Unlocking Nepal’s Potential: A Strategic Vision for Economic Diversification and Growth

Nepal, though landlocked and with a relatively limited industrial base, possesses immense untapped potential. The key to unlocking this lies in clearly identifying national strengths, shaping a long-term vision, and implementing practical, consistent policies. Similar to the Japanese concept of Ikigai—which refers to finding one’s true purpose—Nepal, too, must discover its own national Ikigai to chart a sustainable and prosperous path forward.

The journey begins with recognizing Nepal’s true strengths. The country must carefully assess what it can produce efficiently and what it can offer to the global market. Rather than trying to do everything at once, Nepal should prioritize a few core sectors where it can excel and scale.

One such area is information technology and digital services. Every year, Nepal sees thousands of graduates in IT, engineering, and management. However, the current education system does not provide specialization in globally in-demand skills such as artificial intelligence, machine learning, blockchain, and cybersecurity. By investing in these areas, upgrading tech infrastructure, and fostering innovation, Nepal could position itself as a regional tech hub offering services like software development, back-office support, and digital consultancy.

Similarly, Nepal’s traditional strengths in textiles and handicrafts can be modernized and scaled up. With a heritage rich in weaving and artistry, Nepal can grow its garment industry by introducing better machinery, fashion design training, and international branding.

Another major opportunity lies in the intersection of tourism and the film industry. Nepal’s natural beauty and cultural diversity are globally unmatched. Many Indian film productions choose to shoot in Europe or the U.S., but with improved infrastructure and incentives, Nepal could become a sought-after destination for regional filmmakers. This would not only promote tourism but also create local jobs in hospitality, film, and services.

Nepal can also partner with other advanced economies to boost their competitiveness and take ideas and concepts to enhance their economy.

Furthermore, Nepal must increase its export capacity, focusing on niche products such as herbs, handicrafts, and organic goods while also developing value chains around them. Equally important is the modernization of trade mechanisms. For instance, the integration of India’s UPI (Unified Payments Interface) with Nepal’s banking system has already been agreed upon, but real implementation remains slow. Once fully integrated, digital payments will make cross-border transactions, tourism, and remittance flows significantly more efficient.

To sustain economic growth, Nepal’s financial sector must evolve rapidly. The banking system needs to become more robust by managing credit risks better and reducing non-performing assets.

The adoption of fintech, digital banking services, and the development of secure digital infrastructure—including data centers and cloud services—will be essential. Strengthening cybersecurity should be a national priority. Financial institutions, government systems, transportation networks, and tourism services all need strong digital protection. Nepal should consider partnerships with countries like India, Singapore, Japan, or the United States to develop cybersecurity frameworks while also creating skilled job opportunities in this growing sector.

Energy and infrastructure will also be crucial to Nepal’s future. The country is rich in hydropower potential and has growing prospects in solar and other renewable energy sources. With proper investment and regional cooperation, Nepal could become a power exporter, especially to energy-hungry neighbors. Infrastructure, particularly in transportation and connectivity, is another catalyst for growth.

While Kathmandu enjoys relatively good access, regions like Pokhara, Rara Lake, and other tourist gems remain underdeveloped. A nationwide effort to improve air, road, and internet connectivity would have a transformative impact on tourism, trade, and regional development.

Nepal-a toddler that refuses to grow up

In this broader vision, Nepal’s relationship with India should evolve into a more balanced and strategic partnership. The two nations share deep-rooted cultural, economic, and historical ties. Moving forward, both countries can benefit from regular bilateral committees focused on trade, investment, and sectoral cooperation. Joint ventures in technology, finance, and energy development can bring mutual prosperity. Nepal could also serve as a gateway for Indian tourists and adventure seekers looking to explore the Himalayas, while India can support Nepal’s push for infrastructure and digital integration, including the successful rollout of UPI across both nations.

Beyond the region, Nepal has much to learn from the development journeys of countries like Singapore, South Korea, and Japan. These nations have turned adversity into strength by focusing on education, innovation, and governance. For instance, Singapore, which began as a modest fishing village, is now a financial and innovation powerhouse with a nearly trillion-dollar sovereign wealth fund. Nepal should actively send study delegations to these countries, analyze their policies in areas like smart banking and smart cities, and localize those learnings to suit Nepal’s unique context.

For any of this to succeed, Nepal must build a truly investment-friendly ecosystem. Political stability, consistent policies, and investor confidence are the cornerstones of economic progress. The government should eliminate unnecessary bureaucracy, offer tax incentives, provide legal clarity on foreign ownership and repatriation of profits, and develop Special Economic Zones (SEZs) near border areas to attract both domestic and international investors. These SEZs can be the breeding ground for manufacturing, services, and export-based enterprises.

However, vision alone is not enough. Nepal needs competent and committed leadership capable of executing long-term development strategies. This means coordination between policymakers, bureaucrats, technocrats, and entrepreneurs. Every sector—be it education, health, technology, or finance—must be aligned with a unified national development plan. The government should also invest in building institutions that are transparent, accountable, and forward-looking.

Nepal is not starting from zero. The country has made notable progress in poverty reduction, as recognized by the World Bank, and maintains modest but consistent economic growth between 3.9% and 4.2%. This resilience provides a solid foundation to build upon. What’s required now is clarity of purpose, bold leadership, and smart planning.

As mentioned earlier, Nepal must discover its national Ikigai—the intersection of its strengths, opportunities, and global needs. By committing to a strategic vision, upgrading its financial and digital infrastructure, diversifying trade, and embracing innovation, Nepal can truly unlock its potential and leap into a future of prosperity and self-reliance.

(Kanishka Tripathi is a banking investor based in Singapore. Article based on conversation with Nepal Views)