutionalised federalism after one failed attempt. Yet, this achievement was overshadowed by devastating earthquakes and a trade blockade imposed by India, both of which delivered severe economic shocks. In 2071/72, GDP growth fell to 3.4%, inflation spiked to nearly 7%, and reconstruction became the nation’s central policy priority. Remittances: nearly 29% of GDP: cushioned external balances, but they also masked deeper structural weaknesses. Despite constitutional progress, Nepal remained trapped in a low-growth equilibrium. Political instability, institutionalised corruption by bureaucrats and political leaders, and inadequate infrastructure investment stalled transformation. Industrial
production, harnessing of natural endowments, youth-led development, connectivity, power generation, education, health services, and public economic management all remained paralysed by partisan conflict among the Nepali Congress, Maoists, United Marxist-Leninists, and regional parties. The reliance on remittances provided short-term relief but rooted dependency on external labour markets. Trade imbalances persisted, with imports far outstripping exports, leaving the economy vulnerable to external shocks. Later, the COVID-19 pandemic compounded these stresses, disrupting livelihoods, shrinking fiscal space, and intensifying economic fragility across all sectors. Nepal’s experience illustrates a sobering paradox: constitutional progress without political stability and economic reform cannot deliver inclusive growth. Federalism offered a framework for transformation, but weak governance, fragile institutions, and donor dependency left the state and its people struggling to convert political change into sustainable development.
2083 – Governance, Migration, and Reform Imperatives
Nepal’s democratic experiment entered a new phase with two successful elections at the federal and subnational levels, alongside the execution of fiscal federalism. Yet, critical reforms in production, tourism, health, education, public service delivery, and infrastructure remain far from meeting the demands of a modern society. The general election of Falgun 21, 2082 marked a turning point: the Rastriya Swatantra Party (RSP) won a landslide victory, decisively rejecting traditional political parties whose repeated failures had eroded public trust. The RSP advanced ambitious promises: its election promised, “100-day agenda,” the Budget of 2083/84, and the Fiscal Policy of 2083/84 centred on ending corruption
and strengthening governance. However, the spark of desirable economic transformation has yet to materialise. Execution has been uneven, and critics argue that the
Government risks substituting substance with spectacle. Democratic values and norms remain unrealised, as leadership accountability falters despite overwhelming public mandate. By its first 100 days, the RSP government faced mounting challenges: demographic pressures, youth unemployment, and governance deficits. IMF assessments highlighted weak implementation capacity, corruption, and political volatility. Growth slowed to 3% in FY2025/26, weighed down by domestic unrest and external shocks from the wars
for economic development. Instead of focusing on statecraft and leveraging the country’s vast resources, party rule has paralysed public institutions, misallocated funds, and fuelled corruption. Major national projects illustrate this failure. Since the restoration of multiparty democracy in 2046/47, the Karnali Chisapani Multipurpose Project (10,800 MW hydropower with irrigation potential for 300,000 hectares) and the Arun III Hydropower Project (900 RoR) were halted due to political interference and weak party governance. These missed opportunities highlight how party politics has obstructed strategic development. Despite these setbacks, Nepal retains immense potential to achieve prosperity. Essential public services of education,
Year Political Context Economic Outcome Critical Weakness
1990 Democracy restored Liberalisation reforms Poverty, unemployment, corruption
2006 Peace agreement Remittance-led stability Weak governance, rampage corruption
2015 Federal constitution, earthquake
Low growth, remittance cushion
Instability, infrastructure gap, corruption
2026 Youth unrest, governance crisis
Growth slowdown, remittance buffer
Low trust, weak investment
in Russia-Ukraine and the Middle East. Strong remittances and tourism buffered external accounts, but investment confidence remained fragile. Nepal now risks sliding into a “low-trust, low- investment equilibrium.” Durable growth demands governance reform, efficient public investment, and strategies to harness the demographic transition without which federal democracy may remain a promise unfulfilled. The table summarises the comparison of turning points as presented. NOW ON
Nepal has already lost valuable decades in its pursuit of prosperity. Citizens have sacrificed their lives, labour, and aspirations to build a prosperous nation, yet political systems and party governance since 2015/2016 (BS) have steadily eroded, with no sign of reversal. The autocratic culture within political parties and their governance structures has undermined the state’s capacity
health, connectivity, utilities, and government services remain prohibitively expensive and inaccessible to ordinary citizens. Institutional foundations have cracked under poor regulation, weak oversight, and negligible compliance, leaving the public kneeling for access to basic services. This opinion argues that Nepal must urgently identify and strengthen core pillars of prosperity for 2026–2035. The most critical include: a) Hydropower – unlocking energy
independence and regional trade; b) Education and Health – building
human capital for innovation and competitiveness; c) Agriculture and forestry
modernisation – ensuring food security and sustainable resource use; d) Digital and ICT – creating new
industries and employment opportunities; and e) Migration and remittances –
transforming labour mobility into
investment and skill transfer.
