Provincial Inequality

Nepal enthusiastically embraced federalism to address grievances from backward regions that suffered from chronic underdevelopment, because of which people there felt neglected by the centralised state, among other goals. Through federalism, the country aspires to make development evenly distributed, not clustered in a limited number of urban centres. However, that hasn't quite been the case. The continued backwardness of some provinces shows that federalism alone is unable to reduce the entrenched inequality automatically. The recent National Statistics Office (NSO) data testifies this. According to the data, among the seven provinces of Nepal, Bagmati alone is estimated to contribute more than one-third (36.7 per cent) to the national economy in the current Fiscal Year 2025/26. 

There is a stark disparity among the provinces in terms of economic size, contribution to the national economy, and per capita GDP. Karnali will make a nominal contribution of just 4.2 per cent, while Sudurpaschim's contribution will be 7 per cent. Likewise, Koshi will contribute 15.8 per cent, Lumbini 14.2 per cent, Madhes 13.1 per cent, and Gandaki 9.0 per cent. Likewise, Bagmati is expected to record the growth rate of 5.4 per cent, followed by Gandaki at 5.01 per cent, Sudurpaschim 3.28 per cent, Koshi at 3.13 per cent, Lumbini at 2.87 per cent, Karnali 2.94 per cent, and Madhes at 1.31 per cent. Similarly, Bagmati is expected to record the highest per capita GDP of USD 2644, followed by Gandaki (1651), Koshi (1410), Lumbini (1208), Sudurpaschim (1170), Karnali (1108), and Madhes (934). And, agriculture is expected to remain the largest contributor to provincial economies, except for Bagmati, this year.

These are not just statistics; they represent debilitating structural problems some provinces face. There have been accusations that, despite the devolution of power to provincial governments, some provinces grapple with weak capacity. They still lack experienced civil servants, and entrenched corruption has resulted in poor administrative efficiency. Making matters worse, in the absence of necessary laws and dispute over authority, provinces still have to depend on the centre even to get minor works done. What entrenches the provincial divide further is the fact that some provinces are endowed with stronger prospects of tourism, hydropower, trade access, or urban economics, while others have no option but to depend heavily on subsistence agriculture and remittances. And, frequent government changes and overlapping responsibilities of ministries stand in the way of strengthening provincial governance. 

Ironically, Madhes, which has vast swathes fertile lands that can support thriving agricultural industries and is best placed to benefit from cross-border trade, has long fared poorly economically and in the human development index (HDI). One major reason is said to be the lack of agricultural modernisation. Providing farmers with facilities such as irrigation, cold storage, crop insurance, access to markets, mechanisation, and value-added agro-processing can significantly improve things there. As for Karnali, weak infrastructure owing to its tough topography, limited state investment, low human development, and a lack of economic diversification are claimed to have perpetuated the cycle of poverty and underdevelopment. 

However, there's one thing common between the two provinces that has dragged down their progress: gaps in education and healthcare. Both suffer from high school dropout rates, poor educational quality, malnutrition, and child marriage, among other impediments. The success of our federalism is not gauged by what provisions we have enshrined in the constitution and laws, but by whether a child born in Karnali or Madhes gets opportunities on par with those born in Kathmandu, for example.