Who are the Poorest in Nepal?

Landless agricultural labourers are the poorest group in Nepal. A majority of the economically and socially weaker sections of society, such as Dalits (scheduled castes), Janjatis (scheduled tribes), and Kamaiyas (bonded labourers) make up the majority of landless agricultural labourers. They are often characterized by: informal credit and debt trap, unfavourable work condition, limited capability to benefit from public services such as education and health, negligible political participation, low social status, low labour productivity, casual and seasonal employment, unorganized, uneducated, unskilled and lack of training, less bargaining power and so on. Kamaiya labourers system is especially deep-rooted in West Nepal but the system is abounding in other part of the country as well.

Landless agricultural labourers can be classified into two broad categories: Permanent Labourers attached to cultivating households and Casual Labourers. Permanent labourers generally work on annual or seasonal basis and they work on some sort of contract. Their wages are determined by custom or tradition. They are generally illiterate, ignorant, unorganized, and unskilled workers carrying on agricultural operation in the centuries old traditional wages. There is hardly any motivation for change or improvement. Since, there is direct supervision by the landlord, there is hardly any escape from work. On the other hand temporary or casual labourers are engaged only during peak period for work. Their employment is temporary and they are paid at the market rate. They are not attached to any landlords.

Land is a principal source of income and employment for majority of households in Nepal. The incidence of poverty among the landless varies significantly between those households which are landless and depend on agricultural wage income and those which are landless but not agricultural wage earners. When dividing non-cultivating households into those reliant mainly on casual wage income and those for whom salaries are the principal source of income, the incidence of poverty among the former group is very high.

Many of social evils such as bonded labour and child labour relationships are because of landlessness. Problem of child labour is rampant in Nepal and the important source of supply of child wage workers is landless households in rural areas. Isolated efforts to solve child labour problem are having a minimal contribution in solving the problem as a large reservoir of potential entrant in the market exist. Here too, the landless households need to be availed access to land and wage/income opportunities to stop supply of child labour. In general, the efforts are geared towards regulating demand of child labour, which is rendered ineffective till supply remains unlimited.

Causes of Poverty in Nepal

Two important views are attributed to the causes of mass poverty in the developing countries. They are: the vicious circle approach and the polarization of wealth approach. The vicious circle of poverty is related to low level of income. Low level of income generates low level of savings. Low level of savings reduces the scope of investment. Low level of investment yields low level of income and the circle of poverty goes on infinitely. On the other side, polarization of wealth is related to exploitation of masses in a capitalist economy. Capitalism is characterized by the amassing of wealth at capitalist class and deprivation of the other through various ways. Poverty under capitalism is created by the accumulation of capital with more profit motive. The following factors among others are considered to be the major causes of poverty in Nepal.

Nature of Employment and Poverty

The loss of income caused by unemployment is considered to be a major cause of poverty. Unemployment has other many effects other than loss of income like psychological harm, loss of work motivation, loss of skill and self-confidence, morbidity, disruption of family relations and social life, hardening of social exclusion and accentuation of racial tensions (Sen, 2000).

Employment problems are entrenched in the marginalized groups located largely in rural and backward areas of the country. The worsening employment opportunities, declining real wage rates and reduced hours of work have reduced the total income of the labour force particularly after introduction of New Economic Policies (NEP).

Employment in Nepal is largely unorganized, rural and non-industrial in nature. The rate of rural underemployment in agriculture sector is reported to be over 40 per cent. Opportunities for employment in agriculture sector are very few and the demand for agricultural labour is highly seasonal. The rural poor are also being crushed under the burden of inherited and increasing debt burden at a much higher rate of interest (from 36 to 60 per cent) than the institutional rate.

The households headed by agricultural wage earners are the prominent group of poverty in Nepal. The rate of decline in poverty incidence among this group is lowest. In 1995/96 the incidence was 56 per cent which declined to 54 per cent in 2003/04, i.e., only by 4 per cent during the period of eight years. The second poorest group is one who lives in households headed by self-employed in agriculture. On the other side, households headed by trade and professionals are less poverty-stricken. These groups experienced a dramatic decline in poverty between 1995/96 and 2003/04.

Growth, Inequality and Poverty

During the last 30 years, the annual GDP growth rate fluctuated between 2 to 6 per cent in Nepal. The agriculture sector supports the livelihood of more than three-fourth of the population. The agriculture growth rate during the period of 1976-2000 was at 2.5 per cent, almost similar to population growth rate. There is no remarkable increase in growth rate during the period of substantial decline in poverty incidence which shows that there is no relationship between growth rate and poverty incidence in Nepal.  

The relationship between growth and poverty becomes complex because growth is always associated with distribution and therefore, relationship between growth and poverty cannot be analyzed without considering distribution aspect. Income inequality has increased in Nepal over last decade. Concentration of income among few elites living in the urban areas has increased the violent movements in the country.

Distribution of income has more skewed within particular areas and regions. Kathmandu valley and hill towns have achieved a higher level of living standards, but no improvement is visible in rural areas. Urban-rural differences have increased and minority has benefited.

Level of Education and Poverty

Most of the illiterate peoples have less earning capacity. If people are educated, their income level is generally higher than just literate and illiterate. Education increases employment opportunities and then income level. According to NLSS, poverty in Nepal is concentrated in rural areas and mid and far-western development regions. Illiteracy is twice as high in rural areas as it is in urban areas and 15 per cent higher in mid and far-western regions than in other rural areas. The regions with the highest incidence of poverty also have high illiteracy rates (WB and CBS, 2005).

 Skewed Land Ownership and Poverty

Poverty in Nepal is largely associated with limited access and ownership of land as 65 per cent of its total population is dependent on agriculture (CBS, 2003). Highly skewed Land distribution in favour of big holders is one of the most important causes of poverty. Roughly, at present productivity level, if one hectare per family is considered as the minimum requirement for maintaining a family of 5-6 in the rural area, then using this criterion, it is clear that more than half of the population is likely to be below the poverty line (Shrestha, 2001).

The distribution of land has been highly skewed in Nepal. In 2001, 50 per cent of the households, each operating less than 0.5 hectare, owned only 7 per cent of land. On the other hand, the top 5 per cent of the households operating 4 hectares and above owned nearly 37 per cent of the total cultivated land (CBS, 2003). Poverty incidence is less among households who own more land and vice versa.

Black Economy and Poverty

Black income generation through illegality in legal and illegal activities and corruption in most of the developing countries is a systemic phenomenon. The rising share of black economy affects almost all the macro-economic variables. It reduces the rate of economic growth, leads to higher budgetary and fiscal deficits, raises cost of production and so on (Kumar, 2002). Shortage of budgetary resources directly affects expenditure on social infrastructure like health and education (Kumar, 1997). All these negative effects of black income generation in an economy directly lead to policy failure and affect the poverty reduction programmes of the country.

No estimate has yet been available regarding the size of black economy in Nepal. National and international experiences indicate that it has been rampant and there has been great effect of black economy on poverty in Nepal.

Posted on : 2010-07-28 06:33:44

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