While the population below the poverty line has fallen by nearly five percentage points over 12 years, government officials admit that the improvement is not enough

BY NewBiz Team

Over the past 12 years, Nepal has experienced significant political upheavals, transitioning into a federal republic and holding two periodic elections. However, the critical question remains: has this transformative political shift resulted in improvements in the quality of life for ordinary Nepalis? Insights from the most recent Nepal Living Standards Survey offer some indication of the living standards of the Nepali populace.

The latest survey, conducted after 12 years, provides insights into the changes in the standard of living among the Nepali people during this period. According to the survey report, there has been a reduction in the proportion of Nepal's population living below the poverty line, accompanied by an overall improvement in the standard of living. The Fourth Nepal Living Standards Survey 2022/23 report released by the National Statistics Office (NSO) revealed that 20.27% of the population is still below the poverty line compared to 25.16% in 2011. However, the country has struggled to decrease the poverty rate as envisioned by the 15th five-year plan. The 15th National Plan launched by the then KP Sahrma Oli-led government in March 2020 aimed at decreasing the population under the poverty line to 9.5% by 2024. 

While the population below the poverty line fell by nearly five percentage points over 12 years, government officials also admit that the improvement is not enough. National Planning Commission (NPC) Vice Chairman Dr Meen Bahadur Shrestha said that the poverty rate remained above 20% as the 2015 earthquakes and the COVID-19 pandemic pushed at least four percent of Nepalis below the poverty line.

Another factor, according to NSO, is the revision in the standards for measuring poverty. Enhancements in household consumption, along with political and administrative reforms, coupled with Nepal's ambition to achieve middle-income status, according to the NSO, necessitated the formation of a new benchmark for assessing poverty. As per the new definition, an individual in Nepal is considered poor if his/her annual per capita total consumption expenditure falls below Rs 72,908. 

In comparison, the poverty threshold in 2010/11 stood at Rs 19,261 per individual annually. Accounting for inflation between 2010/11 and 2022/23, this sum translates to Rs 42,845 per person per year. Had the benchmark stayed at Rs 42,845 per person annually, as in earlier assessments, the proportion of the population living below the poverty line would have been projected at 3.57%, according to the NSO.

Twelve years ago, the poorest 10% spent Rs 70 per day (at current prices) on average. This same demographic is now spending Rs 133 daily - a notable growth of 90%.

The latest survey indicates significant improvements in the consumption habits of Nepalis with notable changes observed particularly in urban areas. According to the survey, average annual consumption spending has surged by 66% over the past 12 years, rising from Rs 75,902 in 2011 to Rs 126,172 in 2023. The survey reveals an augmentation in consumption capacity not only among the affluent but also among the poor. Twelve years ago, the poorest 10% spent Rs 70 per day (at current prices) on average. This same demographic is now spending Rs 133 daily - a notable growth of 90%.

Nevertheless, significant disparities in consumption persist. Daily consumption expenditure per person in the Kathmandu Valley amounts to Rs 721, while it is merely Rs 197 per person per day in Madhesh. Additionally, the per capita annual consumption expenditure in urban areas of Koshi, Bagmati, Gandaki and Lumbini provinces surpasses the national average, indicating that residents of these regions consume more compared to those elsewhere.

There has been a rise in the proportion of non-food spending from an average of 38% to 47%. Additionally, the composition of food expenditures has shifted since the previous survey. There is a noticeable move away from cereals, which represent relatively low-cost calories, towards more nutritious diets. This shift is characterised by a larger share of spending on higher-priced calories like fruits, nuts and meat. The findings of the survey show that individuals with lower incomes allocate a larger proportion of their earnings towards food expenses compared to wealthier individuals. On average, food spending constitutes at least 57% of total expenditure, except in the Kathmandu Valley, where it is below 50%.

In rural areas of the Madhesh Province, the poorest 20% of the population dedicate as much as 67% of their income for food expenses. Conversely, the wealthiest 20% allocate only 28% for such expenses in the Kathmandu Valley, despite food expenses accounting for 56% of total expenditure in rural areas of the Bagmati Province. Twelve years ago, food accounted for 62% of total household expenditure. It has since decreased to 53%. This decline is attributed to society's relative affluence, as higher-income groups tend to allocate less of their budget to food compared to lower-income groups who prioritise food expenses.

Of significant note is the rise in consumption of certain food items such as fresh and dried fruits, fish, and meat. Twelve years ago, only 3% of the household's total consumption was spent on fruits. This expenditure has now doubled to 7%. Similarly, spending on vegetables has increased from 10% to 12%. The share of food in total consumption has decreased from 34% to 17% over this period. This shift indicates a decrease in food expenditure and an increase in expenditure on other consumption items.

Significant changes have occurred not only in food consumption but also in the ownership of household assets. Presently, approximately 2% of households own a car, nine out of every 100 households possess computers, 27 own refrigerators, 61 have fans, and 94 own telephones or mobile devices.

Significant changes have occurred not only in food consumption but also in the ownership of household assets. Presently, approximately 2% of households own a car, nine out of every 100 households possess computers, 27 own refrigerators, 61 have fans, and 94 own telephones or mobile devices. Similarly, one in every four households now owns a motorcycle, marking a substantial improvement compared to 12 years ago.

As per the NSO, disparities in poverty levels are evident between urban and rural areas, as well as among different provinces. The survey reveals that the poverty rate in urban areas is recorded at 18.34%, while it stands at 24.66% in rural areas. Province-wise, Sudurpaschim exhibits the highest poverty rate at 34.16%, whereas Gandaki Province has the lowest poverty rate at 11.88 percent. In the rural areas of Sudurpaschim, 40.21% of the population is classified as poor, while such a rate stands at 30.86% in Karnali. In the rural regions of Madhesh, one out of every four individuals is impoverished. Conversely, in Kathmandu Valley, only 7.38% of the population lives below the poverty line, while such a rate in the rural areas of Gandaki stands at 10.27%.

The survey shows that one in three Nepali households does not own land. Specifically, 34.56% of households reported not owning any land, and 19.66 percent owned less than 0.2 hectares of land.

Another significant finding from the survey is the correlation between family size and poverty. The data indicates that as family size increases, so does the incidence of poverty. For households with only three members, the poverty rate is 10.54%, whereas for families with more than six members, the poverty rate jumps to 28.59%. Likewise, higher levels of education among household heads are associated with a decreased incidence of poverty. Specifically, households led by individuals who have completed primary education exhibit a poverty rate nearly 2.5 times lower than those led by uneducated heads. Conversely, households headed by individuals who have completed tertiary education experience a poverty rate of only 0.44%, which is one-tenth of the 13.79% poverty rate among households with heads who have completed primary education. Individuals residing in households with heads employed in the services sector appear to have a lower likelihood of experiencing poverty. Among various employment categories, households headed by agricultural wage workers exhibit the highest poverty rates at 37.81%, while those with heads who are self-employed in the services sector have the lowest poverty rates at 7.26%.

The survey findings indicate a clear relationship between land ownership and poverty levels - as the area of land owned by households increases, the poverty rate decreases. For instance, households with less than 0.2 hectares of land have a poverty rate of 23.32%, whereas households with more than two hectares of land have a significantly lower poverty rate of 11.38 percent. Additionally, the survey shows that one in three Nepali households does not own land. Specifically, 34.56% of households reported not owning any land, and 19.66 percent owned less than 0.2 hectares of land.