As long as social injustices serve to unfairly enrich some groups over others, ensuring every group a share in economic growth will stay an elusive dream, as has been in the case of Nepal.

In just seven years, Nepal halved the prevalence of severe poverty. The percentage of the population living on less than $1.25 a day decreased from 53 percent in 2003 to 25 percent in 2010. If poverty were to continue decreasing at this rate, it would only be a matter of a few years before Nepal eradicates severe poverty. In order to achieve this feat, however, Nepali policymakers must realise that it’s the remaining 25 percent that will be the hardest to rescue from severe poverty.

Caste and geography

This poor population mostly belongs to traditionally excluded and discriminated castes, ethnic minorities, and people living in remote areas. While they jointly make over 80 percent of the population living in extreme poverty, these groups lie at the bottom of the social and economic ladder and have a higher concentration of poverty. For instance, a Hill Dalit, traditionally a  ‘lower’ caste, confronts poverty of 44 percent compared to 10 percent of the ‘higher’ caste Hill Brahmins. The per capita income of the Kathmandu Valley is approximately five times higher than that of Far-Western mountain districts.

Even geographical disparities have a strong caste and ethnic dimension in Nepal. Economically sluggish Far-Western mountain districts have a relatively higher concentration of Dalits. Moreover, Dalits are permanent inhabitants in those districts, as most non-Dalit residents  maintain alternate residences or hold property in more accessible districts such as Kanchanpur, Kailali, and Kathmandu.

The differences in the distribution of poverty across groups imply that income redistribution is not sufficient to bolster inclusive growth that is capable of reducing poverty. Had it been so, Dalits would have been the largest group to be lifted out of poverty in Nepal. If we consider the World Bank’s argument, that remittances have driven poverty reduction in Nepal, Dalits’ access to remittances would have alleviated their poverty because the 2011 Census records that Dalits constitute the largest group of emigrants from Nepal.

Horizontal inequality

This bias against certain groups implies that there must be some additional factors perpetuating  poverty. Eminent development economist Frances Stewart defines the group-skewed distribution of wealth arising from systematic discrimination and exclusion as horizontal inequalities. Unpacking of such inequality, according to her, requires an understanding of the multidimensional aspects of poverty that extend across economic, political, and social facets of life. Groups of people with higher concentrations of severe poverty have limited access to social and political—not solely economic—capital.

People from these marginalised groups, especially Dalits, encounter structural discrimination upon entering the market to pursue local entrepreneurship. A Dalit is not free to start a small business in Nepal since customary laws deny Dalits the social capabilities essential to thrive in business. As a traditionally agricultural country, the greatest opportunities in Nepal are found in the production and sale of food, precisely the areas where Dalits experience the most discrimination.

Similarly, Nepal’s economic liberalisation and opening up to international markets have displaced Dalits from their traditional enterprises. But development strategies have never aimed to compensate for their loss. By enforcing structural adjustments to uphold the globally advocated principles of free market economics, Nepal failed to internalise that customary laws and traditional practices could hinder competitiveness in the market.

Neglect of socially-deprived groups in development strategies, however, has its roots in their under-representation in decision-making. Dalits comprise 13 percent of the national population but make up only six percent of the total members in the Constituent Assembly. Dalit also have not held posts within the Council of Ministers in the previous three administrations and never in the National Planning Commission. Moreover, no Dalit holds any executive posts in any of the major political parties. This lack of representation at the highest levels of decision-making bodies impedes the group’s ability to tap into resources with the capacity to transform lives of people living in poverty.

New strategy

Recognising these horizontal inequalities as the causes of the decade-long armed conflict, the Comprehensive Peace Agreement (CPA), signed by the Government of Nepal and the CPN-Maoist in 2006, mandated that Nepal design development strategies to eliminate group-based inequalities. There have been some efforts in this direction, such as the anti-untouchability law and the introduction of the quota system. However, a failure to align these efforts with national development strategies has kept them from achieving their actual objective.

After almost a decade since the CPA was signed, the narrative that economic growth can solely relieve all social ailments by lifting the destitute out of poverty has gained prominence in the development discourse. Development strategies such as the recent three-year development plan do not recognise that the structural discrimination and weak political agencies of the traditionally excluded groups hinder the reduction in poverty.

Aiming to achieve inclusive growth without any strategic and programmatic support is either an act of deceit to the public or a failure of the policymakers to widen their vision. Evidence from Nepal and elsewhere shows that policies that exclusively focus on accelerating growth and managing income redistribution cannot benefit people living in extreme poverty without addressing systematic prejudices.

A shift is needed towards more inclusive growth patterns that are capable of responding to horizontal and vertical inequalities both. Development strategies must prioritise strengthening the political agency of disadvantaged groups and address cultural norms and practices that reinforce inequality and structural discrimination. Adding up these two strategies to economic growth policy can lead to ‘capability-reproducing growth’ that can reduce poverty by setting the country on a sustainable economic growth path. Therefore, Nepal needs to readjust its development agenda in this direction to make this transition to ‘capability-reproducing growth’.

Nepali is a Fulbright scholar studying International Relations at Georgetown University in Washington DC, the US