Poverty in Nepal: A Causal Analysis

Despite a number of attempts from different sectors, poverty in Nepal is still a rampant phenomenon and the country remains one of the poorest countries in the world.

Poverty in Nepal is not only regional, also has gender dimension. Women and certain ethnic communities are more likely to be poor in Nepal.

By Manoj K. Bhusal

This short essay discusses the issue of poverty in Nepal. Despite a number of poverty-reduction programs run by a myriad of actors, poverty in Nepal is still rampant, and the country remains one of the poorest countries in the world. In this essay, I argue that many poverty alleviation programs in Nepal failed because they isolated poverty as an economic and growth problem, whereas, poverty should have been identified and tackled as a political and a human rights issue. I begin the essay by briefly sharing my own experience of poverty while growing up in rural Nepal. I, then, explore the overall poverty scenario in Nepal and analyze a few major causes and consequences of poverty in the country. After offering an overview of poverty reduction approaches in Nepal, I conclude the essay with a few recommendations intended for organizations and policymakers formulating poverty-alleviation strategies in Nepal.

This essay is adapted from a situational analysis document, which is available here. Citation: Bhusal, Manoj 2013.Poverty in Nepal: A Causal Analysis. Global South Development Magazine. Available at: https://www.gsdmagazine.org/poverty-in-nepal-causes-consequences/

Every time I start writing or talking about poverty, I bitterly remember an event that occurred in a neighborhood home in my village in western Nepal. I was then a small kid of probably eight or nine years. One day, I was getting ready to go to school, and a woman appeared at our doorstep, carrying an ailing kid in her arms. She looked rather nervous and desperate. The ailing child must have been three to four years old, but he looked tiny and frail, a clear sign that he was chronically malnourished.  

The lady told my mother that he had been suffering from diarrhea and vomiting for a few days and that she had come to seek treatment advice. My mother had no medical education whatsoever but was a primary school teacher. That title, however, gave her an unofficial authority to engage in medical counseling also, and she did that every now and then. A medical facility was 6-hour-walk away, so in the village whoever could read and write was an expert in everything. 

My mother, I remember, advised her to give the kid a lot of fluids as he looked severely dehydrated. The advice also included feeding him nutritious food that could help him fight the disease. She also handed her a small bottle of honey and a tiny sack of soybeans, and the lady walked back to her home, with the sick child bulging at her back.      

Two days later, we learned that the kid had died. Nobody knew the name of the disease that killed him. It could have been as simple as diarrhea, or as severe as cholera. He could have died of severe malnutrition. The nearest hospital was far away, and even if a hospital was nearby, his parents could barely afford his treatment.  

For a few days, this death brought sadness to our neighborhood. However, life moved on eventually and everyone forgot about him. A year later, his parents gave birth to a new baby boy, and the dead boy didn’t even become a statistic.   

This was not an isolated tragic event that I happened to witness. As we were growing up in the 1990s, Nepal had one of the highest infant and under-five mortality rates in the world. Malnutrition, exacerbated by extreme poverty, was rife in almost all parts of the country. Things have improved over the years, but the pace has been slow. In Nepal, children still die of easily curable diseases, and an absence of proper hygiene and widespread malnutrition continue to be major public health issues. 

My family was comparatively well off, at least by the Nepali standard, and thanks to my schoolteacher mother, we had no problems eating three to four meals a day. We did experience scarcity and all sorts of uneasiness from time to time, though. I later knew; the things that we experienced had a name: relative poverty. It was something our parents had already faced before I and my siblings were forced to face. 

My father could not continue his education after high school because he lacked the money to support his studies in the city. My mother had begun a teacher’s training at the age of 15, years before she passed high school. When she was 16, she was employed as a teacher. She later wanted me to join a private boarding school in the capital city, however, it was too big of a dream. Her wishes had shattered when she knew that the monthly boarding school fee in the capital city was almost twice her monthly salary. I and my siblings attended a local public school where bunking school and beating students were fairly common and accepted practices. Sometimes teachers came to teach us drunk, and many teachers were underqualified in subjects they were teaching.  

