Author: Anshu Shrestha
Nepal’s execution of federalism in 2015 marked a historic shift in governance, promising to decentralize power and ensure equitable development across the country. This new political structure aimed to address the long-standing urban-rural divide with authority vested among seven provinces and 753 local government units. The hope was that federalism would bridge the urban-rural divide by empowering local governments with more authority and resources. However, nearly a decade later, the question persists: Has federalism truly reduced the development gap between urban and rural areas, or has it widened the disparities?
The need for federalism was sensed during the Maoist Insurgency when Nepal struggled to conduct local body elections, creating a vacuum in local governance. Following the end of the Maoist insurgency, the concept of federalism was introduced without any implementation in the Interim Constitution of Nepal 2007. The roots of federalism can be traced back to the Madhesh Movement of 2007, followed by the Second and Third Madhesh Mass Movement, which demanded the recognition of the Terai region as a single province to address the historical exclusion and marginalization. While this demand was not fully realized, the movement played a crucial role in advancing decentralized governance. The adoption of federalism aimed to dismantle Nepal’s highly centralized governance system, which had long favored urban centers, particularly the capital, Kathmandu.
Federalism in Nepal: A Path Towards Decentralization for Equity
Before federalism, power was concentrated in the central government, leading to rapid urbanization and infrastructural development in Kathmandu and other urban centers. This centralized approach resulted in stark disparities, with the Terai and Mid-Hills experiencing urban growth from 23% in 2014 to 66.08% in 2015 (Bhattarai et al., 2023), while rural areas lagged, struggling to meet basic needs like clean drinking water, food, proper housing and education. Federalism promised a bottom-up governance model, empowering local governments to address regional issues with greater efficiency and effectiveness. The expectation was that this decentralized approach would promote balanced development, reducing the urban-rural divide.
Federalism has decentralized power, guaranteeing autonomy to local governments to create laws and policies that directly address the needs of their constituencies. With such powers, federalism has undeniably brought several benefits, particularly in promoting local governance, empowering marginalized communities, and better resource allocation tailored to local demands.
Further, federalism has enhanced political representation and women’s participation, ensuring that diverse communities and the other half of the country’s population have a voice in decision-making processes (Hilditch, 2021). With the introduction of federalism, women’s participation in decision-making authority and women holding positions of power has slightly increased which marks a huge sign of progress in our country. In a patriarchal society like ours, where women were treated as second-class citizens, the mandatory nature of the constitution’s inclusivity has assisted the unheard women of minority ethnic groups a stage to raising their concerns and needs (Hilditch, 2024b), to contribute to the changes they have been dreaming of.
The Paradox of Federalism in Nepal: Uneven Progress but Growing Inequalities
Despite its promise, federalism in Nepal faces significant challenges that threaten to widen the urban-rural divide. One of the most pressing issues is the unequal distribution of resources and capacities among provinces and local governments. Out of 57 underdeveloped local-level governments, 30 are in Karnali Province. While federalism was intended to promote balanced development, wealthier provinces with greater access to revenue sources have progressed faster, while resource-poor regions like Karnali continue to lag behind. This imbalance exacerbates the very inequalities federalism sought to eliminate. Additionally, Nepal’s economic growth rate has declined since 2018, reaching one of its lowest points in the 2023 fiscal year at approximately 2%, raising concerns about federalism’s impact on overall development (Bhattarai, 2024).
Moreover, interference and a lack of coordination between different levels of government have hindered effective policy implementation. The federal government’s failure to enact the laws regarding the concurrent rights of the federal and provinces has obstructed the implementation of federalism. Although the federal government has provided some model laws to the local government, it often maintains a centralized mindset that contradicts the principle of decentralization (Dhaulagiri Journal of Sociology and Anthropology, n.d.).
Nearly a decade after its implementation, federalism in Nepal presents a paradox. On one hand, it has empowered local governments, improved service delivery, and promoted political inclusion. On the other hand, it has exposed the stark contrasts in resource availability and governance capacities between urban and rural areas. Some urban centers have thrived, but rural areas continue to lag, struggling with inadequate infrastructure, poor educational facilities, and limited healthcare access (Hilditch, 2024a).
