Nepal’s relative underdevelopment mimics the paradox of an “irresistible force meeting an immovable object” where the compelling potential of a uniquely attractive country sits under-utilised. The young republic has no choice but to ramp up its economic ambition if it is to match the tall political achievements of recent years. Nepal today is a progressive country, propelled by the democratic mass movements of 1950, 1990 and 2006, heading in earnest towards building a deeply inclusive state.
Despite modest economic growth, Nepal halved absolute poverty in the past two decades. It dramatically reduced rates of child and maternal mortality. Primary school enrolment, with gender parity, exceeds 97 per cent, and average life expectancy has crossed 70. Nepal also stands out on several measures of civic engagement, from well-managed community forests to community radio. After years of policy paralysis, there is broad realisation now that the country needs to project a clear roadmap to prosperity. We envision Nepal as an enterprise-friendly middle-income country by 2030, peopled by a vibrant middle-class. To get there we need to mobilise an unprecedented volume of public revenue and private investment, domestic and foreign, by signalling credible economic reforms, relaxing binding infrastructural constraints, and designing inclusive institutions.
Nepal and India are among the closest of neighbours in the world. In the 21st century, the challenge is to build on our socio-cultural foundations to leapfrog economically. We now need to mould our thinking to the possibilities and challenges of the 21st century. How do we groom young people for jobs with technology-aided skills? How do we cooperate on mutually beneficial terms on water and clean energy, and help mitigate climate change? How do we accelerate the reduction of poverty, inequality and vulnerability? How do we build sustainable cities and livable habitats? How do we adopt new paradigms of production and exchange? Over the next decade, a sincere pursuit of the following clusters of development issues could lift us all.
One, wider connectivity. When Prime Minister Narendra Modi addressed Nepal’s Parliament three years ago, he spoke of the importance of highways, infoways and transways (HIT). To reduce trade and business costs, to deepen people-to-people ties and to open up new economic opportunities, Nepal needs to connect with growth poles in the region through 21st century electric railways, expressways and expanded air routes directly connecting more cities in Nepal to more cities in its neighbouring countries. Furthermore, the building of synchronised transmission grids to trade hydropower generated electricity will help boost green growth.
Two, augmenting productivity. Nepal’s formidable topography makes material access to world markets costly. However, the availability of clean energy, an affordable workforce and the unexploited bounties in niche sectors with high value-to-weight ratios make Nepal uniquely tempting to investors. Tourism and landscape marketing can be an anchor of prosperity. The fertile Tarai lands and agro-climates in the hills could support a much more productive agriculture than they do today. The rise of the large Indian middle class, and investors, present opportunities on both sides, with Nepal’s hills being potential locations for world-class tourism, as well as education and health institutions.
Three, tapping new economic possibilities. Nepal today faces an enormous trade deficit with India, as production competencies shrink and large inflows of remittances fuel growth in imports. The share of Nepal’s manufacturing sector has plunged from a peak of 10 per cent of GDP in 1996 to around 5 per cent today. However, patterns of trade and industrialisation are evolving. The new emphasis, for example, is on fragmented tasks rather than complete industries. “Make in India” and related campaigns to turn the country into the next global hub for manufacturing presents a great opportunity for Nepal to latch on to fragments of the regional value chain. Sectors like textiles, auto parts, electronics, food-processing and pharmaceuticals embed low-hanging fruits. Nepal’s hydropower can also spur high-energy high-tech sectors such as server farms.
Four, applying mass social innovation. Nepal is an early champion of welfare schemes even at a low stage of development, spending about 4 per cent of national income on social transfers. However, India’s ambitious embrace of modern information and communication technologies, affordable insurance and pension schemes and guaranteed employment are breakthroughs in social innovation that could be emulated in the region. We must adopt and further viable social protection measures to stem the challenges posed by inequality and vulnerability.
Five, protecting the regional commons. The Himalayas are one of Nepal’s — and the world’s — greatest natural assets. South Asia will face a major shortfall in the supply of fresh water over the next decade. This crisis will directly hit subsistence, morbidity and the survival of tens of millions of people. Globally, we are all bound to help limit temperature increase to within 2-degrees above pre-industrial levels. Nepal’s big rivers can be a source of clean energy that can displace dirty sources of power in the Subcontinent.
The relative advantages of South Asian countries can be pooled to match each of our needs through common power grids. Just as upstream water pollution from cities and industries in Nepal could harm agriculture and drinking water in India in the future, air pollution transported to Nepal from much larger sources in India has already been documented to be adversely affecting Nepal’s environment, including at the Buddha’s birthplace, Lumbini. The emission of short-lived climate pollutants, such as black carbon, warms the atmosphere, changes monsoon precipitation patterns and melts Himalayan glaciers. Cooperation on governing our regional commons is vital for our shared quests of good health and progress.
Both India and Nepal are dominated by a youthful population with demographic dividends yet to be reaped. By 2020, the median age will still just be 29 in India and 25 in Nepal. During the visit to India this week by the Prime Minister of Nepal, Sher Bahadur Deuba, it will be a mark of departure to look to the future, not just the past, and to pledge a pursuit of a forward-looking development agenda where each country helps the other on initiatives that are transformative in nature.