After finishing high school, I moved to the capital city with my siblings. We were lucky enough to continue our education, which was supported partly by our parents’ savings and partly by our part-time gig work. Many of my high school friends from the village, however, didn’t have the luxury of continuing education after high school. They were too poor to afford a college education. Some of them went to India for menial work, while some of them flew to the Gulf countries and took up labor-intensive and low-paid jobs as wage laborers. 

This trend, however, not only continues but has intensified over the years. Even after more than two decades of the democratic experiment, the political will to address the root causes of poverty and widespread inequality is still missing. Today, millions of Nepali youths sell cheap labor in foreign lands and struggle to find a way out of poverty. The remittance that they send from abroad serves as one of the highest sources of state revenue and makes a significant contribution to Nepal’s Gross Domestic Product (GDP)[1]


Despite numerous efforts to curb poverty, Nepal remains one of the poorest countries in the world. The level of absolute poverty in Nepal is among the highest in Asia. As of 2006, more than nine million people, about 40% of the population, were estimated to be living below the national poverty line, i.e. US $77/year (Erken 2006: 766). Many studies and official government figures show that a striking majority of the poor in Nepal live in rural areas. Csaki (2003: 34) finds that the poverty rate in rural areas in Nepal during the mid-1990s was almost double the rate in urban areas.   

It’s important, however, to note that overall poverty incidences are falling in Nepal. According to the latest National Living Standard Survey (NLSS)[2], the incidence of abject poverty, when using the international poverty line of $1.25 per day, has dropped to 24.8% in 2011. This figure stood at 68% in 1996 and 53.1% in 2004 (CBS 2011). Even when using the national poverty line, poverty has fallen “at an accelerated pace from 41.8% to 30.9% between 1996 and 2004 and further to 25.2% of the overall population in 2011” (Asian Development Bank 2013: 1).        

A family house in far-west Nepal. More than 90% of the poor live in rural areas of Nepal. Photo: Raralake 

The devil, however, is in the details. Beneath these rosy, encouraging pictures, lies a bitter truth of regional and social inequality and a widening gap between the rich and the poor. For instance, the latest NLSS survey shows that poverty incidence in the far western region of Nepal is not only the highest but also on the rise. Poverty in that region stood at 41.0% in 2004, and instead of falling, rose to 45.6% in 2011 (CBS 2004, CBS 2011). Similar discrepancies can be observed when one compares between rural-urban and hills-Terai(plains) poverty scenarios.

The devil is not only in the details but also in the definition. Like many developing countries, Nepal has measured poverty in absolute terms–using a poverty line dictated by the cost of a predetermined basket of goods. “Absolute poverty occurs when people fail to receive sufficient resources to support a minimum of physical health and efficiency, often expressed in terms of calories or nutritional levels. Relative poverty is defined by the general standards of living in different societies and what is culturally defined as being poor rather than some absolute level of deprivation” (The Penguin Dictionary of Sociology 2012).

Measuring poverty in absolute terms does give some significant statistical insights, but the practice has various shortcomings. Even though absolute poverty seems to be falling rapidly in Nepal, it doesn’t correspond to the wishes and expectations Nepalis had harbored after the major political changes of the last decade. On the other hand, beneath the façade of the falling numbers, there are complex patterns and stories of inequality, powerlessness, and widespread regional and class divisions.  

Poverty in Nepal is mainly a rural phenomenon with 86% of the population still living in villages–with agriculture as their main source of subsistence. Recent studies show that out of the total poor, over 90% live in rural areas. Similar differences can be seen in terms of ecological zones. The number of the poor is remarkably higher in the mountain region than in the Terai or the hills. 

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Caste also plays a significant role in poverty distribution in Nepal. Lower caste people are found to be desperately poor, whereas, higher caste people enjoy a larger share of the income distribution. Dalits, the so-called untouchables, marginalized, and socially excluded indigenous communities, and women suffer more from poverty in all parts of Nepal. 

A 2003 report by the South Asia Alliance for Poverty Eradication (SAAPE) notes that despite Nepal making progress in raising living standards over the last fifty years, the country’s “level of human development remains among the lowest in the world” (SAAPE 2003). On the other hand, the burgeoning gap between the haves and have-nots is yet another issue that has been forgotten while excessively emphasizing on progress made in reducing absolute poverty incidences in Nepal. 

