Urban Pressure, Shrinking Farmland, and Weak Disaster Preparedness Weigh on Bagamati Province’s Economic Prospects

Bagamati Province continues to grapple with poor infrastructure, inadequate health and education services, weak disaster preparedness, unplanned urbanization, and shrinking agricultural land, according to the Nepal Rastra Bank (NRB).

A recent study by the central bank identifies these issues as key obstacles to the province’s sustainable growth despite its strong potential for tourism, agriculture, and hydropower development.

The central bank’s study on Economic Activities of Fiscal Year 2081/82 BS (2024/25) states that inadequate physical infrastructure, including poor road networks, insufficient drinking water, ineffective waste management, and unplanned urbanization, remain serious obstacles to improving quality of life and economic performance in the province which is home to the federal capital Kathmandu.

The report highlights that the growing population in urban areas has led to a sharp decline in cultivable land, while out-migration from the hills and mountainous regions has left vast areas uncultivated. It stresses the need for a balanced approach to the protection and use of agricultural land.

Ensuring access to quality education and affordable healthcare has also proven difficult, while the province faces high risks from natural disasters and climate change, which threaten key sectors such as agriculture, hydropower, industry, and services. The report calls for stronger disaster management and climate adaptation measures.

The study further notes that a large portion of the province’s population still depends on agriculture but lacks year-round employment opportunities. The government, therefore, faces the challenge of promoting agricultural productivity and creating sustainable livelihoods in rural areas.

Rising land prices around the Kathmandu Valley and its surrounding districts have also placed pressure on the private sector, forcing businesses to lease land at high costs. This has increased production expenses, weakened market competitiveness, and discouraged industrial expansion, the study report states.

Despite these hurdles, Bagamati Province remains a key economic hub with immense potential. The NRB report points to opportunities in cultural and religious tourism in the historic cities of Kathmandu, Bhaktapur, and Lalitpur, and emphasizes the need for better utilization of existing tourism infrastructure.

The province also hosts Nepal’s busiest international airport and leads the country in digital connectivity, offering strong prospects for growth through information technology and innovation.

Likewise, its abundant water resources hold significant potential for hydropower generation, while investment in commercial farming, herbal farming, and agro-processing industries could diversify income sources and create jobs, the report says.

According to the National Statistics Office, Bagamati Province was projected to achieve 5.2 percent economic growth in Fiscal Year 2024/25, but the actual growth stood at 3.7 percent. The province’s Gross Provincial Product (GPP) is estimated to reach Rs 22.3 trillion at current prices, with agriculture contributing 11.8 percent, industry 11.1 percent, and services 77.1 percent.

Bagamati accounts for 17.1 percent of the country’s agricultural output, 31.7 percent of industrial output, and 45.4 percent of the service sector. Within its economy, wholesale and retail trade, real estate, and financial services are among the largest contributors.

Read Full Report: Final bagmati EAR 2081_82