POVERTY, INEQUALITY AND LAND REFORM IN NEPAL

The eradication of poverty is the biggest challenge faced by policy makers in Nepal. Poverty is increasingly concentrated among small farmers and agricultural labourers (WB, 2006). Present socio-economic structure of the country reveals that land is the main property and source of income for the majority of Nepalese people. Land reform is important also in the context of incipient industrial and commercial sectors which at present cannot cater for the rapidly growing population. In this respect, increase in agricultural productivity through secure access to land can potentially be one of the most effective approaches to alleviate rural poverty.

Over the last decade aggregate poverty reduced significantly from 42% to 31%. However, the decline was slow in rural areas compared to urban areas and is still high at 35% (WB, 2006). Whilst overall growth increased and overall poverty reduced, the Gini coefficient increased from 34.2 to 41.4, indicating a rise in inequality as the growth was seen most evident in the rich community. The country’s GDP may be constrained by unequal land distribution. For nearly one third of total agricultural land is occupied by 7% of upper households whereas nearly 20% lower households have to survive with less than 3% of total agricultural land (CBS, 2004a).

Land is often misallocated which then hampers agricultural development and perpetuates rural poverty. Those who have land don’t know how to use it most effectively and those who know how to use it, don’t have it. Consequently, the agricultural productivity of the country is much lower compared to other countries in the region (WB, 2006). These all suggest that there is potential for increasing farm production three to four-fold through land and agrarian reform (NPC, 1998). So, proper policy programme to transfer agricultural land from unskilled to skilled farmers through effective land reform program may be an important instrument to alleviate poverty and disparity.

In past fifty years, there have been many attempts to a redistributive land reform program to alleviate poverty and inequality, but without success. The land reform program of 1964 had heightened social and psychological consequences, but had little impact on agrarian structure. The government confiscated and redistributed only a very small fraction of land above the ceiling compared to its

expectation. In 1994 the High Level Land Reform Commission submitted the Badal Commission Report to implement land reform; however no steps were taken to do so. In 2001, another land reform program with a revolutionary tag was announced. The focus of the program was to amend the Land Act 1964 in order to reduce the legal  size of land holding per family.But Thapa (2001) points out that this was merely a political ruse as the political pronouncement was made without weighing up of socioeconomic implications, and exclusive of any schemes and information of land appropriation and redistribution. In conclusion, there has been little progress in the last fifty years in land reform.