Expanding Nepali economy to $100 billion was one of the major promises made by some political parties before the House of Representatives elections held on March 5. The Nepali Congress (NC), CPN-UML, and the Rastriya Swatantra Party (RSP) all pledged to hit that mark within 5-10 years.
The idea, however, did not begin in politics. It came from the private sector. The debate first began around 2021, when the size of Nepal’s economy was about $35 billion. Back then, the idea of tripling its size within a decade sounded not unrealistic. That began to change when the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) unveiled its vision paper, National Economic Transformation 2030 (NET 2030). The document put the $100 billion target at the center of national debate.
The vision called for around $150 billion in investment, with more than two-thirds expected from the private sector. It framed growth not as a gradual process, but as a deliberate push.
Then Prime Minister KP Sharma Oli signaled a willingness to align policy with private sector priorities. In 2022, the government and FNCCI signed a formal agreement to pursue the target together. What began as a private sector aspiration had, by then, become a shared national goal.
The idea also gained ground among economists and the diaspora. Platforms led by economist Swarnim Wagle, now finance minister, helped take the conversation beyond Nepal. By 2025, industry bodies such as the Confederation of Nepalese Industries (CNI) backed the target, terming it achievable but only with clear priorities and strong execution. For decades, Nepal’s policy focus was on stability, inclusion, and incremental reform. Growth mattered, but it was rarely urgent. That has now shifted. Economic transformation is now at the center of political narrative. With a near two-thirds majority in Parliament, the government led by Balendra Shah holds both the political space and the public mandate to act. The goal, once debated in boardrooms and policy forums, now sits firmly within the realm of governance. The question is not whether Nepal should aim for a $100 billion economy. It is how to get there.
Nepal is currently a roughly $40 to $45 billion economy, growing at around 3 to 5% in recent years, with remittances accounting for about a quarter of GDP, exports narrow and weak, and private investment subdued. That is the real starting point of the $100 billion debate.
The Hard Math
Is a $100 billion economy possible? Yes, but only under a sharply different growth trajectory from the one the country has followed over the past three decades. The current ambition, however, is far more aggressive. The goal is not just nominal expansion driven by inflation or currency effects, but a $100 billion economy in real terms within roughly a decade. That is where the challenge, and the debate, begins. Since the mid-1990s, Nepal’s real GDP growth has averaged 4.2-4.3%. This rate is enough for steady expansion, but not transformation. At this pace, Nepal would likely reach a nominal $100 billion economy sometime between 2035 and 2044. Even then, it would likely remain a lower-middle-income country, with limited gains in productivity, competitiveness, or structural change.
The current ambition, however, is far more aggressive. The goal is not just nominal expansion driven by inflation or currency effects, but a $100 billion economy in real terms within roughly a decade. That is where the challenge, and the debate, begins. Under an optimistic scenario of sustained 6% real growth, Nepal could reach a USD 100 billion nominal GDP by around 2033, with real GDP hitting that milestone closer to 2039. Over time, the economy could expand to $191 billion by 2050, potentially moving into the upper-middle-income bracket by the mid-2040s. Per capita income, currently around $1,500, could rise to over $5,500 by 2050. Poverty could fall sharply, to below 1% by 2040.
But none of this will happen on its own. At the other end of the spectrum, if growth slows to 3.1%, the economy will reach roughly $96 billion even by 2050. The gap between these scenarios is wide. It shows that the target depends less on ambition and more on execution. According to Birendra Raj Pandey, President of the Confederation of Nepalese Industries (CNI), the pathway to that execution depends on three factors.
The first is physical capital. Investment levels need to rise significantly, from the current 24% of GDP to around 30%. This will require not only higher public capital spending but also a substantial increase in private and foreign investment. Energy, particularly hydropower, is central. Lowering electricity costs from the current Rs 12-15 per kWh to around Rs 5-7 could unlock energy-intensive industries and create multiplier effects across manufacturing and services, said Pandey.
