Sunday, June 1, 2014

GDP by district and region in Nepal

What is the size of regional economies in Nepal? Better what is the size of each district in terms of economic activities and what is its share in total GDP? Such disaggregated data is pretty hard to get as the CBS does not publish them in its annual (and now quarterly) national accounts estimate. Well, this blog post will shed some light on this front by distilling the share of each district and region in the national economy.  The Nepal HDR 2014 estimates the district and regional level GDP data using a variety of proxy indicators and survey datasets. Again, these are only estimates, which is the closest you can get to right now in pursuit of regional and district level disaggregated data. Earlier, a NRB study estimated that Kathmandu Valley contributed between 23.4% and 31% to GDP. This new estimate puts the figure at 20%. Data on poverty by district is covered here. District-wise household size, population growth rate, migrant population and remittance inflows data here.

Being the industry and services sectors hub of the nation, Kathmandu district’s share of total GDP is the highest—at 15.8%. It is followed by Morang (3.9%), Bara (3.3%), Jhapa (3.2%), Rupandehi (3.2%), Lalitpur (2.9%), Sunsari (2.7%), Kaski (2.5%), Nawalparasi (2.4%) and Parsa (2.4%).  The five districts with the lowest share are Mugu, Humla, Dolpa, Mustang and Manang (all 0.1% except 0.2% for Mugu).

Decomposing GDP by geographic region, Hills contribute to 48.8% of GDP, followed by 45.6% by Tarai and the rest 5.6% by Mountains. By development region, central development region contributes the most to GDP-- 45% (not surprising since the major industrial and services activities happen in this region), followed by eastern development region (20.6%), western development region (17.6%), mid-western development region (10.4%) and far-western development region (6.3%).

In terms of share of total agriculture sector, the Tarai districts top the list as this region is also the breadbasket of Nepal. Jhapa district’s share of total agriculture sector is 4%, followed by Morang 3.6%, Kailali 3.2%, Bara 3.1% and Rupandehi 3%. The lowest contributors are the districts in the mountain region.

Tarai region contributes 51.2% of total agriculture sector, followed by Hills 40.7% and Mountains 8.1%. In terms of development region, central development region is the top contributor (29.8%) followed by eastern development region 26.7% and western development region 20.2%.

Regarding industry sector, Kathmandu district contributes the highest (13.9%), followed by Bara (9%), Morang (5.3%), Nawalparasi (4.2%) and Dhanusha (4.1%). It is concentrated in Tarai region. The lowest contributors are from the mountains region. The Tarai region contributes 52.4%, Hills 43.3% and Mountains 4.4%. The central development region’s share is 53.7%.

In services sector, Kathmandu contributes 27.6%, followed by Lalitpur 4.1%, Morang 3.7%, Chitawan 3.4% and Kaski 3.3%. Tarai region’s share of total service sector is about 57.1%, followed by Tarai 38.9%, and Mountains 4.1%. The contribution of central development region is 54.7%.

Let us look the district-wise share of major sub-sectors in total of those sub-sectors (agriculture sector covered above) that drive GDP: manufacturing; construction; retail and wholesale trade; and real estate, renting and business activities.

Bara and Kathmandu districts contribute 18% and 10.7%, respectively, of total manufacturing activities, followed by Nawalparasi and Morang (7.6% each), Dhanusha 6.2% and Parsa 5.9%. Most of the districts are in the Terai region, which collectively contribute 67.2% of total manufacturing activities in the country. Hills region contribute 30.9%. Central and eastern development region together contribute two-thirds of total manufacturing activities.

In construction, Kathmandu tops the list with 15.8% contribution, followed by Lalitpur 4.6%, Morang 3.1%, Dhanusha 3%, and Jhapa 2.8%.  Hills region contribute almost 53.3% of total construction activities in the country, followed by Tarai 39.8% and mountains 6.9%. Central development region contributes 49.2%.

In retail and wholesale trade, Kathmandu tops the list with 19.9% contribution, followed by Morang 4.7%, Rupendehi 3.6%, Jhapa 3.4% and Lalitpur 3.4%. Tarai tops the list with 49.2% contribution.  Central development region contributes 46.6%.

In real estate, renting and business activities, Kathmandu tops the list with 19.4% contribution, followed by Lalitpur 5%, Chitawan 4.7%, Kaski 4% and Sunsari 3.8%. Hills region contribution is 52.4% and Tarai 43%. Central development region contributes 49.8%.

So, what is the relationship between district per capita GDP and poverty rate. Well, the chart above shows that there is an overall negative relationship, i.e. higher district per capita GDP is associated with lower district poverty rate (the red line shows a liner fit). Now, Manang and Mustang seem to be an outlier as the population there is the lowest (Manang 6,538 and Mustang 13,452), but economic activities seems to be moderately good. It is interesting that poverty rate, however, is pretty high (Manang 37% and Mustang 40%). It might have to do with the high seasonal fluctuation in economic activities (trekking season means robust value added economic activities, but heavy snowfall means a slowdown).  Construction, and hotel and restaurant activities are relatively bigger than other economic activities. [District per capita corresponds to FY2013 and poverty rate corresponds to FY2011.]

Macro messages:
  1. The Tarai and Hills remain central to the economy. Tarai is particularly important for agriculture sector as a majority of the agricultural land and population live there. Being close to the Indian borders and housing major manufacturing firms, it also remains an important industrial hub. Hills region drive the services sector, which contributes the most to GDP growth and is also the largest employment provider. As an administrative hub endowed with probably the best quantity and quality of infrastructure (though still at poor standing compared to similar cities in comparator countries), Kathmandu district tops the list in its contribution to overall industry and services sectors.
  2. Manang, Mustang, Humla, Mugu, and Dolpa consistently come at the last on economic activities, understandably due to the difficult terrain, harsh weather and the lack of adequate infrastructure to stimulate economic activities. Also note that the cost of physical and social infrastructures in these regions is also high.
  3. Obviously, the quickest route to poverty reduction is the stimulation of local economies, thus generating gainful employment opportunities and higher per capita income. This means districts with relatively low economic activities need more attention. However, this has to be done in sync with other investment projects so that robust value chains (in all sectors) are created and districts are interlinked based on their comparative (and competitive) advantages. A sensible idea would be to promote niche products, nurture them and eventually link them to national value chains. Investments and development interventions done in silos and without a coherent, sensible strategy to link up various value added activities across the country are not going to yield the desired results, i.e. sustainable poverty reduction and employment generation. This applies to all sectors and thematic focuses.
It is pretty difficult to see the relevant stuff on the figures above. One way to see full size version is to right click on the figure, select 'copy image URL' and then paste it in browser. Also, it was not possible to include all the figures in this blog post. Below is a slideshow for interested folks.