Discourses on

Nepal’s Development
(Volume I)

Editors
K. Suman
Mantu Khatri
First Edition 2018 (2074 V.S.)
© Nepal Policy Research Center
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Agricultural Development in Nepal:
Emerging Challenges and Opportunities
Devendra Gauchan
Introduction
Nepal is a land-locked, Himalayan country with China (Tibet) to the
north and India on its southern border. The country ranks 144th out
of 188 countries in terms of its Human Development Index (HDI) of
0.558 in 2015 (UNDP, 2016). Nepal’s Gross National Income per
capita (US$ 730) is the second lowest after Afghanistan in South
Asia and its growth rate is very low of 1.5 percent per annum (World
Bank, 2017). The poverty headcount ratio, defined as the proportion
of the people living below the national poverty line is 25 percent
(CBS, 2011). Nepal has made significant progress in poverty reduction
in the last two decades, yet poverty is still widespread, exhibiting
high rates food insecurity and malnutrition, both in rural and peri-
urban areas. Poverty is largely a rural and agricultural phenomenon,
where rate of poverty incidence is higher (33 percent) in rural areas
as compared to only 7 percent in urban areas (NPC, 2017). About 60
percent of the households have only six months of food sufficiency
with undernourishment of 16 percent of the population in the country
(MoAD & FAO, 2016).
Poverty reduction efforts and economic growth of Nepal are
determined largely by the growth of its agriculture sector, which
contributes for one-third of the Gross Domestic Product (GDP). The
sector is pivotal to increase income, alleviate poverty, and uplift living
standard of two-thirds of Nepali people where about 80 percent of
the people are rural. It is a major source of people’s food security,
income and export earnings, and also a major engine of pro-poor
growth, social welfare and human development. The importance of
agriculture as the single most important provider of livelihood for
two-third of Nepal’s population implies that the improvement in this
sector will have a decisive effect on ensuring food security and poverty
reduction. Given the importance of the agricultural sector, this paper
212  Agricultural Development in Nepal
aims to document the current status of agricultural growth,
productivity, public support measures, and its role in economic
development including emerging challenges and opportunities of
agriculture in economic development, poverty reduction and
improving livelihood of Nepali people.
Agrarian Structure
Agriculture lands accounts for about one-third of total land resources
available in Nepal. They are characterized by a very small land
holdings scattered to different plots, where irrigation availability is
very limited and seasonal. Table 1 presents trend of land holding
patterns among farm households from three National Living Standard
Survey (NLSS) of 1995/96, 2003/04, and 2010/11. In the last 15 years,
the average size of land owned by the household is declining from
1.0 ha from 1995 to 0.70 ha in 2010. The land less households is
increasing from 17 percent to 26 percent in the same period.
Furthermore, proportion of marginal farm size is increasing from 40
percent in 1995 to 53 percent in 2010, whilst proportion of small
farmers is declining slightly and those of larger farmers are declining
significantly from 13 percent to 4 percent in the same period. At
present about half (53 percent) of the farm households own less than
0.50 ha land (marginal farms) with low farm labor productivity, and
low level of intensification (CBS, 2011). In addition, these land
holdings are frequently fragmented, averaging 3.1 parcels with
average size of 0.21 ha per parcel (CBS, 2012).
Furthermore, in recent years agricultural area is also declining as
a result of conversion of prime agricultural land into non-agricultural
uses (e.g., housing, industries and infrastructure development) through
rapid urbanization and rural-urban migration (Gauchan, 2015).
Evidence shows that net cultivated area has declined by 5 percent
from 2.65 million ha in 2001 to 2.52 ha million in 2010 (CBS, 2012).
The national statistics show that about 54 percent of the cultivated
area is irrigated, but in reality only one-third of the area (36 percent)
has year round irrigation facilities (MoAD, 2015). It is estimated
that about two-third of the cultivated area is rainfed, where agricultural
production is risk-prone and marginal. Population density on
cultivated land is also high where about 10
 Discourses on Nepal’s Development  213 214  Agricultural Development in Nepal

people are dependent on a hectare of land for their livelihood.

Agroecology and Farming Systems

2010/11
Geographically, the country is divided into three ecological regions

76.6

26.1
52.7
42.9
mainly running from east to west: Mountain, Hills, and Tarai

0.7

4.4
accommodating 7.3, 44.3, and 48.4 percent of the population
respectively (MoAD, 2015). The total land area covered by the
2003/04

Mountain, Hills, and Tarai respectively is 35 percent, 42 percent,

79.9

22.5
44.8
47.2
and 23 percent (CBS, 2012). Even though, they are broadly classified
0.8

8.0
Table 1. Trend of Land Holding Among Farm Households, 1995–2011

three ecological zones, there are wide range of variations from

lowland to highlands due to altitudinal differences. The altitudes in
the country vary dramatically from a minimum of 60 meters in the
1995/96

low lands (e.g., Kechana, Jhapa district) to a maximum of 8,848 m

16.9
40.1
47.0
12.9
1.1
—

(Mount Everest), the highest peak of the world in the Himalayas. A

high agro ecological diversity exists in Nepal ranging from flat
lowlands, and rivers basin, to rugged mid Hills and steep Mountain
Marginal farms (% Households operating less than 0.5 ha)

slopes with subtropical to warm temperate, cool temperate, and alpine

Large farms (% Households operating 2.0 ha and above)

to arctic type climates (Figure 1). These ecological zones have their
own unique resource endowments, cropping patterns and farming
Small farms (% Households operating 0.5-2.0 ha)

systems leading to differences in commodities produced, production

levels, and productivity. There is also a high socioeconomic diversity:
with more than 100 ethnic groups with different culture, communities
Agricultural households without land (%)

and economic conditions (large absentee landlords to landless tenant

Average size of agricultural land (ha)

farmers) with diverse needs for agricultural technologies and support

services. Due to wide agro ecological and socioeconomic diversity,
the country has a high diversity and complexity of farming systems
Agricultural households (%)

with adaptation to specific crops and commodities in specific

altitudinal zones. Rice based farming system is predominant in Tarai,
inner Tarai, and lower part of mid Hills, while maize based system is
Land holding pattern

predominant in middle Hill to lower part of high Mountain region.

