The Nepalese Labour Market – A Historical Macro – Perspective

Dr. Meena Acharya

The Nepalese economy was, and still is, a collection of north-south economic corridors integrated into the economy of the large north Indian provincial towns ( Luckhnow, Gorakhpur, Muzzafurpur, Silgurhi etc.) rather than a horizontally integrated national economy. This is particularly evident in the flow of goods and labour across the border and the price and wage structures in the country. Prices and wages in different parts of Nepal move in tandem with movements in big north Indian cities. There is a constant flow of people between the two countries for employment and other purposes. This is facilitated by the free convertibility of the Nepalese Rupee with the Indian currency in Nepal an open border with India and the 1950 Treaty with India which requires both countries to treat each other's citizens on an equal footing for employment and business opportunities.

The two-way flow of people for employment between India and Nepal may be explained by a particular configuration of historical factors and government policies followed throughout the nineteenth and early twentieth centuries. In the nest few paragraph, I examined these historical facts in some detail.

Export of Gorkhas \ Import of Settlers

Nepal's current borders were established in early nineteenth century after a series of wars among numerous petty hill states, floating between one alliance and another, and the prolonged war with British India extending between 1814-1816. One of the hilly states, namely Gorkha, waged numerous wars against neighbouring states and by the end of the eighteenth century, had established the boundaries of Nepal extending far beyond its current borders. The Treaty of Sugauli, contracted after this war, obliged Nepal, among other things, to relinquish a sizeable portion of her land and grant the East India Company the right to recruit for its services from " among the troops in service of Nepal." It also ensured them the service of the Nepalese army in times of crisis.

Recruitment of Nepalese soldiers in the British Indian Army had started as early as 1814 (Husain, 1970). In the early part of the Nineteenth century, the Gorkha State continued attempts to expand its territory and came into direct conflict with the East India Company. Several wars were fought during the early decades of the nineteenth century. The East India Company found it hard to defeat the Gorkhali army. The wars finally culminated in the defeat of Nepal in 1816 and the Sugauli Treaty. As early as 1826, Gorkha regiments had been used by the company to defeat the Jats (Bolt, 1967). The services of Gorkha regiment, together with Nepali regular battalions sent by Nepal as a gesture of friendship towards the British, in the 1857 Sepoy Mutiny in India are well recorded in history. Since then, both direct recruitment into the British-Indian Army and lending of the Nepalese Army in times of need continued throughout the nineteenth century and right up until the Second World War (Bolt, 1967). Independent India has continued in its various battle with its neighbours has generated much controversy in the country.

Labour exports from Nepal to India mainly took three forms: service in the British Indian Army, service in the Nepalese Army (which used large scale corvee labour and was mainly used by the British in times of crisis and service in the informal sector as personal servants, domestic cooks, and guards for British and Indian Army officers. To this may be added the export of labourers as plantation workers, mainly to eastern hill areas in India (Rahul, 1978).  A substantial number were employed in the tea estates of the eastern hills in India. By 1900, about a quarter of a million people of declared Nepali origin were recorded in the Indian census. This, however, includes populations, which were transferred along with land to British India in 1816.

On the other hand, Nepal imported settlers from India on a large scale for cultivation of vast tract lands and dense forests along its southern borders. Since both the hills and Tarai were only sparsely populated at that time, enough labour not be found to cultivate these lands. But the ruling elite needed export surplus to pay for the goods that were pushed into Nepal by the nascent Indian capitalism.

Therefore, liberal incentives were granted for land reclamation, cultivation, and import of settlers from India  (Regmi, 1976). For example the land regulations of 1861, which consolidated the zamindari system in the Tarai, provided that any individual could offer to reclaim virgin, water, or forest lands which were at a distance of more than one days' walk from existing settlements and which peasants were unable to reclaim through their own labour and resources. On acceptance of such an offer, a person was permitted to procure settlers from India or divert cultivators from other land holdings which were tax free ( Birta land). He was granted tax exemption for ten years and one tenth of the reclaimed area as his Birta, that is, tax-free land. Wastelands for which no settlers were available were given to him as his Zirayat. For cultivating the zirayat, the zamindar was permitted to appropriate unpaid services of one ox-team or at least one plough hand from every settler family each year. The reclaimed areas were inherited and secure from arbitrary eviction and from confiscation, even if the zamindar committed an offence against the state. The settlers were given allotments free of taxes for five years. The zamindar was under obligation to supply credit for maintenance of the settlers families and cultivation of the land. He could charge interest on such credit.

