Nepali Middle Class and Nepal’s Economic Future

If Nepal wishes to be a part of the predicted global economy, professional groups among the Nepali middle class need to be protected against political pressures, military intervention and deplorable corruption.

By Tejaswi Giri

Sandwiched between the two economic pillars – India and China - Nepal is one of the poorest countries in Asia and among the least developed countries in the world with 31% of its population living below the poverty line. Even though Asia leads the decline in global poverty, Nepal has a lot of catching up to do. Economic activity in Nepal slowed in 2006 because of the intensified conflict, weather-related decline in agricultural production and a trend in decline in garment exports which accounts for 40% of export earnings. Owing to the diminishing political uncertainties following the recent restoration of Parliament and the cessation of fighting with insurgents, Nepal’s growth is projected to strengthen in the coming year. Substantial remittance inflows and weak domestic demand may have supported Nepal’s current account surplus at more than two percent of GDP in the past year, but to move the country forward, Nepal has to continue doing what it does best – boost agricultural production (which constitutes 40% of the GDP), encourage tourism (which is a chief source of foreign exchange) and develop transportation, communication and hydropower infrastructure. And to do their "best", the country will have to rely on the intellectual capital which resides in Nepal ’s "middle class".

The World Bank's annual global economic prospects report (released on 13 December 2006) presents a very optimistic picture of the global economy. The key to this long-term hopeful projection is the emergence of a "global middle class" - defined as those with an annual per capita income between the average in Brazil and in Italy , about US$4,000 and US$17,000 respectively. In terms of economic situations, including income levels, economy structures, and human development indicators as defined by World Bank, Nepal remains at the bottom when compared among the five largest (in order of population size, India, Pakistan, Bangladesh, Sri Lanka and Nepal) of the South Asian Association for Regional Cooperation (SAARC) member countries. Nepal’s trend in population change, female literacy and child and maternal mortality are important indicators of economic progress, particularly when discussing the "middle class" that is said to be the driving force of tomorrow’s economy. The demographics of Nepal indicate a period of growing working age populations, which will pose challenges for education and for employment, particularly for middle class people. If these challenges are met, then this demographic segment will tend to boost consumption and saving in the country, reinforcing the impact of rising per capita incomes. Therefore, it is this group - the "middle class" - of Nepali people that the country has to concentrate on, in order to achieve its economic goals of production, tourism and overall infrastructural development.

The definition of Nepal ’s middle class is ever changing. In a broad sense, the middle class consists of those people who enjoy a certain degree of economic independence (who are above the national poverty line), but one who does not have a great deal of social influence or power (who are below the bourgeois strata of society). For the purpose of this article, a segment of Nepali middle-class is taken into consideration. The focus here is on middle class Nepali people who have migrated from smaller villages and towns to larger cities and urban suburbs and others who have moved out of the country to the developed countries as students or skilled migrants. Inter-country migration may be a positive step forward (although some may argue the loss of agricultural labor force) but there is no debate over foreign migration of professionals, being a step backward in economic terms. Foreign migration may generate short-term income, but the overall sustainability of the country’s economy is at stake, if we let this trend of "brain drain" continue. Therefore it is important to retain the country’s intellectual capital.

In any known society or country, middle class has played an important role in its development. However, if Nepal does not develop a retention strategy soon, the country may end up loosing their bright and brilliant middle class professionals. Going back to the World Bank report that touts India and China as rising stars, Nepal should view predictions of this report as an opportunity. Nepal has the good fortune of sharing borders with both these economic pillars, but unless Nepal utilizes it’s human capital to take advantage of their robust neighbors, the proximity of future economic pillars is meaningless. Here is where the role of the focus group comes into play. This said, if resources and constructive energy of Nepal is channeled towards upgrading skills, motivating the workforce and discouraging corruption (including nepotism), Nepal , too, can enjoy the fruits of their neighbors’ success.

The Global Economic Prospects 2007 not only says that the global economy should do well in the next two years, but that globalization between now and 2030 will proceed at faster pace. It predicts an optimistic 3.1 percent growth rate per head in developing countries (compared with 2.1 percent since 1980), and that rapidly growing international trade in services - half of which will come from developing countries - will drive continued globalization. Due to internal conflicts, lack of work opportunity and absence of skill-deserving remuneration, the size of Nepal ’s middle class has been shrinking. To avoid disastrous consequences, this trend has to be reversed. And what needs to be done to reverse this trend, one may ask - the answer may not be as simple but a good starting point would be to invest in the country’s human capital. By providing significantly improved working conditions (in terms of quality and quantity), the country may be successful in retaining its intellectual capital. If Nepal wishes to be a part of the predicted global economy, professional groups among the Nepali middle class need to be protected against political pressures, military intervention and deplorable corruption. Nepal ’s economic future rests in the hands of Nepal ’s middle class and Nepal ’s policy makers need to understand this more than anyone else. If any of the policy maker(s) is reading this and have not made their 2007 resolution as yet… here is one for you…."protect and pamper the professional groups among theNepali middle class in 2007 and beyond"!

(Giri is a consultant  to UNEP/GRID Sioux Falls and can be reached at tejaswi.giri@gmail.com)

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