Second is productivity. Nepal’s productivity growth stands at roughly 1.1% a year. Raising this to around 1.9%, closer to ASEAN levels, would have a strong compounding effect on growth. Improving it will require better regulation, digital systems, trade facilitation, and stronger institutions. Small efficiency gains, sustained over time, can have a big impact. Third is human capital. Around 61% of the workforce is still in agriculture, which contributes only about a quarter of GDP. This points to underemployment and low productivity. Moving workers into higher-value sectors, and expanding technical and vocational training, and higher female labor force participation, could significantly boost output. Currently, only 2-4% of students are enrolled in TVET streams, compared to 40-60% in more industrialized economies.
Beyond these drivers, three delivery engines will determine whether growth can be sustained. The first is sectoral growth. Energy, manufacturing, IT, tourism, and infrastructure have been identified as key growth engines. IT exports, currently around $1.5 billion annually, have room to scale, while manufacturing’s share of GDP, now below 5%, needs to more than double over time. Infrastructure investment, currently at just 3-5% of GDP, must rise toward 10-12% to close the large deficit.
The second is structural reform. Policy predictability, energy pricing, logistics, labor flexibility, and ease of doing business are our binding constraints at present. Without progress on these fronts, capital will remain underutilized and investment will continue to lag.
The third is the strengthening of SMEs. With 84-85% of economic activity still informal, formalization, access to finance, and integration into value chains are critical to building a more resilient industrial base.
“Taken together, these numbers tell a clear story. A $100 billion economy is mathematically achievable—but not under current conditions. It requires lifting growth from 4% to 6% and sustaining it for over a decade,” Pandey said. “It requires raising investment, doubling productivity gains, and restructuring the labor force. Most importantly, it requires consistent policy execution—something Nepal has historically struggled to maintain.”
Where Growth Will Come From
The next question is where the growth will actually come from. The transition from a $50 billion to a $100 billion economy is not just about size. It requires a shift in how the economy works. There is growing consensus among the FNCCI, CNI, and the current government around a high-growth roadmap focused on priority sectors. The strategy calls for a move away from a consumption-led model toward production and service exports.
The central question is not only which sectors can grow fastest, but which can absorb labor at scale. For Nepal, manufacturing and commercial agriculture remain essential because they sit at the intersection of jobs, exports, and import substitution.
Energy sits at the center of this vision. The government’s Energy Development Roadmap, 2025 targets generation of 28,500 MW by 2035. This will need about $46.5 billion in investment. The focus has shifted from domestic supply to positioning Nepal as a regional energy exporter.
Nepal already has a 10,000 MW export deal with India and is exploring opportunities with Bangladesh. Hydropower exports could bring in more than $500 million annually by 2030. There is also growing interest in using surplus energy for high-consumption industries such as green hydrogen and large-scale data centers.
But there are risks. Long-term energy demand from India is not guaranteed. That makes a backup plan essential. Sushil Gyewali, CEO of Office of the Investment Board Nepal (OIBN), says there is strong potential to develop AI-driven data centers that utilize hydropower resources. “Such investments can generate significant returns and create multiplier effects across the economy,” said Gyewali. He added that Nepal should promote energy-intensive industries. “For example, silica processing for chips, hydrogen production, ammonia, and fertilizer manufacturing are all areas where Nepal can leverage its energy surplus. These industries can not only utilize electricity domestically but also create export opportunities,” Gyewali added.
Tourism is another key pillar, but the approach is changing. Rather than relying on seasonal, low-spending visitors, the focus is on building a higher-value, year-round industry. The strategy aims to double tourist arrivals while tripling average daily spending. This includes developing luxury tourism corridors, upgrading regional airports such as Bhairahawa and Pokhara to full international operations, and expanding niche segments like religious circuits and adventure tourism. The goal is to raise tourism’s contribution from around 3% to over 10% of GDP.
