Nepal’s economy presents a profound paradox. On the one hand, the country has made impressive strides in reducing poverty, virtually eliminating extreme poverty in recent decades – an achievement aided by a huge influx of remittances from millions of citizens working abroad.1On the other hand, Nepal remains one of Asia's slowest growing economies, stuck in a low-growth trap, unable to create enough quality jobs for its young and growing population. At the heart of this paradox lies the vast, multifaceted and largely unaccounted for “shadow” or informal economy.

This investigation by Alpha Business Media delves into this hidden sector to quantify its scale and analyse its contradictory impact on Nepal’s gross domestic product (GDP), employment and social stability. Our findings show that the informal economy is not just a side effect, but a dominant feature of Nepal’s economic landscape, serving as both a lifeline and an anchor.