Heaven-sent news

Amidst the widespread social and political distress here comes a heaven-sent piece of good news: the Nepali population below the poverty line has declined to 13 percent. The yet-to-be published report of the third Nepal Living Standard Survey (NLSS) 2010 points to an astonishing 18 percentage point decline in absolute poverty from 31.5 percent recorded by the second NLSS just six years ago.



This sharp decline in poverty has left officials involved in the survey pleasantly surprised, and the findings will leave many more deeply skeptical. But it’s not easy to question the veracity of the survey, conducted by the Central Bureau of Statistics (CBS) with technical support from the World Bank and a good sample size of 7,200 households, without pointing to any serious methodological error.



Almost all of this decline in poverty can be safely attributed to rising remittance inflow. In 2010, the country received Rs 310 billion in remittance, a robust rise from 13 billion rupees just fifteen years ago in 1995/96, and at least one in every two households now receives remittance. There is another bit of good news along with the poverty decline — income inequality has declined substantially during the period.



The Gini-Coefficient, a measure of income inequality in a society, has come down to 0.35 from 0.41 in 2003/04. This has quashed the debate as to whether remittance income helps to narrow or widen inequality gaps in society. Some economists and anthropologists have long doubted the role of remittance in bridging the income gap. Remittance inflow in Nepal is luckily concentrated mainly in the poorer households and as a result the average income of the poorest 20 percent of the population grew some 3.5-fold in the last six years. The income of the highest 20 percent grew only by a little more than double.



With the rising income of the poorest 20 percent of the population come many positive changes. More people can afford to send their kids to school and access health services, as is reflected in rising literacy rates and growing access to health centers. In 2010, about 95 percent of the population had access to primary education and 74 percent, access to health centers. Access to health and education is, however, as much a question of supply as of demand.



The national economy also benefits a lot when income levels for the lowest 20 percent in the economic ladder increase as most of this income is spent in consumption, possibly the consumption of domestically produced goods. The survey shows that 79 percent of remittance income is used for daily consumption, with only 2.4 percent invested for capital formation. One more piece of good news, which this survey may not have reported, is that poverty will continue to fall as remittance is expected to grow in the coming years.

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