Nepal Unrest: Roots Of Turmoil Lie In Economic Deprivation

Its efforts to throw off acute poverty have succeeded to some extent largely due to its hardworking diaspora. Remittances from migrants working in foreign lands especially West Asia and Malaysia have bolstered the country’s foreign exchange reserves and brought some semblance of well-being to most families in the country.  

Dependence On Remittances

The extent of the economy's dependence on remittances can be gauged from the fact that at least eight per cent of the population is living and working abroad. Not only that, migration is rising by the day as young people seek to find any kind of employment in foreign countries. Remittance inflows rose to US$ 10.86 billion in 2023-24, a rise of 14.5 per cent.

The flow of funds from abroad has ensured that the country has a current account surplus. Management of the domestic economy, on the other hand, has done little to ameliorate the living conditions of the population.

Faulty Governance

The fact that Nepal has recently been included in the Financial Action Task Force’s (FATF) grey list indicates that governance has been a casualty due to the frequent changes of political leadership. Countries on the grey list are those with strategic deficiencies in their anti-money laundering and counter - terrorist financing regimes. Being on the list can hinder a country’s efforts to seek funding from global financial institutions.  

In this context, one must mention that ever since the abolition of the monarchy in 2006, the country has had seven different prime ministers. The lack of a stable government has impeded efforts to improve the state of the economy. 

Bleak Employment Situation 

Though tourism and remittances are the mainstay of the economy, as much as 67 per cent of the workforce is still in the agriculture sector which contributes about 24.5 per cent of GDP. By all accounts, there have been little efforts made to modernise agriculture leading to stagnation in output.  At one time, Nepal exported rice but for several years now has had to import foodgrains. 

Yet the biggest fault line in the economy has been the lack of jobs. Unemployment has remained extremely high at over 10 per cent for several decades. This telling statistic is behind the unending migration of the youthful demographic which sees little future in remaining within the country.

This is in contrast to 4.3 per cent unemployment for the rest of South Asia.  As for per capita GDP, it is at US$ 1447, considerably lower than the US$ 2696 in the case of India. 

Tourist Inflow Sluggish

Tourism, the major industry which is reported to account for 6.7 per cent of GDP, has also taken a hit since the pandemic. The sluggishness in tourism arrivals in 2025 has dismayed the industry. The bulk of tourists - as much as 40 per cent - come from India with much smaller numbers from the U.S. and China.

The slowing pace of arrivals has been attributed in recent times to higher airfare costs and cheaper destinations available in Southeast Asia along with geopolitical tensions. With the current turmoil in the country, it looks unlikely that this crucial economic sector will get back to normalcy anytime soon.

Trade With India

Bilateral trade with India is also likely to be affected as most shipments are sent by road and there is a high possibility of disruption. Trade between the two countries is estimated at about US$ 8.5 billion, with a huge surplus for India which exported as much as US$ 7.3 billion in 2024-25.

Major export goods include petroleum products, machinery, vehicles and food products. Most of the trade is carried out by road with only high value items being shipped via the air route. The fact that very few goods are being imported by India indicates the paucity of industrial capacity in that country. 

Economic Stagnation

Nepal’s economy has thus been stagnating for several decades. This is evident from the large-scale migration of young people who comprise the bulk of the population. The age of the protestors in the current demonstrations is reported to be in the range of 18 to 25 years. The country is estimated to have 30 per cent of the population between the ages of 18 and 35.

This is a youthful demographic that has not been able to find livelihoods within the country and are thus rapidly escaping to seek jobs elsewhere. The data on migration varies but there is no doubt that 500,000 to 700,000 people are leaving the country annually to seek their fortunes in other geographies. This does not include the large numbers that reside in India as these are not counted among the diaspora. 

In other words, Nepal has been a ticking time bomb for quite some time. As the economic conditions have deteriorated, young people have sought their future abroad. But the fact that the current dispensation banned social media apps and thus snapped their links with the far-flung diaspora was probably the last straw. One can only hope that the conflagration dies down soon so that the reins of the economy can be taken up by wiser leaders.