Source: CBS, 2011.

In rice based system, double cropping of rice is only possible in

subtropics below 1,000 msl in Tarai and Siwalik (inner Tarai), while
single rice cropping is possible until 2,000 msl (exception exists in
Barnali region, where rice is grown up to 3,000 msl in Chumchur of
Jumla district.)1 in middle Mountains where warm temperate climate
is prevalent. The Mountain crops such as buckwheat and naked barley
are grown in high Mountain region up to 4,500 msl, where climate is
 Discourses on Nepal’s Development  215 216  Agricultural Development in Nepal

Figure 1. Diversity of Agro-Ecological Zones and Farming Sys-
tems in Nepal

Plains (Tarai) Nepal

25.16

0.490
0.534
Table 2. Dimensions of Poverty, Human Development,  and Gender Development

5.13
50.8

44.5
41.5
*based on 2011 data. Nepal HDI Report, 2014; CBS, 2011 based on NLSS 2010 data.
23.44

0.468
0.458
4.52
47.9

43.3
37.4
24.23

0.520
0.515
Mountains Hills

5.69
52.8

56.4
42.1
42.27
10.14

0.440
0.430
Source: Gauchan & Shrestha, 2017.

59.5

37.7
52.9
subalpine and alpine type. Pastoral production system with livestock
grazing is possible in arctic climate upto altitudinal range of 5000

Percent population under poverty line

msl. Crop-livestock and forestry integration is the characteristic

Stunting (%) children under 5 years

Gender Development Index (GDI)*
Human Development Index (HDI)*
features in all these systems particularly in higher altitude regions.

Percent food insecure households

Poverty, Food Security, and Human Development
Nepal remains one of the poorest and least developed country in

Socioeconomic features
Asia with 25 percent of the population living below the poverty line.

Female literacy (%)

However, the level of poverty is declining in the country from 42
percent in 1996 to 25 percent in 2010 (CBS, 2011). Similar, Nepal
has achieved good progress in reducing hunger with better ranking

Poverty gaps
in Global Hunger Index (GHI) among South Asian countries. Nepal
has been ranked 72nd out of 119 countries on the GHI in 2016 (IFPRI,
2017). Despite Nepal’s recent progress in poverty reduction, a wide
variation exists across regions and provinces. A recent Oxford-led
multidimensional poverty study carried out jointly with the
government of Nepal revealed a high incidence of poverty in province
6 and 2 with poverty rate of 51 percent and 48 percent respectively
 Discourses on Nepal’s Development  217
(NPC, 2017). The report showed that 7 percent of the urban population
and 33 percent of the rural population are multidimensional poor.
The major contributing indicators to overall poverty in rural Nepal
are malnutrition, insufficient years of schooling and lack access to
basic support services.
Among three ecological regions, Hills and Mountains have higher
poverty rate, high food insecurity, low human development, and low
gender development indicators (Table 2). The rate of female literacy
and nutrition status (% stunting of children) is very low in the
Mountains. Furthermore there is a high poverty gap index than that
of the plains and mid-Hills due to its limited availability of arable
land, risk-prone environments and low productive agriculture with
poor network of transportation, and limited market availability. In
addition, Mountains have low food security, high gender gaps, low
economic, political, and social empowerment indices and overall low
human empowerment index. Low level of poverty and better human
development and empowerment indices in Tarai are due to its
relatively higher level of economic infrastructure, productive
agriculture, and better non-farm income opportunities.
Furthermore, the incidence of poverty increases systematically
from east to west and from lower to higher altitudes from the Tarai to
Hills and the Mountains (CBS, 2012). Factors responsible for
regional/spatial disparity include per capita land holding, availability
of employment and income opportunities, infrastructure, and access
to education and health services and markets. Clearly, poverty is the
foremost problem of food insecurity in Nepal and its eradication will
have the greatest impact on enhancing food insecurity. According to
Nepal Thematic Report on Food Security and Nutrition (2013), 25
percent of households are considered food poor, i.e., the total value
of their food consumption is insufficient to ensure a basic diet (MoAD
& FAO, 2016). Despite agro-based country, recently, Nepal is
importing a large volume of food particularly rice, fruits, and vegetable
from overseas. Recent data show that Nepal imported food amounting
a total of NPR 134 billion in 2016/17 (https://www.onlinekhabar.com/
2016/10/489353#). Among the poor, the households in Hills and
Mountain regions are more vulnerable to food insecurity as per capita
cereal production is lower and food prices are higher than in the
218  Agricultural Development in Nepal
Tarai region. Seasonal food insecurity is also most prevalent in the
remote Hills and Mountains due to limited availability of land for
cultivation, poor network of transportation, road blockage from
landslides during monsoon seasons and limited market availability.
Role of Agriculture in Economic Growth and Poverty Reduction
Agriculture sector forms the basis for overall development of the
country. The sector is pivotal to increase income, alleviate poverty
and uplift living standard of Nepali people. To a large degree, poverty
is a product of unproductive agriculture. The consequences of
agricultural development for the poor can be direct through improved
agricultural incomes, or indirect through the impacts on employment,
wages, prices of products, and productivity of non-farm assets. Recent
evidence consistently shows that agricultural growth is highly
effective in reducing poverty. Gross Domestic Product (GDP) growth
originating in agriculture is about two times more effective in reducing
poverty than GDP growth originating outside the sector (World Bank,
2008). Many countries that had fairly high agricultural growth rates
saw substantial reductions in rural poverty. Agricultural growth was
the precursor to the industrial revolutions that spread across the
temperate world, from England in the mid-18th century to Japan in
the late 19th century. World Bank (2008) reports that more recently,
rapid agricultural growth in China, India, and Vietnam was the
precursor to the rise of industry. Growth in agriculture sector was
key to China’s massive and unprecedented reduction in rural poverty
and also India’s slower but still substantial long-term decline in
poverty. Vietnam also achieved significant economic growth from
increase productivity in rice sector through land reform, trade, and
price liberalization. Similarly Bangladesh was able to reduce poverty
significantly from increase production of new rice technologies (Boro
rice) resulting from rising farm and rural non-farm earnings and lower
rice prices.
Reforms in agriculture, which account for one-third of GDP and
two-thirds of the labor force, are key to further poverty alleviation,
improving productivity and releasing labor for new sources of growth.
Increased food production is critical for reducing food insecurity and
poverty that can be achieved through reduced cost of production and
 Discourses on Nepal’s Development  219 220  Agricultural Development in Nepal

