Labour migration from Nepal to various countries has reached its highest historical levels in recent years, leading to huge foreign remittance inflows into Nepal’s economy. While this has its obvious benefits, Aashiyana Adhikari looks at the complex impact of large scale youth migration from rural areas to urban/foreign destinations on the economy and Nepalese society.  

With a population of 30.55 million, Nepal is experiencing a significant demographic shift. Young individuals aged 16–25 years constitute approximately 20.8 per cent of the total population, while those between 16–40 years account for 40.68 per cent. This demographic profile highlights Nepal’s first-ever demographic dividend, its ‘youth bulge’ or ‘population dividend’, where a substantial portion of the nation’s populace is young. Typically, this presents a unique opportunity for accelerated economic growth and development. However, over the last decade, there has been a marked increase in the number of young Nepalese workers migrating abroad in search of better educational and employment opportunities. This trend has a dual economic impact: while it significantly boosts Gross Domestic Product (GDP) through remittances sent home, it simultaneously leads to brain drain in critical sectors. This drain, in turn, potentially undermines the full realisation of the benefits that the demographic dividend could otherwise offer Nepal.

Dependence on Remittance

Personal remittances contribute significantly to Nepal’s economy, accounting for 22.8 per cent of the total GDP — one of the highest ratios globally. While these remittances play a crucial role in alleviating poverty and boosting consumer spending, its outsized role in the economy also presents substantial risks. Nepal’s economic stability becomes vulnerable to global economic fluctuations, particularly changes in oil prices that affect the Middle East, a major employment hub for Nepali workers.

Additionally, economic downturns or political crises in host countries can lead to a decrease in remittance flows which can severely impact Nepal’s economy. For instance, in 2020 (during the Covid-19 pandemic) remittance inflows initially dropped by around 12 per cent, highlighting the vulnerability of the economy on such external factors. An imbalanced reliance on foreign remittances creates other problems too.

In many rural areas of Nepal, remittances have led to a noticeable decline in engagement with agriculture. Young, able-bodied individuals often prefer to migrate abroad rather than engage in farming, traditionally seen as more labour-intensive and less lucrative. This migration of rural labour force has left many agricultural fields fallow, leading to a decline in local food production and an increased reliance on imported goods.

The influx of remittance money has also created an environment where those remaining in Nepal are less inclined to seek employment or engage actively in the economy, choosing instead to rely on foreign remittance for their everyday living. The assurance of receiving remittance funds has led some to a perception of less need for active income generation domestically, fostering an attitude of economic complacency. This shift not only affects agricultural output but also stalls the growth of local industries and services, as the motivation to innovate and improve economic conditions diminishes.

Brain Drain and Labour Market Challenges

Migration from Nepal is not a new phenomenon; historically, it is deeply entrenched in the pursuit of economic opportunities. In earlier times, trade initiated some of the earliest movements of people out of Nepal; however, the dynamics of migration significantly shifted during British colonialism in South Asia when the British recruited large numbers of Nepalis in their military forces. In recent times, the pattern of migration from Nepal has evolved, both in scale and global reach,  beyond the traditional, seasonal migration to India.

The expansion of global economies and the availability of labour jobs, particularly in the construction and domestic sectors in the Gulf countries and Malaysia in Southeast Asia, has attracted a large number of Nepali workers. These jobs often promise higher wages than similar roles in Nepal, making them attractive despite the potential for difficult working conditions and the risks of exploitation.

This migration of skilled Nepalis has created critical gaps in Nepal’s domestic workforce, particularly in sectors like healthcare, engineering and technology. It deprives Nepal of essential expertise needed for development and innovation, undermining the quality and accessibility of critical services, especially in rural areas where resources are already limited. The deficit not only stalls progress in essential services but also creates significant imbalances in the labour market. While there is an abundance of unskilled labour, skilled labour is becoming increasingly rare, resulting in inefficiencies and hindering the technological advancement of industries. This shortage hampers Nepal’s ability to progress beyond its reliance on traditional, agriculture-based and low-wage industries, slowing economic diversification vital for the country’s development.

Migration also exacerbates economic inequality within Nepal. While families of migrants often experience significant improvement in their living standards through remittances, those left without such financial inflows remain economically stagnant, deepening the socio-economic divide. This disparity underscores the urgent need for internal economic reforms and development strategies that create more equitable and sustainable growth opportunities across all sectors of Nepali society.

Impact of Demographic Shifts

Youth exodus has pronounced demographic impacts, particularly in rural areas as mentioned above. With young adults migrating to urban centres within Nepal or abroad, rural communities face an aging population and a shortage of labour for agricultural activities. This threatens the sustainability of traditional livelihoods and agricultural productivity, jeopardising food security and rural development. The absence of young men in rural communities disrupts traditional family structures and social dynamics, leading to changes in gender roles and community cohesion. Migration from rural to urban areas may impact access to education in rural communities. As young adults leave their hometowns, schools in rural areas may experience declining enrolment rates, leading to challenges in maintaining educational infrastructure and quality.

Meanwhile, in urban centres, the influx of young migrants from villages places pressure on infrastructure, housing and public services. Rapid urbanisation strains existing resources and contributes to issues such as overcrowding, inadequate housing and pollution.

Finally, the demographic shifts resulting from youth migration contribute to an imbalanced dependency ratio in Nepal. With a smaller working-age population supporting a larger elderly population, social welfare systems face increased strain, placing pressure on healthcare, pension and eldercare services. This strain on social welfare systems may limit the government’s ability to invest in other critical areas such as education, infrastructure and economic development.

Conclusion: Nurturing Nepal’s Future

The challenges posed by youth migration and economic dependence on remittances underscore the urgent need for comprehensive action to nurture Nepal’s future. While remittances serve as a crucial economic lifeline, they alone cannot sustain long-term development. Nepal must prioritise strategic interventions to address the root causes of youth migration and create an environment conducive to retaining its young talent.

Investing in education and vocational training is paramount to equip the youth with the skills and knowledge needed to thrive in a rapidly evolving global economy. By enhancing education quality and relevance, Nepal can empower its youth to become catalysts for innovation and progress within their communities. Further, fostering entrepreneurship is essential to create opportunities for young Nepalese to pursue their aspirations within their homeland. By providing support for start-ups and small businesses, the country can unlock the entrepreneurial spirit of its youth, driving economic growth and job creation from within. Developing industries that offer competitive job opportunities is another critical step towards retaining young talent.

By promoting sectors with high growth potential such as technology, renewable energy and tourism, Nepal can attract and retain skilled workers, reducing reliance on remittances and fostering sustainable economic development. However, achieving these goals requires political stability and a conducive environment for governance. Nepal must prioritise good governance, transparency and accountability to create a climate that attracts investment and supports long-term development projects. Nepal stands at a pivotal moment in its development trajectory.

By prioritising investments in education, entrepreneurship and industry development, it can harness the potential of its youth to drive economic growth and prosperity. With strategic policy interventions and concerted effort from government, civil society and the private sector, Nepal can build a brighter future for generations to come.

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Banner image © Aalok Atreya, Kathmandu, 2018, Unsplash.

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