Resource information
Nepal needs a new economic model to
achieve faster and sustained growth as well as further
improvements in human development and poverty outcomes.
Economic growth, while ro¬bust at around 4 percent annual
average since 2005, is far from the level needed to achieve
the government s ambitious targets. The economy, highly
dependent on remittances, lacks the nec¬essary dynamism.
While substantial gains have been made to reduce poverty and
expand access to services, achieving further progress will
require more determined and targeted state intervention. To
redefine Nepal s growth model, public policy should focus on
3 I s: Investment, In¬frastructure, and Inclusion.
Investment is the bedrock of a sustainable growth model but
in Nepal, the state, firms and households critically
under-invest, with gross fixed capital formation between
19.9 and 22.2 percent of GDP over the past decade (compared
to 30 percent or more in fast-growing countries in East
Asia). In order to unlock investment as well as to expand
access to services and opportunities for all, public
infra¬structure is critical, but Nepal is under-connected
and under-powered. Finally, growth alone will not deliver
continued fast progress on inequality and poverty reduction
unless the growth model is calibrated for inclusion, which
in turn can help sustain dynamic growth.