increased profitability of agriculture in addition to increased supply Figure 2. Strategic Framework of the ADS

and falling prices, as happened elsewhere in South Asia as part of
the green revolution (Gauchan, 2008). Failure to prioritize and
emphasize food production in the past is a major weakness of the
country in achieving the targets of food security and aim of poverty
reduction. Agricultural growth can form a pre-condition for the release
of labor from agriculture to the rest of the economy. In addition to
this, output growth in agriculture is also likely to result in a decrease
in the price of food, which is a wage good, and hence induces
economic growth (Tiffin & Irz, 2006). Similarly, Stringer (2001)
argues that the agricultural sector performs important social welfare
functions in developing nations. For example, during an economic
downturn or an external income shock or financial crisis, agriculture
can act “as a buffer, safety net, and as an economic stabilizer”.
Therefore, progress in sustainable development of agriculture could
be made by sustainable intensification of agriculture, closing “yield Source: MoAD, 2015.
gaps” on underperforming lands, increasing production efficiency,
better management of land and natural resources, developing households, and strengthened farmers’ rights. The ADS also
technologies, policies and strategies to climate change adaptation recognized the critical importance of farmers’ rights and provisioned
and shifting diets and reducing waste (SDSN, 2013). farmers’ participation in different institutional mechanisms to ensure
their functional involvement at the national and local level. This is
Agriculture  Development  Strategy  (ADS)  for  Sustainable currently a major strategy driving agricultural growth. However, the
Agricultural Growth strategic framework lacks institutional modality, structure and
The Agriculture Development Strategy (ADS) is an important policy framework for the implementation of agricultural development
document recently formulated and implemented in Nepal for strategy in the context of federal system particularly at the provincial
transforming and modernization of agricultural system after phasing and local level as it was formulated before the actual implementation
out of Agricultural Perspective Plan in 2015 (MoAD, 2015). This is of new federal system.
being implemented from 2016 with focus on governance, productivity,
profitable commercialization and competitiveness as the key Status of Agriculture Growth
components for the growth (Figure 2). Agriculture growth in Nepal has been low and highly vulnerable in
It aims to sustainable agricultural growth by promoting social and recent decades. In the last one decade, the trend shows that annual
geographic inclusiveness, sustainability, development of private and growth of per capita agricultural gross domestic product (GDP) is
cooperative sector, and connectivity to market, information, and about 3–4 percent from 2003/04 to 2013/14 (Figure 3). The growth
power infrastructure. The acceleration of inclusive, sustainable, multi- rate in agriculture was lowest in 2005/06 and 2012/13 to modest in
sector, and connectivity-based growth is expected to result in 2008/09 and high in 2006/07 and 2013/14. The low growth in 2005/06
increased food and nutrition security, poverty reduction, agricultural and 2012/13 is due to low and erratic rainfalls causing severe drought
trade competitiveness, higher and more equitable income of rural during the monsoon seasons. The performance of agriculture has been
 Discourses on Nepal’s Development  221 222  Agricultural Development in Nepal

even worse in 2015/16 due to mega earthquake of 2015 April–May

and the subsequent economic blockade in later part of 2015 in the
country (NPC, 2017).