Poverty means sweat. In Nepal, it takes 3 hours and 21 minutes to earn enough money to buy a kilo of rice, 4 hours and 26 minutes for a liter of milk, 4 hours and 52 minutes for a kilo of sugar, and over 10 hours for a liter of cooking oil. And if you want a few luxuries- a color TV would cost you 1,258 hours of labor, a bicycle 436 hours. Source: Adapted from Nepal Social Forum (2002)

Of the total poor, over 90 percent live in rural areas. People in the mountains are poorer than people in the Terai

Lower caste people and women are poorer than higher caste people and men

My emphasis here is that while the measurement and analysis of poverty in absolute terms is useful for various policy and statistical purposes, it’s time to go beyond numbers and statistical datasets. Below a dollar or two a day doesn’t tell much about people’s subjective, real-life experiences. So, both in policymaking and research, it’s time to pay attention to people’s experiences, their day-to-day struggles, pains and hardships, their crushed aspirations, their unheard narratives, and their degrading quality of life. In that sense, it’s time to start learning from studies on relative poverty, inequality, subjective wellbeing, and the quality of life. 

In the case of Nepal, this is going to be a constitutional responsibility of government also as the country’s constitution–a progressive constitution in many ways–envisions Nepal to be an egalitarian, welfare economy heading towards prosperous democratic socialism. 


Causes of poverty in Nepal are manifold. Some argue that being landlocked has made Nepal poor, while others point out the dysfunctional politics that has ruled Nepal for decades, if not centuries. As a matter of fact, geography, politics, and a range of other issues are responsible for perpetuating poverty in Nepal. In the following paragraphs, I discuss some of these causes of poverty in the Nepali context.

Being landlocked

As a tiny landlocked country sandwiched between two South Asian giants, China and India, Nepal has had a difficult past. In the past, Nepal has fought vicious wars with both China and British India and suffered several (often unofficial) economic blockades imposed by India. Being landlocked, being tiny, and being a weak economy, Nepal has faced challenges to get out of what we might call a “poverty trap”.

As a landlocked country, Nepal has historically depended on India for sea access and international trade. This has made international trade expensive for Nepal. On the other hand, Nepal’s reliance on India for the trade route has deepened Nepal’s dependency on India.  

Difficult geography 

Nepal is primarily a mountainous country, with high hills and vast, difficult terrains. The difficult geography has been a developmental challenge in itself. Building essential infrastructure–such as road, electricity, etc.–has been difficult. Even when such infrastructure is built, the mountainous terrain affects their durability. For instance, every year in the rainy season, many roads across the country are swept away by floods, and many people are left homeless after their homes are swallowed by massive landslides. 

Dysfunctional politics, civil war (1996-2006) 

Nepal has been in a political transition for many decades, and that has affected Nepal’s fight against poverty. Since the 1950s, there has been no stable government in Nepal which would have been able to deliver on people’s promises. From 1960 to 1990, the country was under a direct rule of the Shah kings; but even then, there was no stability. Various political parties continued their struggle for democracy, and the royal rule was often marred with corruption, and its survival heavily depended on the oppression and exploitation of ordinary Nepalis. 

 After the restoration of democracy in 1990, some progress was made in reducing both poverty and powerlessness.  However, with the onset of a bloody civil war in 1996, Nepal’s improving position on human development and economic prosperity badly suffered.

The damage caused by the war, both physical and psychological, was incalculable and the extent of human suffering was unspeakable. During 10 years of conflict, more than 18,000 people lost their lives, while thousands more were left injured or disabled. More than one hundred thousand people were internally displaced, and Nepal’s economy was badly affected. A poor Nepal served as a fertile ground for the growth of the radical Maoist ideology. Many desperate and unemployed youths joined the rebels with the hope of establishing an egalitarian society, but for many of them being part of the insurgency also meant being employed. 

Understanding poverty as a growth problem 

As I mention in the very beginning, attempts have been consistently made to solve the poverty puzzle in Nepal; however, the progress has been slow and inadequate. As many other scholars also argue, the perception that poverty is merely an economic or a growth problem is primarily responsible for the slow progress, and also for the ineffectiveness of many poverty reduction strategies. Historically, there has been a lack of understanding that poverty is a political issue and it can not be solved by technocrats and professional consultants only. If the state is not ready to see poverty as a violation of human rights, if there is no meaningful political commitment to end poverty, then the dream of poverty eradication remains just a dream.