Nepal has consistently attracted around one million tourists annually. However, tourist spending is very low. “In tourism, the focus should not just be on increasing numbers but on attracting quality tourists,” said Anand Bagaria, managing director of Nimbus Group. Agriculture, which still employs the majority of the workforce, is also central to the transition. The focus is on moving from subsistence farming to commercial, high-value production. Priority areas include Himalayan tea, coffee, herbs, and cardamom, aimed at global markets. By leveraging river basins and integrating agro-tech, the government aims to reduce food imports and position agriculture as a supplier of industrial raw materials. Prakash Shrestha, former Vice Chairperson of the NPC, says agriculture and manufacturing have the most potential for large-scale job creation. “However, moving forward requires proper research and a clear, structured plan. One of the key challenges so far has been the lack of investment in these sectors, largely driven by weak demand,” he said. “Production alone is not enough; goods and services must find a market. Without demand, investment naturally remains limited.”
Bagaria also stresses the need for commercialization and import substitution where feasible. “The domestic market itself offers significant potential. However, legal barriers related to land use and ownership must be addressed to enable large-scale agricultural investment,” he added. The digital economy has emerged as the newest pillar in this growth strategy. With geography posing no constraint, IT services are seen as one of the fastest routes to scale. The plan includes expanding IT exports and positioning Nepal as a “cool-climate” destination for global data centers, supported by stronger digital infrastructure and the Digital Nepal Framework.
Shrestha points to data centers as a promising avenue that could drive both electricity demand and job creation. “However, this requires reliable and consistent power supply,” he said. Nepal’s current energy mix is imbalanced—strong during the monsoon season but weak in the dry months. Data centers, by contrast, require uninterrupted, year-round electricity. Under current conditions, scaling such infrastructure would be difficult.” He suggests linking data center investments with reservoir-based hydropower projects, which can provide a steady supply. Unlike run-of-the-river (ROR) projects, reservoir-based hydropower can provide more stable supply, though these projects typically take at least five years to complete. Therefore, the government must also identify and act on immediate, short-term solutions,” Shrestha added.
The Barriers Beneath the Ambition
Ambition alone cannot overcome structural constraints. In Nepal, these constraints are deep-rooted and persistent. Private investment continues to underperform as businesses have remained cautious even though there is ample liquidity in the banking system. Another major reason is regulatory uncertainty. Investors often face unclear rules, frequent policy reversals, and lengthy approval processes. Starting a business, acquiring land, securing environmental clearances, or managing tax compliance involves layers of bureaucracy that raise both costs and risk. Studies and business surveys have repeatedly identified administrative delays and policy unpredictability as major deterrents to investment in Nepal.
Governance challenges make matters worse. Rent-seeking, informal payments, and weak enforcement of rules continue to affect the business environment. While reforms have been discussed for years, gaps in implementation are wide. In practice, this creates a system where processes are not only slow, but also inconsistent. That erodes trust in institutions and discourages long-term investment.
Appointments to key institutions such as Nepal Rastra Bank, the Insurance Board, the Securities Board of Nepal, the Nepal Stock Exchange, and the Commission for the Investigation of Abuse of Authority need to be transparent and merit-based. In recent years, the effectiveness of these regulatory bodies has weakened, undermining confidence in the system. Restoring their authority and ensuring they function as intended would help strengthen stability and improve the business environment.
There is also a case for reforming the Public Service Commission and creating a dedicated unit within it to oversee appointments often subject to political influence. Proponents argue that the Commission has retained a degree of credibility that can be leveraged to improve the integrity of such processes.
Entrepreneurs view excess liquidity as a sign of weak investment sentiment. Restoring private sector confidence is therefore central to reviving economic activity. Without stronger investment, revenue growth and job creation will remain constrained. There is broad consensus on the need for private sector-led growth, but the immediate challenge is creating a stable policy environment and clear incentives to unlock investment.
At the same time, business leaders point to significant untapped potential. Industrial investment has remained subdued for years, while opportunities in physical infrastructure remain substantial. Reviving models such as BOOT, where the private sector builds, operates, and transfers assets to the government, could help mobilize capital if backed by appropriate legal and regulatory reforms. Political stability alone will not be enough to restore confidence. Businesses are calling for legal certainty, with rules that are modern, predictable, and consistently applied. The new government will need to address long-standing legal constraints that have slowed investment.