Agricultural Productivity
Increasing cereal crop productivity through the application of modern
science to agriculture has been most successful in land-scarce
economies, particularly in Asia. The output growth is the product of
returns to investments in agricultural research, extension and irrigation
infrastructure. Evidence from Asia shows that rising land values
caused by increasing land scarcity, and the rapid adoption of crop
intensification technologies have been key factors contributing to
productivity growth for rice and wheat in much of Asia (Pingali &
Heisey, 1999). Production and yield growth rates remain the most
Figure 3. Trend in Growth Rate of Agriculture GDP in Nepal (%)

commonly used indicators of productivity growth in developing

country agriculture. The area, productivity and yield growth of the
last 30 years for major cereals (five food crops) is presented in Table
3. The analysis of compound growth rate shows that the area growth
is low, yield growth is modest, while production growth is 2–4 percent
depending upon the type of cereal crops. Area growth of barley is
negative, production growth is static and yield growth is also very
low hovering 1 percent per annum. The production and yield growth
for rice is also lower than 2 percent while production growth of maize
and wheat is modest with 2–4 percent per annum. The aggregate
cereal (rice, maize, wheat, millet, barley) yields and production growth
rate for Nepal in the last three decades (1984–2014) increased more
than 1 percent with production growth of 2.5 percent per annum
respectively. However, except wheat, yield growth of most of these
major cereal crops in Nepal are considerably lower than in
neighboring countries in South Asia. Despite the gradual increasing
trend in the yield of major cereal crops (wheat, maize, rice), the
national average is below 50 percent of the attainable yield in the
Source: MoF, 2015.

farmers’ fields. This occurs because, two third of the agriculture is

under rainfed condition that depends upon the mercy of monsoons
and largely of subsistence in nature.
 Discourses on Nepal’s Development  223 224  Agricultural Development in Nepal

Status of Support Measures in Agricultural Development
Presently public sector is still a major player for agricultural research
(new seed of varieties, source seeds, fertilizer), extension and
provision of support services (subsidies, input supply etc.) both in
accessible areas and remote regions, while private sectors are
Table 3. Growth Trend of Major Cereal Food Crops in the Past 30 Years in Nepal

emerging in the provision of input supply and agro advisory services

associated to their agricultural inputs particularly in commercial

Compound growth rate: Note: (***), (**), & (*) significance at 1, 5, & 10 percent level.
1.65***
1.92***
2.58***
0.43***
1.00***
1.71***
Area, production and yield growth from 1984–2014

production systems and market accessible areas (Gauchan, 2015).

Yield

Similarly community based organizations (CBOs) are evolving to

play middle role that both private and public sectors are not being
able to do it. Community sectors are playing major role mainly in
mobilizing communities in agricultural development. The major
support services currently used in agricultural production include
Production

research and extension promotional activities (e.g., demonstration,

1.95***
3.95***
3.85***
2.39***

2.52***
0.37ns

seed mini kits), price and transport subsidy on fertilizers, seeds and
planting materials, quality assurance services, regulation on import
and export, training and networking, infrastructural support (storage,
equipment etc.), and information support services on quality seeds,
new varieties and their availability. The objective of support measure
is to promote use of quality inputs (e.g., seeds, fertilizers, pesticides,
farm machinery) in affordable price to farmers for increasing
productivity and ensuring food security. It also aimed to stimulate
0.29***
1.13***
1.27***
1.95***

0.81***

input market development for commercialization of agriculture by

-0.6*
Area

offsetting high initial distribution costs until the market expands,

economies of scale are realized, and prices decline (World Bank,
Data Source: MoAD, 2015.

2008). In the fiscal year 2013/14 the Government of Nepal allocated

NPR 6.07 billion as subsidies for key physical inputs: (i) chemical
and organic fertilizer, (ii) improved seed, and (iii) mechanization of
Combined cereals

NS=nonsignificant.

agriculture (MoF, 2014). Government has also introduced incentive

Cereal Crops

schemes such as subsidy on premium (75 percent subsidy on premium)

for agricultural insurance, subsidy on use of organic fertilizers, bio-
pesticides and farm machinery, incentives for mechanization of
Barley
Wheat
Maize

