Is Nepal Considered A Low Income Country?

Is Nepal considered a low income country? :- Nepal is now listed as a Lower Middle Income Country by the World Bank Group (LMIC). According to the World Bank’s most recent nation characterizations by income level report Nepal is by and by officially a lower-middle income country, an upgrade from its past status as low income country.

The classification is based on the GNI per capita of the country is valuable for the operational lending policy of the bank, however does not quite capture the degree of development or measure of welfare of Nepal.

It might not even be as if a country called an LMIC has an enormous informal economy and a subsistence level of economic activity. Also, this is not the only way to calculate the distribution of wealth to reduce income inequality. The ‘graduation’ of Nepal, in this way, has little to do with the lives of those in extreme poverty.

Note:  

1) The World Bank has classified nations around the world into four groups of income:  upper, upper middle, lower middle, and lower. The World Bank has put in the lower-income group countries with a per capita income of up to US 1,035 and in the lower-middle-income group those with a per capita income above 4,045.

Those with a country of 4,046 to, 12,335 per capita income are classified as upper-middle-class and those with higher incomes are named as an upper-income class.

2) The World Bank classifies countries into the four groups, dependent on the GNI of the economy, which is impacted by various factors, including the rate of economic growth, inflation, and the exchange rate.

counting Nepali Rupees Paper Money
Counting Nepali Paper Money

3) As per the above factors, middle-income countries are a very diverse group of countries. In this way, they are further categorized into economies of lower middle income and upper middle income, empowering the policymakers to assess appropriate strategy solutions.

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While lower MICs are struggling to provide basic necessities, for example, clean water and food, upper MICs will in general face broader issues related to governance, for example, uncontrolled defilement.

4) Nepal’s gross national income (GNI) is USD 1,090 while that of the last year was USD 960 only as per the World Bank report.

Is Nepal Considered A Low Income Country?

Yes. Nepal is considered a low income country.

What are the reasons behind Nepal being a lower middle income country?

Numerous nations across the world have encountered fast growth, however a small reduction in poverty, as revenue has progressively concentrated in the hands of the rich. Nepal, nonetheless, has the contrary issue, modest growth however rapid reduction of poverty.

In only seven years, the nation has halved the poverty rate and undergone a similarly critical decrease in income inequality. Nepal, yet, remains one of Asia’s poorest and most slow developing economies, with its per capita income rapidly falling behind its local companions unable to accomplish its long-standing goal to move on from low-income status.

Some of the reasons because of which Nepal is a lower middle income country.

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1) Geography

Nepal’s geography, it is said, is a blessing to it and, at the same time, a bane to it. Though stunning, the mountains and landscapes make it hard to build transportation routes between places. This is one major reason why no railway services are available here. And road transport is furthermore equally difficult to construct and go through.

2) Natural disasters

Nepal has been the casualty of multiple natural disasters. Earthquakes in Nepal are another factor in the nation’s instability, with an all-around striving economy and low levels of political stability. Individuals are losing their homes and jobs and are compelled to discover alternate approaches to get by. In the wake of dealing with a natural catastrophe, women frequently become more vulnerable to trafficking.

3) Political instability

Political instability stands apart to be one of the essential reasons why Nepal is a poor nation.  Investment and the pace of economic growth can be diminished by the instability associated with an unpredictable political environment.

Political instability adversely affects growth by decreasing productivity growth rates and, to a lesser extent, the accumulation of physical and human capital. International investors are hesitant to spend money in Nepal with the political situation unclear. Owing to the political environment, domestic industries face a number of challenges.

3) Energy Crisis

Most of all, it is the biggest, as Nepal cannot generate energy, which is a fundamental necessity for any economic activity. Economic growth is so difficult and hard to achieve unless stabilized energy supply can be sustained.

4) effect of Covid-19

The effect of Covid-19 is influencing the economy in a bad way. If the number of returning migrant workers keeps on growing up, Nepal’s remittance-driven economy will face extreme challenges.

In a previous few decades, Nepal has made substantial strides in reducing poverty in regards of the Single Income Dimension. In any case, there is no lucidity whether that is connected to development or to job creation. Remittance-based poverty reduction is illogical.

5) Lack of Necessary Infrastructure

Developing countries often suffer from insufficient infrastructure, for example, roads, schools, and hospitals. This lack of infrastructure makes transportation more costly and eases down the nation’s overall effectiveness.

Higher supply costs and deferrals for companies are caused by poor infrastructure. It reduces labor mobility and hurts exporters’ ability to get items to global markets.

6) Prevalence of Poor Technology

In order to save time, resources and improves work performance, the world is walking towards all the more efficient innovations and their development. As more time and human resources are required, the use of poor technology in Nepal has become a constraint to developmental work, which thus gives a low value.

The key criteria for promoting emerging technology are a massive sum of money and qualified experts. Moreover, in the priority list of government, science and technology have not been given proper attention and falls behind. The shortage of resources and the absence of skilled labor have therefore become significant obstacles to the spread of new advanced technologies in Nepal.

7) Small market

Nepal have an exceptionally low market that deters FDIs from other nations, in contrast to our neighbor India, which is a monetary goliath of Asia.

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