Anticipatory bail has emerged as a key concern. Entrepreneurs say the current framework allows criminal complaints to be used in commercial disputes, exposing investors to sudden legal and reputational risks. Reforming it would not shield wrongdoing but strengthen due process and protect legitimate business activity from misuse. A clear and balanced framework would signal that the state supports enterprise while upholding accountability.
Policy instability is another recurring constraint. Nepal has seen frequent changes in taxation, investment rules, and sector priorities, often tied to changes in government or annual budget cycles. This unpredictability makes planning difficult for investors. Even when policies appear favorable on paper, the lack of continuity undermines credibility. This results in a wait-and-watch approach from the private sector, rather than active expansion.
According to Chandra Dhakal, president of FNCCI, the core challenge has not been access to finance, but weak confidence and political uncertainty. “The recent Gen Z-led protests further dented confidence. At the same time, Nepal has long struggled with political instability, with frequent changes in government creating an unpredictable environment for businesses,” he said. “We have always emphasized the need for a stable government, even advocating for a strong majority. Now that there is a more stable political setup, confidence has started to improve.” Large infrastructure and industrial projects face additional barriers. Land acquisition disputes, delays in environmental approvals, and weak inter-agency coordination often extend timelines by years. Cost overruns are common, and in some cases, projects stall entirely. This not only affects individual investments, but also slows the broader pace of economic transformation, particularly in sectors such as energy, transport, and manufacturing.
Dhakal says the private sector is looking for policy consistency, which is critical for both domestic investment and FDI.
Labor migration presents a deeper structural paradox. Remittances, which account for a large share of GDP, have helped stabilize the economy by supporting household consumption and external balances. However, they also draw a large share of the active workforce abroad. This reduces the domestic labor pool and creates skill shortages even as unemployment and underemployment persist at home. At the same time, Nepal’s export base remains narrow and concentrated to a limited range of products and markets. This constrains the country’s ability to scale growth through external demand. High-growth economies typically rely on expanding exports to sustain momentum, but Nepal’s integration into global value chains remains limited. None of these challenges are new though. They have been identified repeatedly in policy reports, private sector recommendations, and development assessments. What has changed is the context. As Nepal targets a $100 billion economy, the cost of inaction is rising. These are not abstract issues. They determine how quickly capital is deployed, how efficiently firms operate, and how sustainably the economy grows.
Addressing them will require more than incremental reform. It will demand consistency, coordination, and a willingness to confront long-standing governance failures.
The Hydropower Paradox
These structural gaps are most visible in hydropower. While investment is rising and project pipelines are expanding, the system needed to support the growth is fragile. The challenge is no longer limited to building projects. It is whether Nepal can absorb, transmit, and sell the electricity it produces. One immediate bottleneck is power purchase agreements (PPAs). A significant number of projects, estimated at several thousand megawatts, are still awaiting bankable PPAs. Without a guaranteed buyer, developers struggle to secure financing. This slows execution despite strong investor interest. “Our domestic electricity demand is limited, and without sufficient export to India, surplus power remains underutilized. Strengthening transmission and distribution infrastructure, along with enabling open access trading, could help address this issue,” said OIBN’s Gyewali. “Investors are willing to come to Nepal if the right policies are in place.”
Even after projects are completed, the question of demand remains a concern. This is because domestic consumption has not kept pace with rising supply. Industrial growth is weak, and electrification of transport and cooking has been slow. This has created a recurring imbalance: surplus power in the wet season, and imports in the dry months.
Export markets, particularly India, are critical but not fully reliable. While long-term agreements exist in principle, export approvals are often slow and conditional. Since India is the main gateway for regional electricity trade, Nepal’s access to regional electricity markets depends not only on production, but also on regulatory clearance and geopolitical alignment. Transmission infrastructure is another major constraint. In many cases, generation has outpaced evacuation capacity. Projects are completed, but electricity generated by them cannot be transmitted efficiently to demand centers or export points. This mismatch has led to energy spillage during peak production season.