The feudalistic land ownership system 

The feudalistic land ownership system has also played a major role in aggravating poverty in Nepal. Historically, the majority of arable land has been owned by a small group of powerful elites, and it continues to be the case. For instance, in 1950, merely three prominent Rana families had a total of 227,105 acres of land – approximately 42.5% of total cultivated Birtaland in the plains of Nepal (Regmi 1971). Recent studies show that as much as 24.4% of households do not own any land in Nepal. Land fragmentation and the use of land for non-agricultural activities also remain an issue. Democratic governments of the post-1990s did bring some land redistribution schemes, but many such schemes failed due to the lack of a strong political will, but also because feudal landowners wield significant political power and influence in Nepal’s local and national politics.  

Subsistent agriculture  

It is estimated that more than 80% of people in Nepal are involved in agriculture activities as their main source of subsistence. However, subsistence agriculture has resulted in low productivity and, thus, has made very little contribution to raising people’s income. 

Budget allocation in the field of agriculture development has been significant, and there have been several government-initiated “agriculture development” programs in the past decades. In 1968, Nepal inaugurated a separate bank, the Agricultural Development Bank, with the aim of financing agricultural projects and providing low-interest loans to farmers. In addition, there have been subsidies and special packages for farmers as well. However, due to the lack of effective implementation of such programs, they have been unable to produce desired results. Often, agriculture incentive programs and subsidies are simply used as indirect means for benefitting the cadres of governing political parties. 

There has been very little innovation in the agricultural sector in Nepal, and the state has failed to provide necessary infrastructure, equipment, and training to farmers. As a result, a small number of farmers who are involved in large-scale farming, too, are left dismayed, and the Nepali consumer market is flooded with Indian agricultural products. Indian farmers receive heavy government subsidies, and their produces are significantly cheaper compared to the ones produced in Nepal where government subsidy in agriculture is either totally absent or inadequate and inefficient. 

High population growth 

A high rate of population growth and low economic progress are two strong pillars for poverty perpetuation in Nepal. Many programs have been ratified by different sectors for population control; however, the population of Nepal is growing rapidly [for instance, by 2.24% per annum in 2006 (CBS 2006)]. If the same growth pattern continues, it is estimated that Nepal’s population will be doubled within almost 33 years and will reach nearly fifty million. On the other hand, the economic growth rate of Nepal has been miserably low. For instance, the average GDP growth rate of Nepal over the past decades has remained under 5 percent.  

Unemployment and underemployment 

Unemployment and underemployment are also responsible for fueling the poverty crisis in Nepal. Figures from the Central Bureau of Statistics (Nepal) show that as many as 47% of economically active people in Nepal are underemployed. There has been a slight increase in the number of self-employed people, but it will not contribute significantly to poverty alleviation. 

Employment opportunities in both private and public sectors have been scarce. Every year, thousands of students graduate with a college or a university degree, with minimum prospects for employment opportunities.   

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Nepal is one of the few developing countries that adopted a non-contributory pension system in the late 1990s. Since then, Nepal has introduced several welfare schemes, which is a good sign in itself. However, such schemes have been insufficient in addressing the social ills created by widespread poverty and massive unemployment.

On the other hand, the structure of national income distribution is still rigidly centralized in the urban cities and among a minority of elite groups. This inequality in income distribution has severely perpetuated the gap between the rich and the poor. Similarly, at a time when the national economy itself is not internally integrated, the tentacles of globalization have extended their grip into the Nepali market. Since Nepal opened up to the outside world only after the political changes of the 1990s, the full-fledge impacts of globalization are yet to be seen. However, two clear indications of globalization have been 1. the massive influx of foreign goods (thereby huge trade deficit) and 2. massive outflux of Nepali labor abroad, especially to the Gulf countries (thereby an economy heavily dependent on remittances).


In Nepal’s case, poverty has historically been a deep-seated problem that permeates all sectors of life. Poverty has been the root cause of many problems in Nepal. For instance, poverty is, directly or indirectly, responsible for problems such as high population growth, poor health conditions, low development parameters, youth delinquencies, and crime. The political conflict and the civil war of the late 1990s and early 2000s, too, was fueled by widespread poverty and inequality in the country. The migration of Nepali youths abroad in search of better opportunities is one of the biggest effects of poverty Nepal has witnessed in recent history. As of today, more than two million Nepalis are estimated to be living abroad, mostly doing ill-paid menial jobs in India, in Gulf cities, and countries like Malaysia and Singapore.



