Despite high growth, inequality rises

Kathmandu, September 26 :

Income growth in Nepal was high between 1995-96 and 2003-04, with real average per capita expenditure having grown on an average by 4.5 per cent thanks due to the patterns of growth, especially driven by the increasing returns on human and physical assets.

However, low-income growth lacked these assets and income inequality worsened during

the same period, says the joint survey of the Central Bureau of Statistics (CBS)-National Planning Commission (NPC), the World Bank, DFID and Asian Development Bank (ADB), released here today.

During the same period, the income inequality situation worsened due to the increased gap between the middle class and the rich. The survey says that economic and social outcomes are worse in rural areas, particularly in remote areas. It found that poverty levels are highest and access to services lowest, in the remote mid-west and far west regions.

Poverty, as per the survey prepared for September 2006, states that the incidence of poverty declined dramatically, falling from 42 per cent in 1995-96 to 31 per cent in 2003-04. All three measures of poverty – the headcount rate, the poverty gap, and the squared poverty gap improved, says the survey.

The decline in poverty was driven by growth in per capita consumption expenditure and income, which was driven by increases in remittances, higher agricultural wages, increased connectivity, urbanisation and a decline in dependency ratio.

Remittances increased dramatically during the period as more than a million Nepalis were working abroad in 2003-04. Although most of these migrants have been working in India, an increasing number now go to the Persian Gulf or East Asia, where they earn much more than in South Asia.

Migrant workers remitted $794 million in 2003-04, up from $203 million in 1995-95, an equivalent of 12 per cent of Nepal’s GDP, says the survey. Similarly, agricultural wages rose by 25 per cent, non-agricultural unskilled wages rose by 20 per cent and skilled wages more than doubled.

Dr Jagdish C Pokhrel, vice-chairman of National Planning Commission (NPC), opined that survey findings would be effectively used in the planning process as NPC is making a three-year interim plan.

Dr Elena Glinskaya, senior economist at The World Bank, said that Nepal’s priority should be on agriculture, infrastructure, financial sector strengthening, decentralisation and mobilisation to reduce poverty and income inequality. Glinskaya also mentioned various challenges in the economic development.

Similarly, Kenichi Ohashi, country director of the World Bank Nepal office stressed on exploring new ways to get out of poverty in Nepal.

He stressed on increased investment, creating space for development, sustaining growth and effectively move for poverty reduction despite difficulties.