In 2025, surplus generation reached around 1,400 MW in the wet season. But limited transmission capacity and export approvals meant much of it went unused. This points to a deeper structural problem. Nepal is wasting electricity in some regions while facing shortages in others. Weak grid connectivity is preventing efficient power flows across the country, undermining both domestic consumption and industrial growth.
Demand itself is underdeveloped. Despite vast hydropower potential, Nepal still relies heavily on imported fuels such as LPG for cooking. Electrification of these sectors has been slow, limiting the creation of a stable domestic demand base. Taken together, these challenges highlight a core gap. Nepal has focused heavily on generation, but far less on the ecosystem required to support it. Hydropower cannot drive economic transformation unless electricity can be reliably sold, either at home or abroad.
A Test of Delivery
Nepal is at a rare political and economic inflection point, where authority, intent, and public expectation are more aligned than they have been in years. The rise of the RSP has not only changed electoral outcomes, but also altered how power is exercised. The question now is simple: can this mandate deliver?
Unlike past governments built on fragile coalitions, the current administration holds a commanding majority. This will reduce legislative gridlock. Long-stalled laws related to investment, taxation, infrastructure, and financial sector reform can, at least in theory, move faster.
Early signals suggest the government is trying to use this space. Some outdated laws are being repealed or amended. Enforcement agencies have stepped up investigation into financial irregularities, including money laundering. At the same time, there is renewed focus on simplifying procedures for businesses, from registration to regulatory approvals. This has begun to change the conversation from what should be done to whether it will actually be done.
For the private sector, corruption and rent-seeking have remained the central concerns. As Bagaria puts it, improving public service delivery is very critical. “If the government can make strong progress in governance and service delivery, it will significantly boost private sector confidence,” he added. For years, Nepal’s economic reform story has not been constrained by a lack of ideas. Policy reports, private sector recommendations, and institutional studies have repeatedly identified what needs to be done. The problem has been execution, slowed by political instability, frequent leadership changes, and an administrative system that has often struggled to follow through.
Economist Bhoj Raj Paudel points to procurement as a case in point. “Our procurement rules are rigid and disconnected from ground realities. They leave little room for genuine mistakes, threatening them the same as corruption. That discourages decision-making and slows projects,” he added.
Paudel also points to a deeper institutional gap: the lack of learning “Large projects, whether funded by ADB, the World Bank, or others, have faced repeated delays. But their lessons are rarely documented or shared. What went wrong in projects like Melamchi or major highways? Without institutional learning, the same mistakes will repeat,” he added. The current mandate removes many of the usual excuses. It creates space to fix long-standing bottlenecks and send a clearer signal to investors that reform efforts are serious this time.
But it also raises the bar. The idea of a $100 billion economy is no longer just a slogan. It is a benchmark against which performance will be measured. Intent will not be enough. What will matter is delivery—how quickly laws are passed, how well they are implemented, and whether they translate into investment, jobs, and sustained growth. This is what makes the moment different. Nepal has, in the past, had ideas without political backing, and political change without economic direction. Now it appears to have both. Whether that translates into real transformation will depend on how consistently the government uses this window.
Rethinking Remittances
One of the most overlooked structural issues lies in how external income flows shape the economy. Remittances have long been one of Nepal’s strongest economic pillars, and one of its most complex constraints. Remittance inflows account for roughly a quarter of Nepal’s GDP, placing the country among the most remittance-dependent economies in the world. These flows support household consumption, reduce poverty, and strengthen foreign exchange reserves. During periods of economic stress, whether political instability, natural disasters, or external shocks, remittances have acted as a reliable buffer, stabilizing both the macro economy and household incomes.
But they also shape the economy in less productive ways. Much of this income goes into consumption directed toward consumption—housing, land, and imported goods. That reinforces an import-driven economy and does little to build domestic production. Manufacturing and agriculture struggle to expand. Growth becomes consumption-led, with limited long-term spillover.