This uneven pace of development has led to growing disappointment among rural populations, raising concerns about whether federalism is truly achieving its goal of equitable growth. The migration of youth from rural to urban areas in search of better opportunities has further intensified the urban-rural divide. However, it is important to recognize that Nepal’s federalism is still in a transitional phase. Just as the implementation began, the COVID-19 pandemic disrupted economic growth. Despite these setbacks, Nepal has shown signs of recovery, with economic growth gradually increasing in 2024 with the estimation of a further increase in 2025 (World Bank Group, 2024).
To ensure that federalism fulfils its promise, effective fiscal resource management is paramount. Resources must be distributed equitably among provinces and local governments, with a well-defined framework for resource sharing and administrative responsibilities which address the needs of resource-poor regions. Collaboration with international organizations has facilitated creation of innovative solutions like the One-Step Service Delivery program in the Karnali region which has enhanced service efficiency and won public trust (Improved Service Delivery for Karnali Through the One-stop Model, n.d.).
Another key issue contributing to the urban-rural divide is corruption and the reluctance of government employees to work in rural areas. Tackling corruption at the local level is essential to ensure that resources are effectively utilized for development. Implementing strict oversight mechanisms and ensuring transparency at the highest levels of provincial government will help build accountability and transparency. Moreover, an equitable distribution of national income and incentives for working in rural areas can encourage government employees to contribute to rural development, ultimately helping bridge the urban-rural divide.
Conclusion: Strengthening Federalism for an Inclusive Future
Nepal’s journey with federalism is still unfolding. Nearly nine years since the promulgation of the constitution, the system remains in transition, striving to fulfil its promise of decentralized governance and equitable development. While federalism has empowered local governments and brought tangible improvements to some rural areas, challenges such as resource disparity and bureaucratic inefficiencies continue to hinder progress.
These challenges highlight the need for stronger commitment rather than signaling failure. Nepal must prioritize equitable resource distribution, enhance intergovernmental coordination, and adopt innovative approaches like One-Stop Service Delivery and capacity-building. Collaboration with international partners to tailor policies and strategies will be crucial for meaningful progress.
Federalism is more than decentralizing power; it is about governance that uplifts all citizens. With the right strategies, Nepal can transform federalism into a tool for equality, prosperity, and national unity ultimately bridging the urban-rural divide rather than widening it.
References:
Bhattarai, K., Adhikari, A. P., & Gautam, S. (2023). State of Urbanization in Nepal: the official definition and Reality.SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4510827
Hilditch, S. (2021, November 4). Federalism in Nepal: A country in transition. International Alert. https://www.international-alert.org/stories/federalism-nepal-country-transition/
Hilditch, S. (2024a, April 29). A sense of hope: Understanding post-federal dynamics among marginalised communities in Nepal’s Tarai region – Federalism in Nepal Vol. 2. International Alert. https://www.international-alert.org/publications/sense-of-hope-post-federal-dynamics-marginalised-tarai-nepal/
Hilditch, S. (2024b, April 29). “I can speak”: Navigating masculine spaces in federal Nepal – Federalism in Nepal Vol. 5. International Alert. https://www.international-alert.org/publications/federalism-in-nepal-i-can-speak-navigating-masculine-spaces/
Improved service delivery for Karnali through the one-stop model. (n.d.). UNDP. https://www.undp.org/nepal/stories/improved-service-delivery-karnali-through-one-stop-model
Provincial Annual GDP Growth Rate 2018-2023. (n.d.). https://data.nsonepal.gov.np/dataset/provincial-national-accounts/resource/06788f2a-1c52-405f-9ec4-467b933a7d54
World Bank Group. (2024). Nepal development update (October 2024). In World Bank. https://www.worldbank.org/en/country/nepal/publication/nepaldevelopmentupdate
Bhattarai, K. (2024). An analysis of the economic performance of Nepal’s provinces. Interdisciplinary Journal of Innovation in Nepalese Academia, 3(1), 1–12. https://doi.org/10.3126/idjina.v3i1.70273
Dhaulagiri Journal of Sociology and Anthropology. (n.d.). https://www.nepjol.info/index.php/DSAJ
Author Introduction
Anshu Shrestha is a fresh law graduate with a keen interest in legal research, and international law. She is passionate about policy and governance and explores how legal frameworks shape social change and sustainability.
The views and opinions expressed in the piece above are solely those of the original author(s) and contributor(s). They do not necessarily represent the views of Governance Monitoring Centre Nepal and/or Centre for Social Change.
