Nepal’s Human Capital Crisis: Unlocking Potential to Drive Jobs and Growth

Nepal’s economic challenge is not primarily about a lack of natural resources, difficult geography, or limited financing opportunities. The real obstacle lies in the underutilized potential of its people. Despite the talent, resilience, and ambition of Nepalis, insufficient investment in education, healthcare, and skills has left much of the country’s human capital underdeveloped. This shortfall is holding back productivity, innovation, and inclusive growth, particularly in poorer and remote regions.

A Global Lesson: People Drive Prosperity

Successful economies worldwide are not simply rich in resources; they thrive because they invest early and consistently in their people. Access to quality education, healthcare, and nutrition builds human capital, creating a healthier, more skilled workforce capable of driving innovation and growth. Without such investments, entire generations fall behind, reinforcing cycles of inequality and limiting opportunities.

Nepal’s Human Capital Snapshot

According to the new World Bank Nepal Human Capital Review, a child born in Nepal today is expected to achieve just 51% of their full productivity potential by age 18. Barriers to quality education, healthcare, and nutrition mean that half of this potential remains unrealized.

This is not merely a lost chance for individuals—it represents a significant productivity loss for the country’s future growth.

Deep Regional Inequalities

National averages mask glaring disparities:

• A child born in Karnali Province is expected to reach only 46% of productivity potential, far below the global average for lower-middle-income countries.

• A child born in Bagmati Province, home to Kathmandu, is expected to achieve 58%, a level comparable to upper-middle-income nations.

These differences are not driven by ability but by unequal access to quality services. Wealthier families often supplement weak public services with private investments, while poorer households are left to depend on overstretched systems.

Education and Labor Market Disconnect

Even for those who manage to acquire education and skills, Nepal’s labor market often fails to provide quality jobs. A child born today is projected to realize just 18% of their productivity potential—one of the lowest rates globally—largely due to limited job opportunities.

• Between 2010 and 2018, only 4 in 10 new entrants to the working-age population secured paid employment.

• Most jobs remain informal, low-paid, and insecure, especially in rural areas.

• Youth unemployment is acute: more than one-third of 15–24-year-olds are not in education, employment, or training.

• Female labor force participation lags at just 29%, half the rate of men.

The mismatch between human capital development and job availability is a critical barrier to Nepal’s long-term growth.

A Call to Action: Investing in People

To reverse this trajectory, Nepal must scale up public investments in education, healthcare, and social protection, ensuring they are well-targeted and effective. Priority actions include:

• Expanding early childhood education, nutrition programs, and healthcare access.

• Strengthening the public education system with better teacher training, modern curricula, and adequate resources.

• Closing gaps between urban and rural communities by investing in infrastructure and outreach services.

Job Creation: The Missing Link

Over the next three decades, Nepal will need to create 6.5 million jobs to absorb its growing working-age population. This demands a strategic shift:

• Encouraging private and foreign investment by making Nepal more attractive for business.

• Promoting entrepreneurship and small enterprises, particularly in rural areas.

• Expanding public-private partnerships to align vocational and technical training with labor market needs.

• Prioritizing digital skills, technical training, and lifelong learning, especially for women and youth in underserved regions.

Shaping Nepal’s Future

The stakes could not be higher. Without bold action, Nepal risks condemning its young people to cycles of limited opportunity and stagnation. But by investing in its people—ensuring every child, whether born in Karnali or Bagmati, can reach their full potential—Nepal can unlock faster economic growth, stronger social inclusion, and a brighter future.

As the World Bank report makes clear, investing in human capital is not only a moral imperative—it is Nepal’s smartest economic strategy.