With an average per capita Gross Domestic Product
(GDP) of US$260 (2004), Nepal is the poorest country in South Asia and
ranks as the twelfth poorest country in the world.
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This picture is the urban poor community of Birganj(Nepal) |
However, over
the last decade the country has made considerable progress reducing
poverty. Poverty rates declined across all of Nepal’s development
regions and ecological belts:
- Headcount poverty rate declined from 42% to 31% between FY95/96 and FY03/04
- Urban poverty declined from 22% to 10%
- Rural poverty declined from 43% to 35% (although it remains higher than in urban areas)
The standard of living improved between FY95/96 and FY03/04:
- Agricultural wages and in ownership of durables increased
- The actual consumption of 'luxury’ foods rose
- The proportion of households reporting inadequate food consumption declined
- Self-assessments of adequacy of housing, clothing, health care and children’s schooling improved
However,
the decline in poverty has been accompanied by an increase in
inequality. The Gini coefficient increased from 34.2 to 41.1.
Overall,
people who tend to remain poor are households of agricultural wage
earners, those who are landless or have small land holdings, those with
illiterate household heads, and those living in large households (with
seven or more members).
In terms of different caste and ethnic
groups, Hill and Terai Dalits represent the poorest segment of the
population, despite a decline in poverty -- from 58% to 46%.
Nepal
has also improved some of its human development indicators: infant and
child mortality rate decreased, albeit with large regional variations.
Child malnutrition and maternal morality remain high and the prospects
of achieving these Millennium Development Goals are unclear.
Nepal's
achievements are impressive given the country's politically difficult
and conflict-ridden environment. A number of structural economic factors
explain Nepal’s unexpectedly strong development outcomes (see box
below).
How Has Nepal Reduced Poverty?
There are a number of explanations for Nepal’s impressive achievements in reducing poverty.
Remittances:
a significant increase in remittances propped up consumption. The
proportion of households receiving remittances increased to 32% in
FY03/04 from from 24 percent in FY95/96. In 2004, about 1 million
Nepalese worked abroad, primarily in India, the Gulf and East Asian
countries. Also, the average real remittance amount has risen by more
than 80% .
Farm wages:
after improving productivity and tightening the labor market,
agricultural wages increased by about 25% in real terms over ten years.
Increased demand, coupled with improved connectivity and better access
to markets, stimulated entrepreneurial activities and allowed for
non-agricultural wages and incomes to increase.
Urbanization: increased urbanization moved workers from low productivity jobs in rural areas to higher productivity jobs in urban areas.
Fertility: the decline in fertility (starting in the 1980s) reduced the household size and the dependency ratio.
All these factors have contributed to recent poverty reduction. |
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