Moneycontrol Pro Panorama | Why Nepal is in flux? A key answer lies in its growing economic woes

Nepal’s instability does not stem from geopolitics but from its inability to convert potential into progress.

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

This morning, the big headline is Nepal’s social unrest.

To cut a long story short, Nepal's capital, Kathmandu, descended into chaos in early September 2025 as Gen Z-led protests against corruption, nepotism, and a government-imposed social media ban turned violent, claiming at least 19 lives and injuring over 100 others. 

What happened? Clashes erupted after police fired on demonstrators, escalating into widespread unrest that saw protesters storm and set fire to key government buildings, including Parliament and the Prime Minister's residence. The violence forced Prime Minister K.P. Sharma Oli to resign. The social media ban was swiftly lifted, and the army was deployed to restore order, with curfews imposed and flights disrupted. These events were no isolated outburst but the explosive release of pent-up frustration from a generation grappling with systemic failures.

A key reason for this mess is economic unrest—particularly high unemployment. Overall unemployment stood at 10.7 per cent in 2024, far exceeding the South Asian regional average of around 4–5 per cent and the global figure near 5 per cent. Youth unemployment is particularly acute, reaching 20.8 per cent for those aged 15–24—nearly double the world average—and underscoring a profound betrayal of the country's young population. This isn't a temporary setback but a structural crisis rooted in decades of sluggish growth.

Nepal's economy expanded at an average annual rate of about 4.2 per cent from 1996 to 2023, trailing regional peers and failing to create sufficient jobs. While FY25 brought a slight rebound to 4.5 per cent growth, driven by agriculture, hydropower, and domestic trade, it remains inadequate to bridge the employment gap. Compounding these issues is Nepal's heavy dependence on remittances, which accounted for approximately 26.6 per cent of GDP in 2023. While these inflows provide a vital lifeline for families, they mask deeper domestic shortcomings, as millions of young Nepalis seek work abroad rather than building prosperity at home. The nation's vulnerability to natural disasters further exposes the fragility of its economic foundation, disrupting livelihoods and infrastructure.

These economic pressures have bred widespread discontent, amplified by governance failures. Transparency International's 2024 Corruption Perceptions Index ranks Nepal 107th out of 180 countries, with a score of 34, reflecting pervasive impunity that fuels public outrage. The protests, initially sparked by the social media ban and allegations of austerity measures favouring elites, quickly evolved into a broader indictment of inequality, joblessness, and political nepotism. What began as online mobilization snowballed into street battles, revealing a society on the brink.

Nepal’s instability does not stem from geopolitics but from its inability to convert potential into progress. Incremental GDP gains or new infrastructure offer little solace without addressing core issues like youth employment and corruption. Poverty, over-reliance on remittances, and a brittle economic structure have created a volatile equilibrium, where even minor triggers can ignite widespread unrest.

So what is the solution? Without bold structural reforms—fostering inclusive growth, enhancing transparency, and creating domestic opportunities—the recent protests may prove merely a harbinger of greater upheaval. Unless decisive action is taken, Nepal risks losing an entire generation to migration and despair.

Also in today’s MC Pro: Manas Chakravarty’s piece on how global markets are grappling with the clash between cyclical slowdowns and persistent structural pressures, driving unprecedented volatility and reshaping the financial landscape.

And in today’s Chart of the Day, I write about how lower indirect taxes could ease pressure on inflation. There is more on the plate.

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Dinesh Unnikrishnan
Moneycontrol Pro