On 4 November, four members of a Chaurasiya family committed suicide, being unable to pay the debts they had borrowed from a local moneylender three years ago. 

The incident occurred at Nagawa Tol of the Birgunj Sub-Metropolis. According to the neighbors, Paramananda Chaurasiya, aged 38, the head of the family, had borrowed Rs 10,000 from local moneylender Satya Narayan Sah after mortgaging his house for Rs 30,000. 

The money was borrowed about three years ago to fund a legal battle over tenancy right with his landlord Gopal Chaurasiya. Paramanada’s mother Sitadevi Chaurasiya, aged 65, wife Urmila Devi, aged 35, and daughter Satya, aged 17, were among those killed. 

Police officials investigating the incident suspected that the Chaurasiya family committed suicide due to a financial crisis caused by a long-drawn-out legal battle over tenancy rights.

Source: The Kathmandu Post, 6 November 2003 


The concept of “planned development” began in Nepal in 1956, and since then several “five-year plans” have been implemented. In all these “five-year plans”, poverty alleviation has been one of the top priorities. The term “poverty alleviation” also receives much fanfare in the government’s annual policy and program documents. There have been concrete and ambitious targets, too. For instance, the ninth five-year plan was aimed at reducing the percentage of people living under the poverty line from 42 to 10 within twenty years, but it is almost certain that the goal shall not be obtained within the time limit. The government is not the only actor that is involved in initiating and implementing poverty reduction schemes in Nepal. The “poverty alleviation web” is, indeed, a complex structure in itself, involving aid agencies, community organizations, and also the market. On one hand, there are state-centered poverty reduction approaches, and, on the other hand, there are non-governmental organizations (NGOs), community groups and market/economic institutions involved–often with their own interests, their own analysis of the poverty situation in Nepal, and their own target which they want to achieve.

Poverty Alleviation Approaches in Nepal

1. State-Centred Poverty Alleviation approaches: Agricultural Perspective Plan Support Programme for Poverty Alleviation, Poverty Alleviation Fund (PAF), Bisheshwor Poverty Alleviation Program, Integrated Rural Development Programme, Coordination, Supporting, Monitoring, etc.
2. NGO/INGO-Centred Poverty Alleviation Approaches: Skill development training, the establishment of saving and credit groups, technical and financial support to local villages, and community development.
3. Community-Centred Poverty Alleviation Approaches: Community groups are formed, they identify their problems and seek viable solutions themselves such as micro-credits, etc. The state and the non-governmental sector also provide support to strengthen such activities.
4. Market-Centred Poverty Alleviation Approaches: Financial or corporate institutions invest in several sectors and provide employment opportunities. Some are also providing easy credit facilities for farmers or small industry operators.


Despite several initiatives taken and implemented by many institutions and organizations, poverty still remains a bitter reality in Nepal. Many poverty alleviation programs were initiated after the reestablishment of democracy in 1990, however, during the democratic period also Nepali political ground always became unstable and murky. Lack of political will and rampant corruption has affected everything in Nepal, including the attempts for poverty reduction.  

In addition, most of the poverty alleviation schemes implemented in Nepal are often imposed from above, without ensuring meaningful involvement of those for whom these programs were actually meant for. Similarly, many policies and the institutions that formulated these policies have failed to be inclusive and pro-poor in practice. So, it would be prudent to argue that Nepal can fight poverty successfully only if the government brings the empowerment agenda to the center of its poverty reduction strategy. 

In addition, as has been mentioned already, poverty should be seen more as a political issue and less as an economic issue or a growth problem. Poverty in Nepal is intricately linked to other broader structural issues as well. Land ownership, people’s access to resources and institutions, the caste structure, the regional discrepancy, all these issues play a role. And these issues must be recognized and addressed by policymakers. 

  Despite several attempts, land (re)distribution has remained a work-in-progress for decades. If Nepal’s poverty is to be addressed from its very roots, land distribution or redistribution should be radically reformed, and the chains of feudalism, which still influence policy outcomes in contemporary Nepal, should be dismantled.

