Can Agriculture Sector Lead Nepal’s Economic Recovery in Post-pandemic Era?

Can Agriculture Sector Lead Nepal’s Economic Recovery in Post-pandemic Era?

Nepalese Agriculture has seen sluggish growth over a protracted period despite introduction of several policies and strategic approaches in the past. The Agriculture Perspective Plan (APP), initiated in 1995 with a 20‐year vision, adopted approach based on huge investments on key inputs identified as irrigation, fertilizers, and rural roads, mainly to selected commodity pocket areas. Based on it, the government of Nepal formulated several broader policy frameworks. Of those, Agriculture Development Strategy (ADS) and National Agriculture Policy 2004 remained main policy documents to date. All those policies are hailed as sound policy documents but suffered badly in implementation. In many cases, they lacked the supporting legislation and resources for effective implementation.

This COVID-19 pandemic has brought enormous challenges and opportunities to Nepalese agriculture. At a time, when major sources of government revenue such as remittance, tourism & export are threatened by the pandemic impact, agriculture sector has remained an alternative to absorb those economic shocks, revive & lead national recovery. In the last two decades, agriculture sector has been hit hard by mass out flow of people leaving this occupation to take up foreign employment. As a result, fertile lands in mid & high hills has remained uncultivated or under-cultivated and country started importing significant amount of staple food and vegetables. The import statistics are simply alarming despite pesticide issues in fresh food & vegetables came to public attention in recent years. This simply indicates there is no way enough domestic production to prioritize human health to imported fresh food and vegetables with alarmingly high pesticide residue levels. Government agencies since then, have given more attention to regulate pesticide residue issue to some extent.

Experts predict millions of Nepalese youth impacted by pandemic will return home in the next few months losing their employment overseas. This certainly will have multiplier effects on government capability and services. In addition to loosing remittance revenue, current government services and capabilities will be badly stretched to assure supply of food & necessities and employment to those additional millions of its citizen. This could be the high time to integrate those overseas returned youth as well as rest of country into national economic mainstream with new visionary plan targeted in agricultural production and small & medium scale agriculture-based industries. Even though government of Nepal through its line ministries and national planning commission has been doing this job for decades in agriculture, it could be the time to redouble their efforts, reconsider allocation of government resources and streamline all national capacity to revive national economy through enterprise based agriculture which has enormous potential to absorb economic shocks of other sectors and lead national economic recovery.

Minister for Agriculture and Livestock Development, Hon Ghanashyam Bhusal in the early 2020 has come up with five policy areas to bring transformation in agriculture. The policy areas are subsidies in production inputs, delivery of door to door technical services, easy subsidised finance to agriculture sector, crop & livestock insurance, and profit guarantee to farm entrepreneurs by implementation of minimum support prices (MSP). However, most of those policy points are not new, but an honest commitment of relevant ministries to implement would certainly bring changes in positive direction. This blog aims to critically analyse past efforts and suggest future agricultural policy strategies in the light of COVID-19 pandemic and its impact on overall economy.

Redoubling national efforts in agriculture

In Nepal, agriculture is likely to remain major sector of employment for a foreseeable future. It is because of high demand for agricultural products at domestic markets, at least to substitute imports of food commodities, which would create a huge surge in job opportunities in the sector. Subsequent significant incremental growth in the sector can be achieved by improving the productivity of both land and labour. Most of the landless people in the rural region take seasonal work on farms, in the processing and service sectors, or seasonally on small farms during peak periods. As wage employment varies from low-skilled and low-paid daily labour to jobs in technology services that require higher skills and reward higher wages. Agriculture can be expected to generate employment in Nepal over the coming decades provided government support to establish agriculture-based industries such as processing, packaging, transportation, distribution, and marketing of farm produce.

Experts suggest government should take this crisis as an opportunity to accelerate engine of agricultural growth. For this, they need enabling policies and comprehensive climatic zone-specific strategies. Local-level programs in agriculture need to prioritize youth’s choice of enterprise guided by comparative advantage of enterprises. Governments at all levels need to coordinate in order to address such a massive youth unemployment challenge, however, local government at municipality & province levels will have a major role to ply. Programs should aim at integrating youth into agricultural business to retain them in the occupation. Young rural people often do not appreciate agricultural occupations. Campaigns of awareness & education should, therefore, target their interests including information on market requirements, product standards, knowledge & skill needed to succeed in their enterprise, required inputs and new machinery and tools.

