How Urgent To Join Middle-income Club ?


Nepal is a perfect example of a country that adopts national and international policies very quickly. Many a time such acts are done with haste and encouragement from the international communities that are involved in the development of Nepal. Since a couple of years, Nepal government, with the guidance of the World Bank (WB), is eager to become a middle-income country by the year 2030. Is this feasible and necessary? A national debate is required before this happens. 

According to UNICEF, there are 27.2 deaths per 1000 live births in Nepal. According to BMC Childbirth and Pregnancy website in Nepal, approximately 90 per cent of babies are delivered at home. There are several cases of women delivering babies in the field while being taken to the nearest health posts which at times take hours of walking. These are some facts related to births in Nepal. As Nepalis complete their life cycles, the majority of them pass thorough several phases of struggle to even have the basic levels of nutrition, education and health services. Access to livelihood opportunities is another challenge which drives away the youth to seek work in other countries with high hopes, but some of them fall into traps of agents and employers who abuse their labour and deprive them of having a dignified lifestyle.

Vicious cycles of poverty 

There are daily cases of Nepali workers who migrate to foreign countries with high hopes of earning for their families dying in foreign lands with their bodies being brought back in coffins. Thus it will not be an exaggeration to say that the majority of the Nepali people who belong to the low-income status are ready to migrate to middle-income status. The protest against loan-sharking that is going on currently shows that the   majority of the low-income families are still struggling to meet their daily needs and in the process are being trapped into vicious cycles of poverty. 

A WB Nepal Development Update report published in last projects that Nepal’s economic growth rate to remain at 4.1 per cent in 2023. This is actually less that what WB had projected last year. It also states that the inflation will be recorded up to 8.9per cent in South Asia in 2023 which could decrease to 7 per cent in 2024. According to Asian Development Bank (ADB) has forecasted Nepal’s inflation rate at 7.4 per cent in 2023 and 6.2 per cent in 2024. While the country’s economic growth has been sluggish, a report of the National Planning Commission (NPC) shows that the per capita income of Nepalis will go up by 40.11 per cent to reach 1,935 US dollars in the next 4 years. The question here is why such ambitious projections are being made. Are they guided by motive to move Nepal to middle income country? 

So, what is this middle-income country? According to the World Bank, middle-income countries are those with $1,026 to $12,475 per capita GNI. The WB classifies countries for operational purposes for the financial and economic development services that it provides to them. Middle-income countries make up a large share of the world population and economic activities thus seen to be key to global economic growth. It states that the middle-income countries are very diverse by region, size, population, and income level. Some examples include Belize and the Marshal Islands which are nations with small populations. However, middle-income families also include all four BRICS nations – Brazil, Russia, India, China and South Asia. Although the middle-income countries are further classified under lower-middle income and upper-middle income countries, so the question one can ask is:  Is Nepal really in the state to be in the same category of the BRICS giants? 

There are far more important things that Nepal needs to do such as ensuring rights and entitlements per the spirits of the constitution so that Nepalis start having a livelihood that helps them to increase local economy and have a lifestyle of dignity. According to the WB’s Country Economic Memorandum, 2017, many countries in the world have experienced rapid growth but modest poverty reduction as income has increasingly concentrated in the hands of the wealthy. It states that Nepal has opposite issue. It has modest growth but brisk poverty reduction. Nepal has halved the poverty rate in just seven years and witnessed an equally significant decline in income inequality.

However, the memorandum states that Nepal remains one of the poorest and slowest-growing economies in Asia with per capita income rapidly falling behind its regional peers and unable to achieve its long-standing ambition to graduate from low-income status by 2030. The same WB report suggests that there is a need to change the development model to graduate Nepal from low-growth trap. However, in 2020, the World Bank listed Nepal as a low-middle-income country from a low-income country. 

Development models

After reviewing several development approaches Nepal had taken before and after the restoration of democracy in 1990, it is important to note that several “development models” have been implemented with support by bilateral and multilateral grants and loans from international organisations such as ADB and WB. The Productive Credit for Rural Women and the Microcredit Project for Women, which initiated external funding for deprived households via women borrowers are two examples of development projects with support from the ADB and in the process the apex organisation Rural Microfinance Development Centre Ltd (RMDC) was created. Now it is known as the RMDC Laghubitta Bittiya Sanstha Ltd. The status of the Grameen Banks and RMDC needs to be reviewed to see how much it has helped in the financial flow and economic development in the country. 

Looking at the daily struggles of the Nepalis both in the rural and urban areas of the country, there should be a public debate on how the country has fared regarding development approaches here. We need to take stock of how the grants and loans that have come into the country have actually helped or burdened us before graduating into a middle-income country which will strip us from getting the benefits that a low-income country gets in improving the livelihoods of the poorest and the marginalised Nepali people. 

(Sharma is a journalist and women rights advocate Twitter handle: @NamrataSharmaP)

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