It should also be emphasized that the poor should be empowered, and bottom-up development approaches should be adopted instead of conventional development paradigms or the continuous rote and repetition of “ending poverty” or “making poverty history”.  

Support for small and microenterprises (SMEs) has been scarce in Nepal, and policymakers should realize and address this issue. In addition, the promotion of new agricultural tools and technologies (the ones that do not interfere with biodiversity or pollute the environment) is essential in revitalizing Nepal’s agriculture sector. While the modern agriculture system has its own pitfalls and can have detrimental effects on biodiversity, raising agricultural productivity using traditional and eco-friendly means is possible. 

Nepal should also address systemic issues that perpetuate poverty and powerlessness in the country. It has been already mentioned that policies and institutions should be inclusive and pro-poor, but the focus should also be on ensuring the rule of law and on ending endemic corruption.  

While schemes designed and implemented for slowing down the population growth have worked to a certain extent, they must be developed further to make them more effective. Policies are also needed to check rising brain drain and to retain the “fleeing labor”.  

It’s prudent to emphasize in the end that fighting poverty is a difficult and complex task. It needs long-term and sustained actions, as well as genuine commitment and political will. It requires relentless effort and concerted actions at local, regional, and global levels. On the other hand, transparent and accountable political leadership and a system that is based on the principle of the rule of law is also essential to lead the fight against poverty.        


The main aim of this essay was to discuss the poverty situation in Nepal. I open up the essay with my own experiences of poverty in Nepal and then move on to discuss the overall national scenario. I list the following as factors that perpetuate poverty in Nepal: 1. Being landlocked 2. Difficult geography 3. Dysfunctional politics and civil war (1996-2006) 4. Understanding poverty as a growth problem instead of a political or human rights issue 5. Feudalistic land ownership system 6. Subsistent agriculture 7. High population growth 8. Unemployment and underemployment 

  In the subsequent section, I argue that, among others, poor human development and mass migration of Nepali youths are two major consequences of poverty in Nepal. The essay also briefly discusses poverty alleviation strategies implemented in Nepal. Such strategies have mainly been 1. State-centered 2. NGO/INGO/aid agency-centered 3. Community-centered and 4. Market-centered. I conclude the essay with a set of recommendations for policymakers and development practitioners working in the field of poverty reduction in Nepal.  


I wrote the first draft of this essay in 2007 as the first assignment of my bachelor’s degree at the Diaconia University of Applied Sciences (Diak), Finland. The assignment was named “poverty in my own context”. I recently updated the essay since it has received some attention online. I’m thankful to my teacher Tony Addy at Diak who gave me invaluable feedback after reading my assignment text.     


Country Poverty Analysis (Detailed) Nepal 2013. Asian Development Bank.  Available at: https://www.adb.org/sites/default/files/linked-documents/cps-nep-2013-2017-pa-detailed.pdf  

Csaki, C., 2003. Reaching the rural poor: a renewed strategy for rural development. The World Bank.

Erken, R., 2006. Nepal. Encyclopedia of World Poverty, edited by Mehmet Odekon. Sage Publications.

Nepal in Figures 2006. Central Bureau of Statistics, Government of Nepal. Kathmandu. URL: www.cbs.gov.np

Nepal in Figures 2011. Central Bureau of Statistics, Government of Nepal. Kathmandu. URL: www.cbs.gov.np

Nepal Living Standards Survey 2004. Central Bureau of Statistics (CBS). Kathmandu, Nepal 

Nepal Living Standards Survey 2011. Central Bureau of Statistics (CBS). Kathmandu, Nepal 


[1]Conducted by the Central Bureau of Statistics (CBS) Nepal, the National Living Standards Survey offers one of the most comprehensive pictures of the poverty situation in Nepal. The first NLS survey was conducted in 1996 and then followed up again in 2004 and 2011. CBS has also begun a new annual survey, called the Annual Household Survey (AHS), which collects data on household information, demography, education, housing facilities, consumption, and labor force. The AHS also offers new insights on consumption and poverty patterns in Nepal.  

[2]In 2012, the share of remittance in Nepal’s GDP was 25.42%. In 2001, this contribution was merely 2.44% (World Bank 2012).   



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