Despite Being One Of South Asia’s Oldest Kingdoms, Why Is Nepal So Far Behind?

Posted by saurav_50 in Business and Economy, GlobeScope
November 20, 2017

From 1960-2016, India’s GDP has risen from $36.5 billion to $2.2 Trillion. That means that the Indian economy has grown by 55.5 times in 56 years. Whereas Nepal’s economy from 1960- 2016 has increased from $0.5 billion to $21.14 billion, meaning the economy has grown by just 21 times. India’s economy went from the billions to the trillions and Nepal economy is still in the billions.

India got independence from British Raj in 1947 and Nepal got independence from Nepali family regime known as Rana in 1951, which is just 4 years afterwards. Now, India is the world’s 7th largest economy by GDP and Nepal is the 108th largest economy by GDP in 2016. Interestingly, Bangladesh, which was founded in 1971, had the GDP per capita $1358.78 in 2016, compared to Nepal which has just $729.

Many of us don’t know that Nepal is one of the oldest nation-states in South Asia. India and Nepal share a similar culture: both are Hindu dominant states, with strong cultural, linguistic, and family ties, and a similar political and governmental structure. Nepal and India share an open and porous border of 1751 kms. The open border should be the key to explosive economic growth, but Nepal hasn’t managed yet to grab the juice from it.

Nepal is one of the poorest countries in the world, and it is a member of the Least Developed Countries (LDC), whereas India is a member of BRICS and G-20 – the world’s exclusive economic powerhouse clubs. Why is Nepal poor? The answer is difficult. Even Robinson and Acemoglu don’t have the perfect answer as to why nations fail in their magnum opus, “Why Nations Fail“.

The three series of Punic wars (264 BC-146 BC) made Romans at the epicentre of global power after overthrowing Carthage. The rise of Rome gave European history a new turning point. The rise of the Holy Roman Empire in Europe after the fall of the Roman Empire pushed Europe into darkness; this darkness was lightened by the Renaissance in the 1300s to 1500s. From 1600-1800, the ‘Great Divergence made Europe into the zenith of human civilization, surpassing the Mughals of India, Qing Dynasty of China, Tokugawa Shogunate of Japan, Joseon Kingdom of Korea, and Ottoman Turkey. From 1800-1990, the decolonized and third world countries boomed via globalization and interconnected technology and information.

Europeans mitigated the Malthusian Trap via innovation to grow surplus food, and maintained their population growth, subsidised to boost the economic revolution. The savings and investments were increased in the new mode of redistribution of wealth in European society, in the backdrop of the dismantling of collectivist institutions, giving rise to the individualism.

Individualism, the free market, free mobility of European intellectuals from London to Florence, and the age of exploration made the Western countries the wealthiest in the 19th century. The discovery of America in the 15th Century, its official formation in 1776, rise to being an economic power in the 1870s, becoming the largest economy in the world in the last decade of 19th century, and becoming the world’s superpower in 1945 – this is the miraculous rise of the United States. The US rose from the isolated New World to a superpower in just 400 years. Nepal has a history of more than 3000 years and she only came into the global scene after the 1950s. Nepal before 1950 was a highly exclusive society with an extreme feudalist pattern. Nepal’s landlocked nature, between India and China, made it always stay on the verge of a strategy for survival.  Leo E. Rose’s famous book, “Nepal’s Strategy for Survival”, accounts the fear of being succeeded or annexed by her giant neighbours. Nepal’s survival even today is questionable, with the changing global order and fear of newly emerging powers after the farewell of the British Raj from India in 1947.

China, which is Nepal’s northern neighbour, has another story. It is the world’s second-largest economy by GDP as of 2016. Nepal is thus bordered by the 7th and 2nd largest economies of the world. The Nepali are unaware of Richard Baldwin’s ‘Great Convergence’ taking place in a world where the economic magnet is shifting from West to East, i.e. at the doorstep of the New Delhi and Beijing. After 1990 and especially after the dot-com bubble in the US, the technology transfer and outsourcing of jobs have already made Bangalore the IT hub of South Asia. Even in Nepal, major Silicon Valley-based companies are outsourcing to the notable companies like DeerWalk Services, Verisk Analytics, Geospatial Systems, Serving Minds, and Yomari Inc. The Computer Association of Nepal says that BPO (Business Process Outsourcing) in Nepal is estimated to have an annual turnover of more than ₹5 billion ($4,87,34,850).

Do Nepalis living abroad know about this new seismic shift in the world order, especially the ‘great convergence’ of the fourth phase of technology? Who is responsible for taking action, then: the Nepali diaspora in the west and India, or the Nepali labourers in the Middle East, or the corrupt Nepali leaders residing in Nepal? Let us think!