Significant decline in Poverty Rate since 2010-11
According to Nepal Living Standar Survey IV (2022-23 ) 20.27 percent of the population in Nepal lives below the new poverty line. The incidence of poverty is higher in rural areas (24.66 percent) than in urban areas (18.34 percent). According to the 2022-23 official poverty line, an individual in Nepal is classified as poor if their annual per capita total consumption expenditure is less than NRs. 72,908.
Nepal has a Poverty Gap index of 4.52 percent, implying that a total of NRs. 94.71 billion is needed to bring the poor up to the minimum welfare threshold defined by the new poverty line in 2022-23 assuming perfect targeting and zero leakage. The average shortfall of mean income is higher in rural areas at 5.64 percent compared to 4.03 percent in urban areas.
Poverty is considerably lower during the third season, between October and January, at 17.56 percent. The first and the second seasons have a higher incidence of poverty at 20.87 and 22.50 percent, respectively. The low poverty during the third season coincides with the months of the largest festivities – Dashain and Tihar.
There is considerable variation in the incidence of poverty across the seven provinces and the 15 administrative domains. The poverty rates are higher than the national rate in four of the seven provinces. Poverty rate is highest in Sudarpaschim (34.16 percent), followed by Karnali (26.69 percent), Lumbini (24.35 percent) and Madhesh (22.53 percent). Gandaki,
Bagmati and Koshi, however, have a lower than national rate at 11.88, 12.59 and 17.19 percent, respectively. The poverty depth and severity are also higher in provinces with a higher poverty headcount.
Overall, agricultural land ownership is associated with lower poverty rates. In rural areas, land ownership is negatively correlated with poverty rates – poverty headcount decreases as the area of land owned increases. In urban areas, however, poverty headcount is higher in households with less than one hectare of agricultural land compared to households with no land.
The incidence of poverty has a strong positive correlation with a household’s remoteness to basic facilities. Relative to households within 30 minutes of schools, government hospitals, markets, police stations, ward offices, and banks, poverty rates are at least 1.5 times higher among households that take more than 30 minutes to access these facilities.
Like in other countries in South Asia, Nepal’s poverty line is defined using the Cost of Basic Needs (CBN) approach. According to the CBN, a poverty line is the minimum expenditure needed by an individual to fulfill their basic food and non-food needs. Based on the food consumption patterns of households in the NLSS, and the average cost per calorie, a food poverty line is estimated. This line quantifies the cost of purchasing basic food items which fulfil a minimum caloric requirement. The food poverty line is augmented with an allowance to meet basic non-food needs (non-food poverty line). The absolute poverty line is the total monetary value of basic food and non-food needs and defines the minimum acceptable standard of living in the country. Individuals whose consumption expenditures are below this minimum monetary threshold are identified as poor.
There is a significant decline in Poverty Rate since 2010-11. Measuring changes in poverty over time requires a consistent and comparable trend. Specifically, the old and the revised poverty lines represent two different levels of deprivation, where the revised poverty line raises the bar and sets a higher minimum acceptable standard of living. A simple comparison, therefore, of two poverty rates based on two different poverty lines at two points in time will be inaccurate.
For an accurate estimate of poverty reduction in the last 12 years, welfare comparisons in the two survey rounds are made against the same minimum welfare threshold defined by the old poverty line in 2010-11. Against the benchmark of 42,845 (old poverty line, in 2023 prices), Nepal has seen significant reduction in poverty headcount over the last 12 years, from 25.16 percent in 2010-11 to 3.57 percent in 2022-23.