Millet
Rice

agriculture (relaxation on import duty for agricultural machinery such

as tractors), incentives for opening up agro-enterprises especially
targeted to young people, land ceiling waiver for agro-enterprises
and provision of special soft loans for agriculture through Nepal
Rastra Bank (NRB) directives (Gauchan, 2015). But these support,
 Discourses on Nepal’s Development  225
subsidies and incentives are limited and available only to major food
and cash crops in favorable market accessible areas of Tarai and mid
Hills. A large number of farmers located in remote Mountains and
Hills and those involved in subsistence farming of traditional and
underutilized crops have not been able to receive support, subsidy
and incentive measures.
Emerging Agricultural Development Issues and Challenges
Nepal’s long term agricultural development is at risk due to climate
change events, outmigration of labor force, loss and degradation of
lands, environmental pollution, and lack of adequate holistic policy
and investment framework for agricultural development. Agricultural
productivity and profitability from farming are low due to low use of
modern technologies, limited commercialization, and diversification
of agriculture. Despite having comparative advantages of high value
and low volume products such as dried vegetables, coffee, tea,
vegetable and roots, ginger, and cardamom, the country is not being
able to exploit comparative advantages properly. As a result, Nepal
is importing a large volume of foods particularly rice, fruits, and
vegetables from overseas in recent decades as a result of insufficient
production, inadequate availability of food grain, unfair distribution
system and limited access and utilization of food at the inter and intra
household level. Population density on cultivated land is high and a
large proportion of farm households are employed only partially (disgu-
ised employment) thus, fueling labor outmigration. Rapidly changing
markets, liberal policy environment, and climate change are making
agricultural policy-making highly knowledge intensive and complex.
The capacity of policy makers and planners is presently limited to address
in the changing dynamics of market, policy environments and un-
predictable changes in climate. The emerging agricultural development
issues and challenges facing Nepal are briefly outlined below.
Climate Change Impact
Climate change is an emerging threat to sustainable agricultural
development and food availability in Nepal. The country is highly
vulnerable to climate change risks, given the complex topography
with low development of the country, and predominantly subsistence
226  Agricultural Development in Nepal
rain-fed farming system. Warming of temperature and increasing
rainfall uncertainty have brought increasing incidence of climatic
hazards such as drought, flood, landslide, cold-wind, hailstorm, which
have serious effect on the agricultural production, food security and
the people’s livelihoods. Water scarcity is also grooming in agriculture
as a result of drying of water sources caused by adverse climate change
effect (drought, warming) and increasing use and misuse of water
resulting in from improper management, increased cropping intensity
and urbanization. In addition, higher temperature is expected to
increase water demand, where rainfall declines, many will seek more
irrigation to ensure food security and maintain improved livelihoods
(Selvaraju, 2014). However, mainstream agricultural development
policies, programs and activities lack clearly designed road maps
and programs for mitigating and adapting climate change effects in
agriculture. For instance, climate change adaptation programs for
carbon sequestration activities envisaged in Climate Change Policy
(2011) are not being adequately incorporated in mainstream
agricultural policies and on-going programs and activities in Nepal
(Gauchan, 2015). As a result mainstream agricultural development
activities lack focused programs for climate smart agriculture to
address climate change adaptation and mitigation activities.
Outmigration from Rural Areas
Outmigration in Nepal in the last one decade has created chronic
shortage of young and skilled human resources in agricultural
production and agribusiness posing critical threat to ensuring food
security. Even though, labor outmigration has resulted in a large flow
of remittances, it has resulted in critical shortage of human labor in
agriculture and other economic sectors. Estimates show that the scale
of rural out migration and feminization is increasing rapidly in recent
years with almost half of all households (53 percent) has at least one
migrant outside their residential locations with over one-fourth (26.6
percent) of women headed households in 2010 (CBS, 2011). Low
value addition and poor return from farming has triggered
outmigration and less attraction of youth in agriculture. Estimates of
the number of Nepali migrants abroad including seasonal workers in
India and those who use informal channels, is about 4 million—one-
 Discourses on Nepal’s Development  227
third of the working male population (World Bank, 2011). This has
resulted in poor farm management, land abandonment, and increasing
proportion of land remaining fallow. Labor scarcity and high cost of
production in agriculture have also resulted in increasing area under
fallow land, which is more prone to degradation. Moreover, it has
also triggered erosion of unique agrobiodiversity with loss of local
knowledge, practices and skills held by farmers and local communities
in conservation and sustainable use of crop varieties and animal breeds
and their production systems.
Loss of Prime Agricultural Land and Land Degradation
Liberalization, urbanization, and modernization of production systems
have brought several current and emerging issues to be resolved for
sustainable development of agriculture in the country. The major
current and emerging issues include loss of prime agricultural land
into non-agricultural uses (e.g., plotting), land degradation, depleting
water resources, and environmental pollution. Nepal has experienced
huge loss of prime agricultural land in major cities and market centers
of Tarai and Hills as a result of rapid urbanization and unplanned
infrastructure development. Currently 28 percent of total land (3.26
million ha) is degraded which includes 36 percent of the forest, 37
percent of the rangeland and 10 percent of the agricultural land
(MoEST, 2008). Estimates show that about 10–200 tons of soils/
hectare/year in Nepal are lost every year depending upon types of
land use adopted (MoPE, 2002). Estimate of the latest agricultural
census (2011) shows that the availability of area of agricultural land
has declined by 5 percent (128,000 ha) from 2001 to 2010 (Central
Bureau of Statistics, 2012). In addition, degradation of agricultural
land is a major problem affecting agricultural productivity and
national food security. Population growth, rural poverty, and lack of
alternative livelihood options have forced farmers to cultivate
marginal lands, encroach forests, overgrazing of livestock, and loss
of biomass resulting in continued land degradation. Soil erosion and
landslides resulting in from inappropriate land uses are major causes
for land degradation particularly in the Hills and Mountains.
Furthermore, land degradation and loss of fertile farm lands are also
caused by riverbank cutting, flooding, sedimentation and water-
