Nepal’s AI Paradox

Nepal may be safe from the first wave of artificial intelligence (AI) disruption sweeping across South Asia, but that safety comes at a cost. According to the World Bank’s South Asia Development Update: Jobs, AI, and Trade released in October 2025, Nepal has the lowest exposure to AI-related disruption in the region.

That means Nepali workers are less likely to lose jobs to automation. But it also means the country could be left behind in the race for higher productivity, wage growth, and technological competitiveness. 

The World Bank study finds that only about 7% of South Asian jobs are highly exposed to AI without human–AI complementarity, compared to 15% in other emerging markets. Among them, Nepal ranks at the very bottom, largely because of its agriculture-heavy and low-skilled workforce.

“AI exposure tends to rise as the proportion of skilled workers increases and agricultural employment declines,” the report notes. “Nepal’s large rural workforce and low average skill levels explain its minimal exposure.” More than 60% of Nepali workers remain in farming or manual occupations—sectors where AI has little immediate role. This helps shield workers from automation, but it also limits Nepal’s entry into higher-value, AI-enabled industries that are now driving growth elsewhere in the region.

Skilled Jobs Scarce, AI Skills Scarcer

Across South Asia, jobs requiring AI-related skills already earn a wage premium of nearly 30% percent, driven mainly by India and Sri Lanka. Nepal, however, has yet to see such gains because digitally skilled professionals remain rare. The report finds that countries like Sri Lanka and Bhutan, with more urban and skilled labor forces, show greater AI exposure and complementarity. In contrast, Nepal’s digital economy remains in its infancy, with few enterprises equipped to integrate AI tools into daily operations.

Without a stronger digital foundation, Nepal risks seeing its youth and graduates sidelined as AI reshapes professional work across borders.

Youth and Entry-Level Workers Most Vulnerable

Regionally, young and moderately educated workers—those entering white-collar or service-sector roles—are most exposed to AI-driven change. While Nepal’s low exposure currently shields many, the country’s growing number of university graduates could face increasing competition as AI automates or transforms entry-level professional tasks.

Generative AI has already reduced monthly job postings in areas like customer service and software development by about 20% globally. Although Nepal’s IT and outsourcing sectors are still small, similar patterns could emerge as international clients shift toward AI-powered workflows.

Three Bottlenecks Holding Nepal Back

The World Bank highlights three major constraints that stand between Nepal and the promise of artificial intelligence. First, the country suffers from a severe shortage of skilled professionals capable of developing, managing, or even effectively using AI systems. The limited technical workforce not only restricts innovation but also prevents industries from adopting AI-driven solutions at scale. Second, Nepal’s unreliable electricity supply continues to disrupt digital operations, making it difficult for businesses and institutions to maintain the consistent power required for advanced computing and automation. Finally, slow and inconsistent internet connectivity remains a critical bottleneck, undermining access to cloud computing, data sharing, and real-time applications—the very backbone of an AI-enabled economy.

Together, these weaknesses form the structural bottlenecks blocking Nepal’s path to an AI-enabled economy. Strengthening them—through investment in education, digital skills, and infrastructure—will be essential for turning AI from a distant threat into a productivity opportunity.

Complementarity and Opportunity

While AI can displace some jobs, the report offers a silver lining: roughly 70% of AI-exposed roles in South Asia are complementary. This means AI can augment human labor rather than replace it.

For Nepal, that means potential in sectors like education, health, finance, and professional services, where human judgment remains irreplaceable. But capturing these gains will require strategic policy action, ensuring that Nepal’s low exposure today does not translate into technological exclusion tomorrow.

Deepen Chapagain, Country Director at LogPoint Nepal and Vice President of the Nepal Association for Software and IT Services Companies (NAS-IT), argues that AI’s impact depends on how it is implemented. “It’s not uniform,” he said. “In large international firms, automation has led to downsizing. But in Nepal, most organizations are smaller, so the effects differ. AI should be seen as an opportunity—a productivity multiplier, not just a threat.”

He added that Nepali firms have yet to deploy AI at scale. “Most organizations lack strategies for its use. Those that learn to integrate it effectively could achieve efficiency gains without cutting jobs,” he added.

Skills: The Missing Link

Labor expert Jeevan Baniya, Deputy Director at Social Science Baha, said AI is already reshaping labor markets globally and Nepal cannot remain insulated.

“In trade and services, many tasks once done manually like ordering or customer support are now automated,” he said. “The skills we learn today may become obsolete within five to ten years.”

Citing the ILO Centenary Report, he added: “Beyond capital and human resources, skills are the key to developing and promoting employment. AI is rapidly transforming the types of skills demanded. The skills we learn today can become obsolete within five to ten years — sometimes even sooner.”

Baniya argues that Nepal’s education and training systems lag far behind these shifts. “Our training providers must track global skill demands and update curricula accordingly,” he said. “Education should be aligned with labor market needs so graduates can compete both domestically and globally.”

Experts agree that Nepal’s current low exposure protects it temporarily—but it’s a fragile advantage. Without decisive investment in skills, research, and infrastructure, the same conditions that shield Nepal from disruption today may soon lock it out of regional growth opportunities.

Observers say that Nepal must prioritize skill development, private-sector investment in training, and greater research on how AI is shaping its economy. “We lack data on how AI is affecting jobs or which sectors are most exposed,” Baniya noted. “That’s where investment in research and innovation becomes essential. Our technical education, IT, and AI-related courses must also meet international standards.”

As AI transforms productivity and wages across South Asia, Nepal faces a choice: remain shielded but stagnant, or take the leap toward building a workforce ready for the age of intelligent machines.

This article was first published in the November 2025 edition of New Business Age magazine.