NRB reveals stark provincial GDP disparities: Bagmati contributes 36.71%, Karnali 4.2% to Nepal’s GDP

Kathmandu / June 21: Bagmati Province has a significant share in Nepal’s GDP, with the province accounting for contributing 36.71 percent of the national economy.

Similarly, the historically and geographically remote Karnali Province has a share of only 4.20 percent in the country’s GDP. This shows a huge disparity in the province-wise economic activities across the country, shows a half-yearly province-wise study report unveiled by Nepal Rastra Bank (NRB)

Among the other provinces of the country, Koshi Province contributes 15.80 percent and Lumbini Province contributes 14.20 percent. Madhesh Province, considered the fertile land of the Terai, contributes 13.08 percent to the country’s GDP.

Gandaki Province, the area having a high potential for tourism, contributes 8.98 percent and Sudurpaschim Province contributes 7.03 percent. In this way, Bagmati alone accounts for more than one-third of Nepal’s GDP, while the remaining six provinces have shared the remaining share with very little economic activity.

The NRB report also shows that there is also a huge gap between the provinces in terms of economic growth. Due to the rapid activities in the services and infrastructure sectors, and estimated economic growth rate of Bagmati Province to remain 5.40 percent and that of Gandaki Province will be 5.01 percent in the current fiscal year. However, the initial projection that the economic growth rate of Madhesh Province will shrink to only 1.31 percent indicates that the economic slowdown is prevailing in the Terai districts.

Due to the low development of infrastructure, the traditional nature of agriculture and the weak capacity of budget spending at the local level, provinces like Sudurpaschim, Karnali and Madhesh are not able to make the expected economic leap. As development priorities are limited to Kathmandu and its surrounding areas, the people of remote areas have not been able to reap the economic dividends of federalism, reads the NRB report.

The centralization of financial resources and investment by banks has further exacerbated this regional disparity. The fact that 65.52 percent of the country’s total deposits collected in banks and financial institutions and 60.33 percent of the total credit flowing is concentrated in Bagmati Province alone. In contrast, Karnali Province maintains only 1.22 percent of total deposits collection and 1.11 percent of credit flow. The situation is similar in Sudurpaschim Province, where only 2.35 percent of total deposits and 2.79 percent of credit have been reached.

Even in Madhesh Province, total deposits are limited to 5.54 percent and credit flow is limited to 8.67 percent. The practice of banks collecting deposits from rural areas by expanding branches in villages but concentrating the same deposits in cities and disbursing credit only to large commercial sectors in Bagmati Province has obscured the potential of remote areas. The inability to invest local resources in the development of the same area has widened the gap in regional inequality.

In addition, the state of agriculture, industry, and services has also not been able to escape this cycle of inequality. Koshi Province’s share in the development of the agricultural sector is 21.36 percent and Karnali’s is only 5.51 percent.