Sujeev Shakya outlines significant trends shaping Nepal’s economic landscape by 2043.
The book ‘Nepal 2043: The Road to Prosperity’ by Sujeev Shakya delves into the evolving dynamics of Nepal’s economy, particularly since the liberalization era that began in 1990. Shakya emphasizes that traditional metrics like GDP and per capita income do not accurately reflect the country’s economic reality. This is largely due to two critical economic activities that are often overlooked: remittances and capital transfer activities related to land and assets. He notes that the government’s approach to increasing tax revenue, particularly through consumption taxes, presents challenges to fostering economic growth.
High import duties on vehicles, comparable to those in Singapore, and a 13% value-added tax on air tickets exemplify the government’s strategy to tax consumer spending. These financial burdens can hinder the creation of economic opportunities that reforms could potentially unlock. Despite these challenges, Shakya points out that Nepal’s GDP has seen substantial growth. From a mere $508 million in 1960, the GDP rose to $4 billion by 1990, and surpassed $10 billion by 2006. By 2024, it is projected to reach $44 billion, marking a significant increase over 18 years.
Looking ahead, the Vision 2030 document sets a target of $100 billion for the GDP, while the Vision 2043 document anticipates a staggering $423 billion economy with a per capita income of $12,100. Shakya forecasts that by 2043, around 7 to 8 million Nepalis will reside abroad, significantly boosting formal and informal remittances, which could exceed $100 billion. The trends of increasing capital transfers and consumption, along with advancements in literacy, education, and healthcare, are expected to enhance the mobility of Nepalis seeking better opportunities.
Shakya identifies four distinctive traits within the Nepali economy, particularly in consumer and spending behaviors. Initially, he points out that the populace is primarily rent-seeking, yet it is gradually transitioning toward a more entrepreneurial mindset. This shift is evident in the proliferation of cafés and restaurants frequented by young Nepalis, where prices mirror those found in the United States. Many patrons benefit from remittances, allowing them to spend without relying solely on local income.
Secondly, a considerable portion of the population generates income through rent from inherited or developed properties. With a high percentage of Nepalis owning their homes, rental income has become a popular source of revenue. Shakya’s research in 2023 revealed that remittances account for nearly $10 billion, representing a quarter of Nepal’s GDP. Furthermore, informal remittances are estimated to equal this amount, bringing the total to a significant $20 billion.
Interestingly, social spending remains robust, even during crises. Events such as weddings and festivals continue unabated despite challenges like natural disasters or pandemics. Observations from interns and professionals indicate that peer pressure heavily influences spending decisions, particularly in sectors like education and automobiles. Lastly, Shakya highlights the sizable informal economy, which a recent study estimates to constitute 38.6% of the overall economy. A staggering 99% of real estate transactions occur outside formal channels, illustrating the potential for growth as segments of this informal economy transition into formal recognition.