Any Indian family that moved into Nepal was given a free allotment of agricultural land in addition to home site and a free supply of building materials for constructing hut. Once an Indian was settled in Nepal in this way, he could be appointed a zamindar up until the 1920's when a ban was imposed on the purchase of land by Indians in Nepal. Regmi, (1976) observes that these facilities were utilised to a considerable extent, thereby accelerating the pace of agricultural development in the Tarai and generating agricultural surplus for exports. Only in recent decades the hill population has started to migrate to the Terai plains.

Thus, throughout the 19th century and the early decades of 20th century, on the one hand, Indians were actively sought, encouraged and included to emigrate and settle in Nepal Terai, so that the Terai plains could be cultivated and surplus grain generated for export. On the other hand, Britain as an imperial power in the subcontinent was given full facilities to recruit hill people for its expansionist wars and repressive army in the subcontinent. Moreover, the Nepalese army itself was put at the service of the Empire whenever necessary on a mercenary basis. Thus, while service of the army in India and abroad became an important occupation and source of livelihood for the people in the hills, import of Indian labour involving lower costs became the major sources of agricultural development of the Terai. Moreover, the Nepalese people seemed to prefer to seek employment in under-populated comparatively colder hilly belt across the northern belt of India rather than in the hot and malarial domicile, most Nepalese going to India for employment tended to return home. It is hard to establish whether Nepal was a net exporter to importer of labour during this period.

During the eighties, however, Nepal was estimated to experience a net inflow of labour. The migration survey (National Population Commission, 1983) showed a large portion of Indian immigrants in Nepal, and the commuter survey showed a net inflow from India into Nepal. A sample of 200 commuters in each of the ten important border points were interviewed to find their nationalities, purposes and duration of visits, and types of work and/or occupations in which they were engaged. Of the 2,419 commuters interviewed, more than 55 per cent were Indians (Ibid., p. 413). About 57 per cent of the commuters reported to be in business, wage labour and services. Among the labourers, both coming to Nepal and going to India, Indian nationals predominated. Similarly, the proportion of businessmen among the Indian commuters was much larger than the comparable proportion among Nepalese commuters. Proportionately, a larger number was found to be engaged in services among the Nepalese commuters.

Similarly, a study of the emigrant populations in the three towns of Kathmandu valley and ten Terai districts showed that, among an estimated migrant population of 28,287 in the Kathmandu Valley (i.e. 8 per cent of the total population), about 31 per cent were immigrants. Of the immigrants, 72 per cent were Indians. Of the 38.5per cent estimated migrant population in the Terai, 24 per cent were born abroad. Immigrants of the Terai came from areas adjacent to the Nepal Terai. The survey showed 6.9 per cent came from India, 2.6 per cent from Bangladesh, and only 3.1 per cent from all other countries.

Because of their known martial skill as well as other skills and preferences, Nepalese industrial development relies primarily on imported labour. As a consequence, the Hill labour market is characterised by greater outward male migration than the Terai and the labour and the product market in Nepal are integrated vertically with neighbouring Indian markets rather than horizontally among themselves. More recent studies of the migration streams are not available. Individual case studies (e,g. Dixit, 1997) have cited   examples of Nepali migrant labour in north western Hills of India . Also, anecdotal evidences are coming out about the migration of male labour from Terai households as farm labourers to agriculturally more advanced areas of Punjab and western U.P., while Nepali farmers in these areas have to import labour from more depressed areas of Bihar and Urissa. Migration of the Hill population o more virgin hills of north-east India has stopped completely. In recent years, there has been a reverse flow because of political expulsions from these areas, particularly from Assam, Manipur, and Bhutan.

Thus, at the micro level like in many other countries, the Nepalese labour market is characterised by various forms of dualism manifested in the difference in the wage rates between the urban and rural labour markets, informal and formal sectors, differing marginal rates of return and differing labour to land ratios on various sizes of farms (For a summary exposition of these issues for other countries See Majumdar, 1992). The Nepalese labour market suffers from additional macro-level imperfections arising out of its geopolitical location and historical development. Until  20 years ago, participation in the wage labour market was small in agriculture. The urban labour market was dominated by services and construction. The manufacturing sector provided employment only to a small proportion of the total labour force. 

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