Hydropower
Nepal’s energy future is defined by ambitious projections and pressing challenges. According to the Energy Development Framework and the Electricity Demand Forecast Report, demand is expected to grow annually between 4.5% and 9.2%, reaching nearly 28,713 MW by Fiscal Year 2091/92. This growth reflects rising needs across agriculture, construction, manufacturing, services, transport, and domestic consumption. Planned projects, including those with signed PPAs, concession agreements, and government studies, collectively represent more than 25,000 MW of capacity, underscoring the scale of investment required for transformation. Yet, Nepal’s challenge is not generation but utilisation. With a clean energy base already in surplus, the nation must shift from exporting raw electricity at low value to fostering energy-led derivative industries. Fertiliser production, data centres, mechanised farm-forestry, processing industries, and modernised transport can multiply economic benefits and create jobs. Realising this vision requires investment in productive infrastructure and reforming outdated systems. The Nepal Electricity Authority’s weak distribution network, coupled with governance inefficiencies, remains a critical barrier.
Tourism
Nepal’s tourism products are deeply rooted in its Himalayas, rich heritage, and vibrant ecosystems. Key offerings include mountaineering and trekking routes such as the Kangchenjunga Circuit and Everest Base Camp; wildlife safaris in Chitwan and Bardia; spiritual pilgrimages to Lumbini, Muktinath, Sworgadwari, and Pashupatinath; and cultural immersion in ancient Newari towns, Maithili. According to the Investment Board Nepal (2024), 62.5% of foreign visitors arrive for leisure, 15.2% for trekking, 13.1% for pilgrimage, and 9.2% for other purposes. Tourism contributes about 1% of GDP and 11.5% of national employment, making it Nepal’s fourth-largest industry, though 43.6% of businesses remain concentrated
in Bagmati Province, highlighting regional disparities. Adventure and nature tourism remain Nepal’s strongest assets, complemented by culture, heritage, wellness and spiritual tourism. Wildlife and ecotourism further diversify the portfolio. Yet structural challenges persist: weak connectivity, limited ICT infrastructure, and inadequate hospitality standards constrain growth. Without significant investment in airports, roads, hospitality service standardisation and digital systems, Nepal risks losing competitiveness in attracting high-value visitors. To unlock its full potential, Nepal must prioritise sustainable tourism, strengthen institutional frameworks, and reposition itself as a leader in resilient mountain tourism. By doing so, tourism can evolve from a fragile sector into a transformative pillar of inclusive prosperity.
Agricultural, Forestry and Livestock
Agriculture, forestry and livestock remain the backbone of Nepal’s economy, employing nearly two-thirds of the workforce. Yet, despite decades of public investment, donors’ interventions, and abundant natural resources, the sector has failed to deliver transformative growth or sustained job creation. The Agricultural Perspective Plan, Agricultural Development Strategy, periodic plans, the Forestry Master Plan, and community forestry initiatives achieved conservation gains but did not catalyse broad-based development. Nepal continues to rely heavily on imports of cereals, dairy products, timber, and other goods, exposing structural weaknesses in domestic production and value-chain integration. To reverse this course, Nepal must strategically modernise agriculture, forestry, and livestock. Moving beyond subsistence farming toward agro- processing, regenerative agriculture, and diversified cultivation of high-value crops such as spices, large cardamom, tea, coffee, horticultural products, edible oils, and medicinal plants is essential. Harnessing non-timber forest products, including essential oils, could position Nepal as a supplier of premium goods in global markets. Equally critical is the
Nepal continues to rely heavily on imports of cereals, dairy products, timber, and other goods, exposing structural weaknesses in domestic production and value-chain integration.
modernisation of livestock value chains: dairy, meat, and cheese which remain underdeveloped despite strong demand and export potential. Energy utilisation offers another frontier. By leveraging hydropower and renewables, Nepal can strengthen agri-forestry value chains through modern processing, storage, and distribution systems. Education and research institutions must align with this modernisation agenda, fostering innovation, entrepreneurship, and start- ups. Targeted financing and investment incentives are vital to engage youth and entrepreneurs, ensuring inclusivity. Past fragmented approaches have proven insufficient. What is needed now is a strategic redesign anchored in sustainability, competitiveness, and global integration. By prioritising connectivity, ICT, and quality standards, Nepal can reposition agriculture, forestry, and livestock as engines of growth, reversing import dependence and securing food security, rural prosperity, and ecological resilience.
