Integrate Informal Economy

Nepal’s economy continues to reel from slow growth, largely due to the weak manufacturing. The productive sector is still underdeveloped. As a result, it cannot engage a large number of workers entering the labour market every year. Our economy heavily relies on the agriculture marked by low productivity. This is a reason why many Nepalis opt to go abroad as migrant workers. While a large portion of the economy remains informal, remittances sent by Nepali migrant workers provide a lifeline to it. There are also inherent systemic flaws to prevent the economy from growing. One is that our universities produce educated unemployed people who lack the knowledge and skills required for the job market. Political instability, widespread corruption and lack of policy consistency are other factors that have badly affected the economic sector. 

The majority of the population is engaged in agriculture, but its share in the country's Gross Domestic Product (GDP) stands at just 25.6 per cent. The service sector contributes 62 per cent to the GDP, while the industry's share is nominal at 12.4 per cent. The service sector grew, even though there is no strong base of manufacturing that forms the core of the economy in any country. This scenario gives ample hints as to why the unemployment rate is high in the country. According to the Fourth Nepal Living Standards Survey (NLSS) 2022/23, the unemployment rate stands at 24.73 per cent, while 20.96 per cent of people are economically inactive. It is estimated that more than 500,000 individuals join the labour market annually, but only around 100,000 of them can get employment in the public and private sectors. 

However, experts argue that attaining actual data on unemployment is a challenging job, as there are no coherent methods and parameters that the related agencies apply in conducting surveys and population censuses. Nepal follows international practice, especially the method of the International Labour Organisation (ILO) for the NLSS, but its approach may not suit Nepal, where the biggest chunk of the population is involved in the low-paid agro-sector that largely falls into the informal economy. The country should devise such procedures that address the reality on the ground. The NLSS categorises employed persons into two categories – 'at work' (i.e., having worked for at least one hour in a week) and 'not at work' (due to temporary absence from a job), according to a news report of this daily.  National Statistics Office (NSO) considers even support workers involved in business establishment and the agro sector as employed if they work for about 14 hours per week. 

As the informal economy consists of more than 60 per cent, procuring trustworthy data on employment status has become difficult. To overcome contradictions in unemployment statistics, the Ministry of Labour, Employment and Social Security (MoLESS) has already set up a system in 691 of 753 local bodies. All local units have Labour and Employment Centres that will operate the web-based platform to gather data on employers and employees of various institutions.  These centres must be equipped with essential resources – human and financial – so that they are able to generate reliable data. Disaggregated data on unemployment has become essential to frame appropriate economic policy and plans. It is imperative to formalise the informal economy with investment in infrastructure, industries, agriculture, trade, technology and tourism. This will not only enable us to have accurate data, but also create jobs and give impetus to the overall economy.