Nepal continues to remain among the lowest-ranked countries in South Asia in terms of human development even though the country has made rapid progress in the last few decades, a United Nations report says.

Nepal’s human development index (HDI) value in 2021 stood at 0.602 which is third worst after the war-torn Afghanistan and Pakistan, which is also facing an economic crisis lately, according to the report titled ‘Making our future: New directions for human development in Asia and the Pacific,’ released on Sunday by United Nations Development Programme (UNDP).

Higher score means a better human development condition. The HDI is a summary measure for assessing long-term progress in three basic dimensions of human development—a long and healthy life, access to knowledge and a decent standard of living.

Even though Nepal’s social indicators such as life expectancy and schooling years of children remained comparable to other South Asian countries ranked above Nepal, its per capita income has remained second lowest, contributing to the decline in HDI score.

Nepal is also graduating to developing country status in 2026 without meeting the threshold of per capita income requirement. The country, however, has met the threshold related to human assets and economic vulnerability.

According to the report, Nepal’s per capita income calculated based on purchasing power parity (PPP) in 2021 stood at $3,877, which is just above Afghanistan, whose per capita income on PPP basis stood at $1,824.

The PPP is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries.

Economist Pushkar Bajracharya said that Nepal has been doing well in the social sector but has continued to fall behind in boosting per capita income.

“It is because the country has been struggling to create a conducive investment climate,” he said. “Increased private sector investment and the government’s capital expenditure are a must to boost the country’s economy and in turn grow per capita income.”

Nepal’s economy grew by just 1.9 percent in the last fiscal year 2022-23 and it is projected to grow by 3.9 percent this year, according to the Nepal Development Update report released by the World Bank in early October.

Even though Nepali economy was doing fine before the Covid-19 pandemic, the globe-encompassing scourge brought it to its knees. “Nepal never achieved sustained high economic growth amid such unprecedented environments,” Bajracharya said. “The country needs to achieve over six percent economic growth for at least 6–7 years to drastically improve its per capita income.”

Though Pakistan’s per capita income is better than that of Nepal, it lagged behind Nepal in HDI because of its poor social indicators. According to the UNDP statistics, Pakistan’s per capita income on PPP basis was $4,624 in 2021. “Nepal performed well in the social sector because most people want to send their children to school,” Bajracharya added. “Mobilisation of non-government organisations at the gross root levels also contributed to help the social sector.”

Sri Lanka, which ranks the highest among South Asian countries, has the HDI score of 0.782 followed by the Maldives with 0.747. They have been categorised among the countries with high human development in the Asia Pacific region. The Maldives has the highest per capita income on PPP basis at $15,448 followed by Sri Lanka’s $12,578.

Nepal, along with Bhutan, Bangladesh and India, falls into the category of countries with medium human development. Under this category, Bhutan has the highest HDI score and per capita income and India the second highest per capita income.

Pakistan and Afghanistan have been categorised among the countries with low human development.

Nepal’s position in terms of human development has not changed over the last five years.

By releasing the 2018 Statistical Update about HDI in September 2018, the UNDP had stated that though Nepal made solid progress in human development since 1990, the country lagged behind other South Asian countries.

At that time too, Nepal was above Pakistan and Afghanistan but behind other South Asian countries.

Between 1990 and 2017, Nepal’s HDI value increased from 0.378 to 0.574, an increase of 51.9 percent. Nepal’s per capita income as per purchasing power parity increased by about 111.6 percent, according to the UNDP update released in 2018.