Digital Economy
Nepal’s digital economy stands at a pivotal juncture. The Nepal Rastra Bank reports that digital transactions reached Rs 852 billion ($7.3 billion) in a single month of FY 2082/83, a 71% year-on-year surge driven by 72.94% smartphone penetration and 98.4% 4G coverage. Mobile banking and QR payments are expanding rapidly, while government reforms such as lifting the FDI cap for IT, introducing a “Green Channel” for
tech investment, and revising digital lending rules: signal a favourable policy environment. Yet, bottlenecks persist. Critical digital infrastructure remains fragmented, with most banks refusing to accept trusted data from the Nagarik App, forcing citizens into dual digital- paper systems. Policy declarations often outpace implementation, and the digital divide continues to marginalise rural communities. Moreover, Nepal risks being locked into a low-cost outsourcing model unless it builds a high-value digital talent pipeline skilled in AI, data governance, and cybersecurity. To accelerate growth, Nepal must strengthen Digital Public Infrastructure through interoperability and trust frameworks, mandate adoption of national digital identity, and establish integrated payment gateways. Simultaneously, investment in reliable data centres, power, and connectivity is essential to empower the private sector. By shifting focus toward high-value digital services and inclusive access, Nepal can transform its digital economy into a foundation for resilience, innovation, and global competitiveness.
Migration and Remittances
Remittances have nearly eradicated extreme poverty, but dependence is risky. Policies to maximise skill transfer, reintegration of returnees, and diaspora investment can transform migration into a development pillar. For Nepal to transform migration and remittances from a safety net into a primary engine of prosperity for FY 22083-2092, three decisive shifts are required: treating the diaspora as a strategic asset, formalising remittance flows into productive capital, and creating viable alternatives to foreign labour migration.
• Unlock Diaspora Investment Through Constitutional Reform Currently, Non-Resident Nepalis (NRNs) face the same legal barriers as foreign nationals under the Foreign Investment Act, stifling their potential to contribute. With Nepal aiming for a $100 billion GDP by 2092, the estimated $50-70 billion held by the diaspora is essential. The government
should initiate a constitutional amendment to Article 14 to grant NRNs meaningful economic rights including a dedicated investment window, recognition of foreign professional credentials to reverse the brain drain, and removal of punitive capital gains taxes on property. This would create a credible signal that Nepal sees its diaspora as partners, not just remittance senders. Active participation in Nepal’s secondary market could become one of the most promising avenues for mobilising investment from the diaspora. To unlock this potential, it is essential to proactively reform and amend both primary and secondary market policies, creating incentives that encourage diaspora investors to engage. At the same time, a well-designed SME financing strategy should be formulated as a transformative initiative: a true game changer for Nepal’s economic development.
• Modernise Financial Infrastructure for Remittance Mobilisation With remittances accounting for a quarter of GDP and digital transactions surging 71% year-on-year, the new UPI-NPI cross-border payment linkage is a game-changer, enabling instant, low-cost transfers via mobile apps. To channel this into investment, the government should operationalise the budget’s proposed “remittance investment schemes” that offer incentives for directing funds into productive sectors. Complementary measures like lottery schemes for formal remittances and zero-cost migration initiatives will further formalise flows and protect migrant welfare.
• Build a “Migration with Dignity” Ecosystem The declared “Decade of Internal Employment Promotion” (2025-2035) must be backed by tangible action. The government should expand the Safer Migration Project’s financial literacy programmes and enforce the new mandate requiring pre-departure skills training to ensure higher-value
employment. Furthermore, the legal framework for international remote work offers a third model: allowing Nepalis to earn global income without leaving home. This, combined with returnee reintegration programmes, would break the cycle of exploitation and turn migration into a choice, not a necessity.
RISKS AND CHALLENGES
Nepal today faces a convergence of risks that constrain its economic potential. Governance weaknesses, marked by corruption and fragile institutions, continue to erode investor confidence and stall reforms. Export stagnation leaves foreign exchange earnings far below regional peers, deepening reliance on remittances. Meanwhile, youth migration drains domestic talent, creating urgency for job creation and innovation at home. Finally, climate vulnerability threatens agriculture and tourism, the very sectors that sustain rural livelihoods and national branding. Together, these challenges underscore the need for bold policy action to stabilise growth and build resilience.
AT FINAL
Nepal’s economic future hinges on governance reform, the single most critical determinant of its course. Persistent corruption, weak institutions, and the rooted misgovernance of political parties have eroded public trust and paralysed state capacity. Unless political parties themselves undergo structural
improvement, governance reform will remain rhetorical rather than transformative. For decades, remittances have buffered Nepal against crises, from trade blockades to pandemics. Yet, this reliance has entrenched dependency, masking structural weaknesses and discouraging domestic investment. The diaspora’s contributions, while vital, cannot substitute for a dynamic domestic economy. Nepal’s immense potential in hydropower, tourism, and digital services remains unrealised, largely due to political volatility and policy inconsistency. Projects such as Karnali Chisapani and Arun
III illustrate how partisan interference has stalled transformative opportunities. Without stable governance, these sectors cannot drive structural transformation. The challenge is clear: Nepal must confront the corrosive culture of political party corruption and mismanagement. Reforming party governance, strengthening transparency, and enforcing accountability are prerequisites for unlocking investment, diversifying exports, and creating jobs. Only then can Nepal shift from a remittance-dependent economy to one powered by innovation, energy, and sustainable growth.
(Neupane is a former Chairman of the Nepal Stock Exchange (NEPSE). He is currently serving as Research Fellow at Baya Himalaya, a policy research institution in Nepal)
