Released on Tuesday, the World Bank report titled ‘Demographic Change in South Asia: From Tailwinds to Headwinds for Development’ warns that South Asia's transition from an aging to an aged population is happening faster and at a lower income per capita than comparable developing economies. While the average developing nation takes 32 years to make this shift, South Asia will do so in just 25 years.
For Nepal, the working-age population's share of the total population is projected to hit its peak in the 2040s—giving the country a larger window for preparation than countries like Bhutan and India, which are less than a decade away from their peaks, or Sri Lanka, whose share already peaked in 2005.
However, the report highlights deep structural vulnerabilities within Nepal that threaten to squander this potential:
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High Informal Employment: More than 60 per cent of workers in Nepal are employed informally. Informal employees across South Asia suffer wage penalties earning 45 to 84 per cent less than formal workers, severely dragging down productivity and income. Furthermore, approximately 91 per cent of Nepali workers aged 65 and older are informally employed, leaving the vast majority completely outside contributory pension frameworks.
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The Remittance Paradox: Remittances account for roughly 25 per cent of Nepal's GDP and drove 40 per cent of poverty reduction between 2001 and 2011. Despite this, returnee migrants lag behind non-migrants in salary for about three years upon returning, indicating that migration has yet to translate into durable, long-term domestic productivity gains.
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Gender and Care Gaps: Nepali women work, on average, nine hours per week less than men due to persistent care burdens, which severely constrain female labour force participation and overall economic output.
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Healthcare Deficits: Household out-of-pocket health spending in South Asia remains the highest of any region, while government health spending as a share of GDP declined between 2000 and 2023. Less than a third of primary health centres in Nepal are adequately equipped to deliver chronic disease prevention and management.
A Roadmap for Action
Despite these hurdles, the World Bank noted that Nepal can leverage positive initiatives already in motion. Through the Social Security Fund—a contributory social insurance scheme financed by a 31 per cent contribution rate—the government provides a 9 per cent matching contribution for informal workers. Scaling this scheme could significantly bolster old-age income security.
To turn the demographic tide into sustained growth, the World Bank recommends that South Asian nations, including Nepal, bundle vocational training with job placement and life-skills services to better absorb returnee migrants into the domestic labor market. Furthermore, countries must act immediately to improve primary healthcare, expand access to finance for micro, small, and medium enterprises (MSMEs), streamline regulations, and remove barriers to women's employment before the demographic window fully shuts.