228  Agricultural Development in Nepal
logging. A great part of land degradation in Nepal has been linked
directly or indirectly to changes in land use patterns.
Environmental Pollution and Loss of Agrobiodiversity
Modern agriculture often lies at the center of the complex set of
problems surrounding environmental pollution and ecosystem
degradation in addition to negatively impacting on human health and
biodiversity. Excessive use and misuse of pesticides and other
agrochemicals is common in commercial production system-mainly
vegetables and cash crops in Tarai and market accessible Hills.
Increase incidence of pest and disease outbreaks in production, post-
harvest and storage as well as their easy availability has promoted
their excessive use and misuse. In addition, increasing presence of
pesticide residues and microbial contamination in food grain,
vegetables, and milk is observed in supply chains throughout the
country. As a result, trend of environmental pollution (air, water, and
soil pollution), destruction of ecosystems and adverse effect on public
health, animal life, and micro flora is increasing. Pesticides related
problems in Nepal are difficult to notice except poisoning cases which
however, may have posed long term effects to the non-target
organisms, environments and human-beings (GC, 2011). The country
lacks adequate facilities for pesticide testing, pest risk analysis, and
food quality testing to monitor, reduce and control their haphazard
us for minimizing negative impact on human health and environment.
Similarly, currently available quarantine check posts for crops and
animals are inadequate and constrained by adequate laboratory and
infrastructure facilities to regulate import of disease and pest free
agricultural crops, weeds and animals. The progress on the
development of food safety programs and adoption of Integrated Pest
Management (IPM) approaches have also been inadequate to
effectively enforce them to weak institutional and regulatory capacity
of the country. Existing Pesticide Act (1991 amended 2005) does not
have legal provisions for judicious use of pesticides, policy on IPM
and actions to legally enforce and minimize pesticide residues in
food and agricultural products (Belbase & Khanal, 2014).
Furthermore with modernization and youth migration and haphazard
use of agrochemicals, a rapid erosion of agrobiodiversity is occurring
 Discourses on Nepal’s Development  229
with the loss of local knowledge, practices and skills held by farmers
and local communities in conservation and their sustainable use. Over
hundreds of traditional crop varieties and animal breeds are either
disappearing or under risks of extinction with modernization and
commercialization combined with lack of adequate incentives and
support measures for their conservation and sustainable use.
Weak Governance of Agricultural Research and Development
Presently agricultural research and development (R&D) systems are
governed by state-led separate research and extension organizations.
Agriculture research and extension activities are very weak and those
available are mainly along the lines of commodity and disciplinary
research with incentives for working in urban centers rather than for
holistic multidisciplinary problems solving in the remote farmers’
fields, where food insecurity and poverty is high (Gauchan, 2014).
Furthermore, the present R&D institutional framework has not
adequately considered the role of educational institutions and non-
state-led organizations which include private sectors (agro
entrepreneurs, input dealers etc.) and community based organizations
(cooperatives, farmers and users groups, youth clubs etc.) in the
participation and provisions of agricultural R&D activities and
support services. In the changed context of federalism and
decentralized governance, the available R&D framework and
structure has not been able to transform fully to provide adequate
and equitable access of agricultural technology and agricultural inputs
to different social category of farmers. Due to poor governance of
agricultural R&D, Nepal lacks adequate investment in agricultural
R&D, institutions, road networks, and market infrastructure for
agricultural development. Rising production cost from, low
technological base, poor infrastructure, and increased input prices
have reduced profit margins and farm income, and created
disincentives to adopt yield-increasing technologies and practices.
Opportunities and Ways Forward
Nepal has significant potentials to enhance production, productivity
and income of farmers by reducing farm level yield gaps through
increasing use of improved technologies, inputs (fertilizers), credits,
irrigation facilities and improving rural roads, electricity,
230  Agricultural Development in Nepal
communication, and marketing facilities. Despite substantial
constraints such as a difficult terrain, poor connectivity, and land-
locked situations, opportunities exist for increased agricultural
production and marketing through modernization and
commercialization. Nepal is blessed with a broad range of
agroecological zones and proximity to vast markets in India,
Bangladesh, and China. The country has several underutilized
comparative advantages in terms of diverse altitude, ecology, and
natural isolation barriers appropriate to production of quality products
and niche commodities. The Mountains have a natural advantage in
livestock and medicinal herbs, while the Hills have comparative
advantage in a variety of crops, such as off-season vegetables,
temperate and subtropical fruits (citrus), cash crops like, tea, coffee,
seed production, and spices. The flat lands of Tarai have growth
potentials in food production, vegetables, fruits, oilseeds and cash
crops. In addition, the country has a significant social capital at the
community level consisting of a culture of active community and
farmers groups in forestry, agriculture, irrigation and micro-finance
(saving and credits) including low labor costs and growing youth
population to meet increasing human resource needs. The country’s
proximity to a large market in India, Bangladesh, and China provides
opportunity to develop agroindustry with comparative advantage for
export of quality and niche commodities. Moreover, the country can
take advantage of R&D spill-ins from India and other neighboring
countries on agricultural research. A great potential exists to increase
productivity and income of resource poor farmers by strengthening
existing agribusiness models led by private and other non-state actors
such as cooperatives and farmers’ organizations. The strategy for
agricultural development, therefore must focus on improving the
productivity, profitability, and sustainability of smallholder farming
by promoting modernization of agriculture, improving governance,
increased investment, public-private partnership and creating enabling
policy environment. Some of these potential opportunities and ways
forward for agricultural development in Nepal are outlined below.
Mechanization and Modernization of Agriculture
The quest for rapid socioeconomic development in the next two
 Discourses on Nepal’s Development  231
decades would require mechanization, modernization and
commercialization of agriculture, and production of high value
commodities for increasing per capita income, fulfilling the demand
of urban residence and aspirations of young generation and enhancing