This is not unique to Nepal, but the scale makes it more significant. Countries that have used remittances to support long-term growth have done so by channeling these inflows into investment. The Philippines, for instance, has developed diaspora-focused financial instruments, including targeted savings schemes and investment funds, to mobilize remittance income into infrastructure and enterprise. Similarly, Israel and India have issued diaspora bonds at different points to tap overseas savings for national development projects, especially during periods of external financing pressure.
The lesson is clear: remittances become transformative only when they are invested, not just spent. That raises a practical question for Nepal—how to channel these flows into productive use.
One option is to create credible investment instruments for migrant workers. Diaspora bonds, infrastructure funds, or hydropower-linked schemes could allow Nepalis abroad to invest directly in the economy. But these instruments must be credible and competitive. Returns need to be attractive, risks clearly managed, and trust in institutions strengthened. Without that, savings will continue to flow into informal or low-productivity assets.
Hydropower and infrastructure offer particularly strong opportunities. These are long-term, capital-intensive sectors that align well with the nature of remittance savings. If structured properly, they can provide stable returns while supporting national growth. Allowing migrant workers to invest in such sectors, through transparent and well-regulated platforms, could create a direct link between external earnings and domestic capital formation.
At the same time, financial sector reforms are essential. Expanding access to formal banking channels, improving financial literacy, and creating diversified investment products can help redirect savings into more productive uses. The goal is not to reduce remittances, but to improve how they are used. Because in their current form, remittances are sustaining the economy, but not transforming it.
The Financing Constraint
Nepal’s growth ambitions are unfolding within a tight fiscal reality. Government revenues are limited, while expenditure pressures, from infrastructure to social spending, continue to rise. The result is a persistent fiscal deficit, with little room for large-scale public investment. Yet the scale of transformation being discussed requires capital far beyond what the state alone can mobilize.
This gap between ambition and resources sits at the core of Nepal’s development challenge. As Bagaria notes, reaching a $100 billion economy is possible, but only with clear priorities. “Nepal’s resources are limited, and our credibility is not at its highest. The key question is how to allocate these limited resources over the next five years. Otherwise, we will continue the same pattern of incomplete projects. Direction and prioritization are critical,” he said. “For growth, foreign direct investment is essential, which means credibility must be strengthened.”
Domestic private investment, while important, faces its own limits. Borrowing capacity is tied to the size of the financial system, and large, capital-intensive projects often exceed what local investors can finance on their own. This is where foreign direct investment becomes not just useful, but essential. For small, capital-scarce economies like Nepal, FDI brings not only capital, but also technology, expertise, and access to global markets.
Nepal’s own experience supports this. In hydropower, early projects such as Khimti and Bhote Koshi, developed with foreign investment and expertise, played a catalytic role. They demonstrated the commercial viability of large-scale projects and helped build confidence among domestic investors and financial institutions. Without these early FDI-backed investments, the sector’s evolution would likely have been much slower.
The telecom sector followed a similar path. The entry of international players, including TeliaSonera, helped accelerate the development of Nepal’s telecom infrastructure at a time when the sector was still nascent. Foreign participation brought capital, technology, and competitive pressure, all of which contributed to expanding access and improving service quality.
The financial sector offers another example. International joint ventures and foreign partnerships in banking have helped strengthen governance standards, improve risk management, and introduce new products. These developments have supported the broader modernization of the financial system. Taken together, these examples point to a consistent pattern. FDI has often entered at moments when domestic capacity was limited, helping unlock sectors that might otherwise have taken far longer to develop.
Today, the need is even greater. Nepal faces a wide range of investment demands, from hydropower and transmission lines to transport infrastructure, urban development, manufacturing, and digital systems. Public resources alone cannot meet these needs, and relying solely on domestic capital would slow progress significantly. Clear identification of priority sectors, where Nepal holds a comparative advantage, will be key to attracting meaningful FDI.
But investors look for policy stability, predictable regulations, efficient approval processes, and credible dispute resolution before committing funds. Without these, capital will flow elsewhere. The challenge ahead of us is twofold: recognizing the limits of domestic resources, and creating the conditions for external capital to fill the gap.