For rural youth including those recently returned from overseas employment to realise potentials in agriculture, they should be provided with assurance of access to resources such as capital, land, and skills training. If local government such as Municipality takes initiatives in lease and contract farming of currently uncultivated or under cultivated farmlands of mid and high hills, youth without land would be eager to take any entrepreneurial risks. At the same time, they could be skilled or re-skilled using current institutional infrastructures of government such as agricultural knowledge centres and agricultural training centres. As current government is proposing to provide credits at subsidised interest, they could venture into high value agriculture as a business. That trend could bring a shift in agriculture from subsistence to commercial farming if those needs of young entrepreneurs are timely addressed by the government mechanisms without bureaucratic hassles.

Paradigm shift possible in Nepalese Agriculture

Cereal crops, livestock, fruits & vegetables are major sub-sectors of Nepalese agriculture. On detailed review of past development efforts, we notice that cereal crops mainly rice, maize & wheat are found on the top priority in terms of public sector investment and human resource development followed by livestock. Fruits, vegetables, ornamental flowers, spices, mushrooms, medicinal and aromatic plants, coconut, tea, and coffee are placed in the less priority ladder of government program investment. However, the Agriculture Perspective Plan (1995-2015) recognized some horticultural crops as high value commodities such as large cardamom, coffee, Tea, oranges, and have emphasized on research and development programs for those crops. That brought some policy shift from cereal based agricultural development toward high value horticultural crops. Some progress reported since then in terms of area coverage, production, and productivity of those agricultural commodities are very encouraging.

The investment in horticulture has been rewarding due to expanding domestic and international markets. Hence, the private sector is more attracted to invest in this subsector since the expansion of domestic consumers, as public has become more aware of balanced healthy diet and can afford those products as well. Mid & high hills of Nepal is suitable to sub-tropical and temperate fruits, vegetables and vegetable seeds spanning from west to east. The approach could be further strengthened for horticultural production, especially citrus, apples, potato, off-season vegetables, vegetable seeds, ginger, coffee, orthodox tea, big cardamom and other non-conventional fruits such as avocado, berries, dragon fruit, kiwi fruit and so on. Over the years, it has been demonstrated from farmer’s experience that productivity of the land, especially in hilly regions could be increased manifold by raising horticultural crops, like fruits, vegetables, and other special high value crops. In fact, diversification in agriculture through those crops in the mid & high hills is the best option for increasing farmer’s income in a sustainable way. This sector could make higher contribution to agricultural GDP and provide more income to farm entrepreneurs compared to farming of cereal crops. In a conventional calculation, a farmer in the mid hills of Nepal can earn 4 to 10 times more by growing horticultural crops compared to other crops. Horticultural crops are also environment-friendly and some of these crops can be successfully grown even in the marginal lands. Certain fruit crops are less affected by drought as compared to seasonal cereal food crops. For instance, climatic adversities such as drought & incidence of pests such as American army worms have severely affected rice and maize crops, respectively in recent years in the mid hills.

There are also land pockets in the country which are not suitable for growing field crops but can be efficiently used for growing certain horticultural crops. Tree fruits can be successfully grown along the mountain slope contours with minimum mechanisation, thus providing not only income & employment to hill people, but also mitigate topsoil erosion. Fruits such as Indian gooseberry & custard apple are grown successfully in sub-tropical arid regions not suitable for any other crops. The land with shade and poor drainage, which cannot be used for cultivation of other crops can be successfully cultivated with big cardamom. Hence, the horticultural sector has immense potential of generating employment in farm production & post-harvest processing leading to increased production of low volume and high value crops & establishment of small-scale agriculture-based industries in the mid & high hills of Nepal. Major constraints identified in this sector are lack of strong institutional infrastructures for research and development, reliable transport options, access to market centres, cold store chains, and entrepreneurial management to attract private sector investment. Because of current inefficiency in supply chain, the price of vegetables and fruits received by farmers is only about 30 percent of the retail price the consumers pay.

Efficient supply chain requires development of cold storage chains for reducing the post-harvest losses of fruits, vegetables, and flowers. Improving the post-harvest management & keeping product fresh for longer enhance overall improvement in productivity. Public investments in strengthening rural transport link to domestic air and road transport would worth taxpayers’ money in reducing post-harvest losses, thereby supplying consumers with fresh products timely. Similarly, cereal crops such as rice, maize & wheat; legume crops such lentil, chickpea, arhar and so on could be prioritised in the flat lands of foothills, inner Tarai and Tarai regions with mechanisation to increase land and labour productivity.