the export of commodities and value added processed food.
Agricultural mechanization is critical options for addressing
agricultural labor scarcity, high cost of production and promoting
commercialization and modernization in agriculture. The rationale
for mechanization in agricultural development is to increase the scale
of farming operations and to improve the timeliness, quality, and
efficiency of the operations for increase production, productivity and
profitability of farming operation (Gauchan & Shrestha, 2017).
Mechanization is therefore prerequisite for modernization and
commercialization which provides an option for improving efficiency
in agriculture production, reducing women drudgery and promoting
diversification in agriculture. The agricultural research as well as
agribusiness sector will have to be knowledgeable of international
trade requirements, market search and meeting the trade objectives
for export promotion. The process will help make agriculture
competitive in the region through agricultural diversification, reducing
the cultivation cost, improving quality of the products and creating
conducive environment for the competitive market price of the
produced agricultural commodities. Mechanization and modernization
therefore can contribute to increasing production, productivity, and
profitability of agriculture by increasing land and labor productivity
as envisaged in newly formulated Agriculture Development Strategy
(ADS) of the Government of Nepal. The ADS aims to bring
modernization of agriculture by promoting profitable commer-
cialization and governance of agriculture.
Public Investment in Research and Development
Public investment in agricultural research and development (R&D)
has contributed significantly to productivity growth, economic growth,
and rural poverty reduction in many developing countries (World
Bank, 2008; Fan, 2008). Agricultural R&D is a form of economic
investment. As such net social benefits will be minimized at levels
were the marginal social benefit equals its marginal cost. Alston et
232  Agricultural Development in Nepal
al. (2000) provide evidence of a high rate of return from investment
in agricultural R&D from a Meta-analysis of 292 case studies
conducted in several countries. In spite of the importance of
agricultural sector in Nepali economy and employment generation,
the public-sector investment in agriculture has been very low. Public
support in terms of incentives, information and infrastructure is
essential for the growth of agriculture and the underinvestment is a
pervasive problem in the country. The current investment of 3–4
percent of the total national budget in agriculture is not sufficient to
promote adequate agricultural growth and ensure food security to
ever-growing population. Furthermore, out of the total allocated
budget in agriculture, the country is allocating and spending a very
small share in research while a larger share of the public expenditure
is allocated for price subsidy in agricultural inputs mainly
fertilizer.The current investment intensity pattern in agricultural
research is only 0.30 percent of the agricultural GDP and for rice
research it is only 0.02 percent of the value of rice output (Gauchan,
& Pandey, 2011)2. As an internationally accepted norm, at least 1
percent of the total value of the output (e.g., AGDP) needs to be
invested in research to spur agricultural development in the country.
Therefore government will have to give highest priority in investment
in agricultural research including building right institutions, incentive
measures, and agricultural infrastructure.
Promote Public-Private-Community Partnership in Research and
Development
Promoting the development of a strong, dynamic and sustainable
agriculture sector in Nepal will require adoption of specific research
and development (R&D) partnership modality with a coordinated
effort between the public, private, and/or community sectors, where
the roles of each of the sector may differ across commodities, value
chains, production systems and stage of agricultural development.
The R&D partnership modality needs to consider the current context
and future development that requires use of integrated agricultural
system linking both formal and informal system and use of market
and non-market channels (Gauchan, 2014). An effective and efficient
governance of R&D systems is critical using public-private and
 Discourses on Nepal’s Development  233
community partnership at both local and national level. Public sector
agencies have comparative advantage in longer term investment for
technology development (e.g., breeding new varieties), coordination
and regulation, and private sectors in efficient delivery and marketing
of inputs and outputs, while community sectors have comparative
advantage in scaling-up and multiplication of inputs and technologies
(e.g., seeds) including farmers’ based extension of services at the
local level. At the local level, a public-private-community partnership
of local actors (both state and non-state) is suggested through adequate
decentralization of state-led agricultural R&D activities and
identification of comparative advantage of each of agency (state and
non state led) for the better provisions of new technologies and
technical services at the local level. Figure 4 provides suggested model
for public-private and community partnership for provision of
agricultural R&D services in the context of new federal system of
the country.
Figure 4. Partnership of Public-Private-Community Sectors
234  Agricultural Development in Nepal
In the context of current socioeconomic context of diversity of
social groups, and poor access of technology and technical services
to rural poor, small and marginal farmers and disadvantaged social
groups, there is a need to improve effectiveness of institutional
governance of agricultural R&D in Nepal. This will require a strong
institutional structure and linkage mechanism with public-private-
community partnerships for governance of agricultural research at
different hierarchal levels (e.g., central apex level to provincial and
local level) suited to the new federal structure of the country. In this
context, participatory methods and structure is essential to enhance
and promote inclusive access of technology and technical services to
all groups of farmers (small farmers, disadvantaged groups (Dalits
and marginalized Janajatis) and rural poor (Gauchan, 2014).
Incentives for Private Sector Participation
In recent years with liberal economic policy, the role of private sectors
and other non-state actors such as cooperatives, producer groups,
community based organizations (CBOs), and non-governmental
organizations (NGOs) are increasingly emerging as key providers of
inputs, seeds, exotic varieties, and the technical services (Gauchan
et al., 2003). Potential exists for private sector investment targeting
domestic market focusing on hybrids, horticultural crops and those
of high value cash crops and commodities. The demand for improved
technologies such as hybrid seeds, fertilizers, machinery etc. are
rapidly growing and is being met by increased level of imports,
suggesting the possibility to increased production for import
substitution with increased involvement of private sectors. A good
scope exist involvement of domestic private sectors in hybrid seeds
of rice, maize, vegetables and in the production of those of the source
seeds that are not currently undertaken by public sectors (newer