The country’s past shows that when FDI aligns with national priorities, it can be transformative. The real question now is whether Nepal can scale the experience to meet the demands of a much larger economic ambition. Learning from Others Nepal is not the first country to aim for rapid economic transformation. Many have done it before. Some have doubled or even tripled their economies within a decade. Their experiences offer useful lessons for Nepal.
Take Vietnam for example. The country’s turning point came with the Đổi Mới reforms in 1986, when the government shifted from a centrally planned system to a market-oriented economy. Over the next two decades, Vietnam opened up trade, simplified regulations, and actively courted foreign investment, particularly in export-oriented manufacturing. By the mid-1990s, its GDP growth exceeded 9% in some years, driven by industrial expansion and deeper trade integration with ASEAN and global markets. Sectors like electronics, garments, and furniture expanded rapidly. Exports surged, jobs followed. Vietnam’s experience shows how policy consistency, export orientation, and investment facilitation can drive rapid growth.
Bangladesh took a more sector-focused approach. Until the early 1990s, growth was modest. Its growth accelerated with the rise of the ready-made garments industry. By focusing on textiles, building export capacity, and encouraging private enterprise, Bangladesh created millions of jobs, particularly for women, while sharply increasing foreign exchange earnings.
For over three decades, Bangladesh has averaged growth above 6%. Its economy has transformed from largely agrarian to a manufacturing hub integrated into global supply chains. This highlights the impact of targeted industrialization and sectoral focus.
Rwanda presents another model, particularly in institutional reform. After the 1994 genocide, the country initiated economic reforms in the late 1990s and early 2000s. These included privatization, investment promotion, and governance strengthening. From 2006 onward, Rwanda sustained growth of around 8%, led by services, improvements in the business environment, and increased trade integration. Its experience shows how policy stability and institutional discipline can support growth, even in resource-constrained or post-conflict settings.
Closer to home, regional economies reinforce the same point. India’s post-1991 liberalization combined macroeconomic stabilization with sectoral reforms. This attracted both domestic and foreign investment. Growth accelerated from about 3.5% in the early 1990s to over 6% by the end of the decade, driven by IT, telecom, and manufacturing. Bhutan leveraged hydropower as a core growth engine, using export revenues to fund infrastructure and social development. Sri Lanka, despite political instability, expanded exports in apparel, tea, tourism, and services. “Reflecting on history, the first wave of economic reforms in the early 1990s brought major structural changes in Nepal. Since then, however, we have not seen such a significant wave of reform. The dividends of those early reforms are now being realized in the commercial sector, finance, banking, insurance, and other industries, with many new companies emerging,” Pandey said. “Yet, average growth since the 1990s has been only about 4.2%, which, while not insignificant, has left us lagging behind regional peers. For example, India’s average growth during the same period was around 7%. Economically, we have fallen behind, and governance shortcomings contributed to this situation.”
Despite differences in context, these experiences point to a common set of principles. Policy consistency and predictable regulation build investor confidence. Investment in infrastructure and human capital expands productive capacity. Export orientation allows industries to scale, while institutional discipline sustains growth over time.
Fixing Capital Spending
The RSP manifesto’s strong emphasis is on infrastructure as the foundation of sustained growth is rooted in both economic theory and global experience. It commits to fast-tracking long-delayed national projects, expanding airports, building all-weather expressways, and developing a long-term railway network. These efforts could improve connectivity and lower the cost of doing business. It also proposes issuing infrastructure bonds and attracting investment from the Nepali diaspora, recognizing that domestic savings alone are insufficient to finance such a transformation.
Globally, economies that have sustained high growth over long periods have invested heavily in physical infrastructure. Countries such as China, South Korea, and India relied on large-scale investments in transport, energy, and industrial systems that raised productivity, connected markets, and supported industrialization. Sustained capital formation in these economies deepened markets, reduced logistics costs, and attracted both domestic and foreign investment, reinforcing growth across sectors.
