Nepal Needs Rainbow Economy

For decades, Nepal has relied on a limited dimension for economic growth and transformation. At various moments, agriculture worked as the backbone, hydropower was projected as a national saviour, tourism as an employment generator, remittance as a lifeline of households and recently information technology (IT) as an emerging sector. Remittance has particularly served as the most reliable economic shock absorber for the nation. It has financed consumption, supported foreign exchange reserves and stabilised the balance of payments. 

Despite these hopes, the country continues to face a different reality – sluggish productive growth, rising import dependence, youth outmigration and inability to convert its resources into broad prosperity. The economy is not generating employment for its youth, industrial expansion remains weak, exports remain stagnant and the economy has become increasingly consumption-oriented. As the World Bank noted in its recent Country Economic Memorandum, Nepal’s growth model is “resilient but stagnating,” stating that the current system is failing to create jobs or boost productivity.

Roadmap

Perhaps the problem doesn’t lie in the absence of opportunity, but in the narrowness of economic imagination. The emerging global discourse on the Rainbow Economy offers an important roadmap. It proposes a more inclusive dimension which involves integrating multiple colour economies such as green, blue, orange, purple, gold and white economies working integratively to create employment, enterprises, innovation and resilience. International discussions are framing such colour economies as a future-oriented scope of sustainable competitiveness. For Nepal, it has become a strategic necessity as well. 

The country’s economy grew at an average of just 4.2 per cent annually between 1996 and 2023. Private consumption accounts for 84.5 percent of GDP, while gross fixed capital formation sits at 24.3 percent, which reveals an economy that heavily relies on spending rather than producing. The Asian Development Bank’s Country Partnership Strategy for 2025-29 highlights that growth requires structural transformation: shifting from remittance-driven consumption to productivity gains and employment creation. Such structural transformation requires shifting from labour export to internal value creation and remittance-driven consumption to remittance capitalisation.  

Green Economy focuses on low-carbon, resource-efficient and sustainable environmental growth. Nepal's economically viable hydropower potential is an estimated 43,000 megawatts. India’s electricity deficit creates growing demand for Nepal’s power exports. Moreover, the government has taken a crucial step in this direction to realise this potential by establishing a fund for mobilising capital through bonds, equity, and remittance pools. 

Gold Economy focuses on advanced technologies like artificial intelligence (AI), big data, fintech, and cybersecurity. In this economy, value is created through data and information rather than physical raw materials. With the approval of the National AI policy 2082, Nepal has already taken a crucial step towards embracing AI. Likewise, Orange Economy represents creative and cultural industries related to arts, design, and intellectual property. Nepal loses the majority of its most productive youth every year. In order to stop such outflow, it requires domestic employment generation on a large scale by ensuring those who return bring skills, capital and entrepreneurial ambition that can foster new entrepreneurships and industries. 

Purple Economy centres on social inclusion and formalising unpaid labour. The local traditions, indigenous crafts, linguistic and geographic diversity of Nepal remain economically undervalued. Similarly, as millions of men are out-migrated, their wives at home are committed to performing unpaid labour, which is a massive hidden GDP loss. This economy tends to formalise invisible labour through inclusive employment opportunities such as public spending on childcare centres, elderly care, and healthcare, and so on. Blue economy emphasises the sustainable use of water resources. As a landlocked nation, blue assets in Nepal are its rivers, lakes, and glaciers. In India, the blue economy contributes nearly 4 percent of the national GDP. For instance, programmes like Sagarmala, a project in India to enhance port connectivity, port-led industrialisation and waterways, have helped keep goods flowing, from oil imports to the export of farm products. Such sustainable management of water resources, eco-tourism and climate-resilient water infrastructure can generate value to the economy. 

Red Economy represents agriculture and rural production. Most farmers lack the financing to move beyond survival. While nearly 60 per cent of the population still depends upon agriculture, this sector remains the largest employer. Yet output is underperforming. Through financing, improved infrastructure, and value chain development with digital tools, this economy can ensure that goods are processed and consumed locally, generating the value chain output. It helps market linkages, reducing imports of food items and creating exports of processed foods.  White Economy represents healthcare like hospitals, pharmaceuticals and medical services. Every year, we spend a significant amount for medical treatment outside Nepal. Developing a robust healthcare management, such as medical tourism, specialised hospitals, and production of pharmaceuticals, can absorb the expenditure, create employment in skilled jobs and also position Nepal as an affordable provider of healthcare services. 

Strength

The true strength of the rainbow economy lies in the interconnectedness of various colours. Remittance could be utilised through the issuance of modern financial instruments like green bonds into hydropower, agriculture and digital projects. Such integration can channel remittance inflows into capital for long-term economic growth and development. For this, various policy measures should ease the investment in productive sectors through tax benefits, policy dialogue and diaspora. Likewise, skills development programmes should be provided to youth and women, while public-private partnerships can help increase investments.  For this transformation mechanism to succeed, the financial sector must evolve from tradition collateral based lending toward value chain financing, intellectual property-based lending and green financing. The Nepal Rastra Bank’s ESRM (environmental and social risk management) guidelines are crucial steps; however, it requires complete transformation to channel remittance pool into productive utilisation for sustainable economic growth. By implementing the features of such a multi-coloured approach, the economy can transform from a traditional model to one that can be productive, create employment and sustainable economic growth.

(The author is an assistant manager at the Rastriya Banijya Bank.)