The Road Ahead

There is no other right time for Nepal to adopt path to sustainable prosperity for majority of low- and middle-income earners; and agriculture is the only sector that could lead to that path. It is because agriculture can contribute significantly in improving all aspects of quality of life in hilly regions of Nepal. Better quality of life is the state where majority of population are healthy, wealthy, and happy. In reference to the Minister’s five-point strategic policy to transform Nepalese agriculture, the authors of this blog have the following suggestions.

Proactive Intervention and support from government and line agencies to farm entrepreneurs would be needed in

  1. Expansion of Knowledge & Skill:
  • Climatic zone-specific enterprise based on comparative advantages
  • Market potential of agricultural products (exploration of both domestic & international markets)
  • Assurance of inputs and technological services
  • Enterprise specific technical skills
  • Managerial/negotiation skills
  • Product marketing skills
  1. Resources allocation policies: Land & Water, investment capital, farm mechanisation
  • Accessible information on land capability classification at municipality levels; the existing land classification needs to be revisited to update land use pattern
  • Practical policy framework for long term contract & lease farming at municipality levels
  • Practical policy guidelines of resources allocation (i.e. water) at municipality levels
  • Promoting practices of natural water harvesting (constructing farm dams for seasonal water storage)
  • Access to loan with or without collateral
  • Availability of suitable machinery & equipment
  • Availability of servicing and spare parts of farm machinery
  • Establish and enable mechanism to provide necessary skills to operate farm machinery & do minor repair
  • Promoting adoption of mechanisation friendly farm practices
  1. Services delivery: Farm inputs, market information, technology services
  • Assurance of timely availability of fertilizer, seed, chemicals, fuels etc
  • Real time (weekly/monthly) price information of agricultural products
  • Promoting adoption of agricultural product insurance
  • Establish mechanism of regular training & retraining of entrepreneurs on new technology
  • Real time information on disease and pest outbreak
  • Promoting awareness on chemical safety of vegetable, fruits, meats, and other food products
  • Establish and enable testing mechanism in food products before sending to the market (enhanced regulatory framework to abide chemical withholding period)


Agricultural farmland has remained a pivotal natural resource for centuries. Nepal has one of the most fragmented land holdings because of its unique social taboo of ancestral land distributed among sons in the family. Average agricultural land holding is often reported less than 0.5 ha per household which is considered one of the main bottlenecks for transforming subsistence farming to commercial farming with mechanization. It also creates complexities in revision and implementation of land suitability classification, lease & contract farming which is a form of land consolidation and an essential pre-requisite for commercial and enterprise-based farming. In the current and post COVID-19 era, rural industries including agriculture is supposed to play a key role in providing meaningful employment to overseas returned youth and leading national economic recovery of Nepal. Most of the farmland/rice fields of Nepal have its traditionally entitled irrigation resources, also known as “Kulo”. In the process of land consolidation for agricultural commercialization, water resource could be one of the most contentious resource issues for sustained increase in farm productivity. Moreover, construction of small-scale farm dams to harvest rainwater should be encouraged to supplement irrigation needs of horticultural crops in the mid hills. It is often said in academic discussion that, there are no less acts, rules, and policies in Nepal but poor implementation & smooth coordination among line agencies are lacking in this sector. Any time is right time to start a good work, let alone this pandemic hit economy. Five themes focused policy strategies adopted by this Agriculture minister at this critical time of national economy, should be well supported by all stakeholders including federal finance ministry with favourable budget allocations. As major stakeholders, National Planning Commission of Nepal & Policy Research Institute-a government policy think tank, could work together in advising stakeholder line ministries of pragmatic & synchronised policy advice to accelerate national economy through modernized agriculture which could have a huge impact in the long run.

About the authors:

This blog is written from a summary of authors’ presentation at a Policy dialogue series 1 between Nepal Policy Institute & National Planning Commission of Nepal on 20 May 2020, and another subsequent dialogue between Nepal Policy Institute & Policy Research Institute of Nepal government held via zoom conference on 31 May 2020. This is authors’ opinion and we equally respect alternative diverse views in those issues.

Dr. Ghimire is currently working in Agricultural research in CSIRO Agriculture & Food, and is also current Secretary of Nepalese Association of Agriculture, Forestry and Environment in Australia (NEPAFE), a Nepalese professionals’ association in Australia registered in New South Wales, Australia.

++Dr. Devkota is an Agricultural Economist and is currently Research Fellow at Institute for Studies and Development Worldwide (IFSD), Sydney, Australia