For Nepal, however, the issue is not simply allocating funds. It is about execution. Capital expenditure has remained inconsistent and significantly under-implemented. According to World Bank analysis, Nepal’s total capital spending across all levels of government declined from about 11.4% of GDP in 2020/21 to around 7.8% in 2023/24, well below the 10-15% considered necessary to bridge the country’s infrastructure gap. At the federal level, the share of capital expenditure in the total budget fell from 27.1% to 20.9% over the same period, with only about 62% of allocations executed on average. This means a substantial portion of development funds remains either unspent or inefficiently used.
Recent fiscal data reflects the same pattern. In the current fiscal year, capital spending has been slow, with only about 15.6% of the allocated budget utilized by mid-February 2026, despite significant allocations for development projects. Revenue collection has also fallen short of targets, further tightening fiscal space.
Low capital spending directly weakens demand in the economy. Public investment is one of the few tools available to stimulate broad-based activity in the short term. It creates jobs, drives demand for inputs, and builds confidence in the private sector. When capital expenditure is low or poorly executed, this multiplier effect does not materialize. The result is visible. Industries operate below capacity, private investment remains cautious, and overall demand stays subdued. In practical terms, without a meaningful increase in public investment, especially in infrastructure, market demand cannot strengthen and structural constraints persist. At the same time, high recurrent spending on salaries and administration continues to crowd out development expenditure, limiting resources for transformative projects. Project-level challenges add to the problem. Land acquisition disputes and bureaucratic delays continue to slow progress. In several major road and airport projects, compensation issues have led to long delays and cost overruns, reducing efficiency and weakening investor confidence. Without a sharp improvement in both the scale and quality of infrastructure investment, sustaining growth of 7% or higher will be difficult. Infrastructure is not just a set of projects. It is the backbone of economic transformation.
Effective investment in energy, transport, logistics, and connectivity would expand productive capacity, reduce transaction costs, and stimulate both supply and demand. Increasing capital expenditure, through better project preparation, faster execution, and stronger public financial management, is therefore essential. Not just to build infrastructure, but to create the economic momentum needed for long-term growth.
The Reform Moment Returns
The reforms of the 1990s offer a useful reference point for the current RSP-led government. Backed by a strong majority, the Nepali Congress government reshaped the economy through liberalisation, opening up key sectors and expanding the role of the private sector.
The political transformation of 1990 remains one of the most decisive turning points in Nepal’s modern history. While it is often remembered for restoring democracy, its deeper and more enduring impact was economic. It altered the structure of opportunity, allowing private enterprise to emerge as a central force in shaping the country’s future.
The decades that followed marked a period of transition, during which the foundations of a more modern, private sector-led economy were gradually laid. It was a time of experimentation and adjustment, as businesses responded to new policies and explored emerging opportunities. In many ways, this was a formative phase in Nepal’s economic evolution. Long-standing barriers began to break down. New actors entered the market. The structure of the economy began to shift. The process was not always smooth, but it was transformative.
Nepal now finds itself at a similar crossroads in 2026. A near two-thirds majority government is in place. Much of Parliament is made up of first-time lawmakers. A wave of Gen Z-led political change has reset the country’s political landscape.
The question now is whether the RSP-led government can match that earlier moment of reform and reshape the trajectory of Nepal’s economy.
All Eyes on Execution
Nepal’s $100 billion target has brought clarity to its economic debate. It sets a benchmark against which progress can be measured, not just in terms of GDP, but in investment, productivity, and structural change. The requirements are clear: higher capital formation, stronger exports, improved governance, and consistent policy execution.
The current political mandate provides a rare window. The question is whether it will be used to fix long-standing structural weaknesses, or simply sustain the status quo at a larger scale.
The $100 billion target matters not because of the number itself, but because it forces Nepal to confront a harder question: can it build an economy that produces more than it consumes, exports more than it imports, and creates enough jobs at home to reduce its dependence on migration?
The cover story of April 2026 issue of New Buisness Age magazine.
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