IT Engine is Revving, Time to Build the Highway

The IT sector in Nepal has quietly evolved over three decades. From early players like Mercantile and PCS in the 1990s to the important growth triggered by D2Hawkeye in the 2000s, the industry has moved from obscurity to a billion-dollar engine, largely without fanfare or government support.

After 2012–13, a wave of new companies entered the scene. Despite the 2015 earthquakes and border blockade, and thanks in part to the resilience shown during COVID, the sector thrived. Remote work became normalized, and IT exports surged.

In 2022, a NAS-IT and IIDS survey valued IT exports at $515 million. By 2024, reports citing Nepal Rastra Bank estimated foreign earnings from IT services, including freelance and corporates, at $800 million. The number may have crossed the billion-dollar mark if we factor in underreported and remittance-channel earnings.

Despite this scale, there is no dominant firm. While companies like Cedar Gate, Cotiviti Nepal (now Infinite Nepal), Fusemachines and Leapfrog each employ hundreds of people, none control more than 2–5% of the market. This distributed growth has made the industry more resilient and competitive.

Quiet Builders, Unheard Voices

One challenge has been visibility. Nepali IT professionals and entrepreneurs typically avoid public platforms. As a result, policymakers long remained unaware of the sector’s scale and potential. That’s why NAS-IT was formed—to advocate, coordinate and educate. From just 30–35 founding members, we now represent 70–80 companies. In the past three years, we have held over 100 meetings with lawmakers, ministries, development agencies and government officials. Our lobbying was not about handouts; it was about long-overdue policy reform.

One key success was getting legal clarity for opening overseas branches—a demand dating back 20 years. We helped amend a decades-old law, originally drafted during King Mahendra’s time, to apply specifically to IT. The Nepal Rastra Bank has also become increasingly supportive.

IT is already largely digital, with most companies receiving and spending over 95% of funds through traceable banking channels. This transparency has helped gain the government’s trust.

Building on Strengths, Learning from Delays

Nepal’s IT sector leans heavily toward software development, design, artificial intelligence, animation, quality assurance and data services. We have built notable expertise in healthcare data for the US, Australian mortgage back-office support and more recently, AI.

But we came to the game rather late. Had we opened up like India did in the 1990s, we would be far ahead. India now has robust IT policies, widespread foreign currency flexibility and has become a global tech powerhouse. Nepal, by contrast, still lags behind. Today, our IT workforce is around 100,000. The maximum realistic growth is to 400,000–500,000 direct jobs, with an equal number of indirect beneficiaries. That is significant. But we must be realistic; we will not reach India’s scale. Our market, talent pool and institutional capacities are smaller. That said, we have enough strength to aim for 4x–5x growth if we get the policies right.

AI: Threat or Opportunity?

Yes, AI will disrupt existing jobs; simple website-building and data entry roles may disappear. But it will also unlock new opportunities. Globally, the IT sector directly contributes about 4% to GDP. That share could rise to 15% by 2040, fueled by full-spectrum digitization and AI integration.

Think of hospitals. Right now, we may only have digital registration. But in 10 years, we will see AI-powered EMRs, lab reports and X-ray diagnostics. In logistics, automation will be standard. In agriculture, drones and AI-powered robots are already in use in countries like China. We must adopt, adapt and innovate to stay relevant.

Nepal’s GDP is roughly $44 billion, with IT contributing around 1.8–1.9%. With strategic growth, this could rise to 5–6%. But the real prize is beyond the IT sector's direct contribution to GDP share. Can we use IT to drive productivity in agriculture, logistics, education and healthcare—the other 95% of our economy? That is the vision we must collectively chase.

Protecting and Empowering Domestic Capability

We have urged the government to prioritize Nepali IT firms for public digital projects. Critics may cry foul in a globalized world, but the truth is, other nations fiercely protect their digital sovereignty.

In India, Aadhaar and UPI were primarily built by Indian firms like TCS and iSPIRT by using local expertise. US government contracts often prioritize domestic firms for security and economic reasons. The EU prioritizes regional providers to comply with GDPR and support local economies. Why should Nepal be the only country giving away its digital work without reciprocity?

We are not asking for blind protectionism. We are asking for smart support. Nepali companies, some earning tens of millions, are ready to build license systems, EMRs, education platforms and more. They just need the chance.

One systemic issue is the procurement law that awards contracts to the lowest bidder, regardless of quality. Because of this, many capable firms do not even bother applying. We need a system that prioritizes long-term functionality over short-term cost.

Rethinking Software Development

We also need to overhaul how we think about software. Public agencies often treat it as a one-time purchase. But good systems are built iteratively. Requirements evolve, and solutions must evolve with them.

Globally, organizations have small internal teams that gather daily requirements and work with external developers in stages. We must learn from that approach.

Every government department should aim to digitize and automate completely over 3–5 years, starting with their most impactful tasks. Focus on the 20% of operations that serve 80% of users. Build smart, then scale.

Fixing Education, Fueling the Pipeline

All of this hinges on fixing our education system. Although we have a large education budget, quality is still patchy. Students from wealthier families fare better because their parents invest in quality schooling. But shouldn’t public investment deliver results across the board?

We need reforms, from school to Ph.D. level, that prioritize critical thinking, STEM education, and real-world skills. Good education is the foundation of every successful economy. Look at China. Its rise was not accidental; it invested in education and R&D. It welcomed foreign investment, then leveraged it for knowledge transfer.

We are seeing early signs of this in Nepal. Nepali-American entrepreneurs have raised millions in funding and are creating hundreds of jobs in Kathmandu. But these are private initiatives. The state must step in; not to control, but to enable.

Creating a Real Investment Environment

Nepal is not a prime destination for global investors yet. That is understandable. Investors seek returns; but also policy stability, ease of doing business and legal clarity. We must offer those.

Let’s be honest: foreign investors do not just bring money. They bring global know-how, operational excellence and exposure. That is what builds a competitive economy. Instead of fearing that young talent will be poached, we should ensure that they gain international exposure and bring that expertise back.

The more we open up strategically, the more our workforce will evolve, and the more we will grow.

This was the cover opinion of August 2025 issue of New Business Age Magazine.