varieties of cash crops, vegetables etc.).
Incentive systems need to be developed and adopted to attract
and incentivize private R&D sectors and private entrepreneurs in
developing competent technologies, varieties, and management
practices. Incentives should be created based on assessment of
potential options and practices globally available. These may include
recognition and reward, royalties from revenue of agricultural product
 Discourses on Nepal’s Development  235
and inputs (e.g., seed sales), soft loans and subsidies for private sector,
research block grant for breeding, and technology development and
implementation of plant variety protection laws. Private sectors also
need increase access to diverse technologies (germplasm, materials)
to invest and promote their own R&D. There is also need for
protecting plant varieties such as finalization, approval and
implementation of draft Plant Variety Protection and Farmers Rights
Bill (2005) that will encourage investment and participation of private
sector in plant breeding as well as creating ownership rights for
farmers. Development and enforcement of Contract Farming and
Marketing Act (contractual agreement for production and marketing)
is also essential to incentivize private sector participation by reducing
risk and assuring production and marketing of quality seeds, inputs,
technologies and products (Gauchan, 2015). Efforts are therefore
needed to finalize, approve and implement proposed Agri-Business
Promotion Bills (2014)/Contract Farming Act to strengthen
agribusiness for ensuring compliance measures and make full
implementation of pre-contract agreement.
Climate  Smart  Agriculture  for  Addressing  Adaptation  to
Changing Climate Risks
The climate smart agriculture for addressing climate risk management
include promotion of agricultural service systems to facilitate
community-based seed storage and nucleus herd maintenance and
management employing locally adapted seeds and breeds. The
agricultural R&D programs are suggested to focus on breeding and
promotion of drought, flood and heat stress-tolerant crop varieties
and animal breeds, management of agricultural diversification,
integrated farming system, and integrated approaches to hazard risk
reduction. This will also include integrated plant nutrient management
(IPNMS), integrated pest management (IPM); on-farm water
management and conservation of biodiversity and traditional crops;
promotion of conservation agriculture in field crops rotation,
improved crops and cropping systems, multi-story cropping and
agroforestry systems. Climate smart agriculture will also include
opportunities to facilitate adaptation and mitigation synergies in the
integrated farming system and livestock sector for improving animal
236  Agricultural Development in Nepal
shed management, improved composting and manure management,
and promoting the production and use of biogas at the community
level. Short-term risk management practices in the livestock sector
includes vaccination against contagious animal diseases, deworming
against internal parasites and use of animal relief camps during
disasters (Selvaraju, 2014) including introduction, promotion and
sustainable management of pasture and forage species, and improving
support services in livestock areas. The other sustainable practices
and adaptation strategies may include rainwater harvesting and soil
moisture conservation; improvement of degraded land; protection
from riverbank cutting and inundation; slope stabilization and
management, and alternative energy sources for households.
Development of Enabling Policy Environment and Support Services
Policies, institutions, market systems, and socioeconomic factors are
vital to increase productivity, profitability, and sustainability of
agricultural production systems. The importance of informed policy-
making and supportive policy environment in the changing socio-
economic context is ever increasing. Predominance of farming
communities in the rural areas and dependence of economy on
traditional agriculture in Nepal require identification and formulation
of relevant policies that protect interests of farming communities
and of the nation, while making Nepali agricultural products
competitive in the global market. This requires strengthening of
national research and development capacity in understanding,
monitoring and analyzing changing markets and policy issues. Better
policies and institutional set up are required to improve production
and timely delivery of quality seeds, fertilizers and other inputs as
well as monitoring their qualities in the market. Access to agricultural
credit and public support system is crucial for expansion of improved
technologies, practices and adoption of market-oriented production
systems. Investment in R&D in agriculture is imperative since the
dynamics of farming is changing and agriculture research is an engine
for agricultural growth. Policy and legal frameworks are also needed
for supporting and facilitating investment in breeding and seed
production, providing access to plant genetic resources, protecting
breeders’ rights, and ensuring seed quality control. Policies should
 Discourses on Nepal’s Development  237
support community-based organizations, credit cooperatives, micro-
credits, and expansion of formal banking services in rural areas to
improve farmers’ access to farm credit. Adequate investment on rural
infrastructures and markets is essential to increase farmers’ access to
inputs, adoption of improved technologies and farmer-market
linkages. Financing and credit policy with soft and easy loans for
agricultural machineries and commercial agriculture in rural areas is
suggested. Implementation of insurance schemes covering all
agricultural commodities to minimize risks in farming is essential
for the adoption of farm mechanization and commercialization of
agriculture.
Considering the diversity of geography, agroecology,
socioeconomic setting and farming system, selective youth and
women friendly mechanization is suggested based on specific context.
This will require a portfolio of policy incentives and support measures
for farmers and stakeholders in a mission to modernization and
commercialization of agriculture through enhancing adoption of
appropriate agriculture and rural mechanization technologies. An
immediate action plans are needed for the implementation of new
Agriculture Mechanization Promotion Policy (2014) that includes
most of these suggested policy options including formulation and
implementation of other policies, legislations and regulations favoring
commercialization of agriculture (e.g., Contract Farming Act, Land
leasing legislation, Agriculture Land Use Act, Cooperative Act etc.).
Finally, restructuring of current R&D systems is needed to be more
inclusive, farmer led, market driven, decentralized, and cost effective
for strengthening links in the changed federal system of the country.
Endnotes
1. Exception exists in Barnali region, where rice is grown up to 3,000
msl in Chumchur of Jumla district.
2. Research intensity of investment is defined as the ratio of research
investment to the value of agricultural production. This measure is preferred
to absolute levels of expenditure to make the country’s agricultural R&D
efforts easily comparable within international contexts.
238  Agricultural Development in Nepal  238
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