Arya News - Diaspora-led startups and AI services are powering rapid expansion, but experts warn sustaining growth will require education reform and policy stability.
KATHMANDU – Nepal’s information technology industry reached a symbolic economic milestone in 2025, with sector representatives estimating that service exports crossed the $1 billion mark, more than doubling in just three years.
But industry leaders and researchers say milestones alone do not guarantee long-term success. Sustaining the growth, they argue, will depend on improvements in education, digital infrastructure and policy stability as well as the sector’s ability to generate hundreds of thousands of new tech-enabled jobs in the coming decade.
The question is whether Nepal has the institutional readiness, education reforms, digital infrastructure and policy stability required to sustain growth — and whether the country can realistically generate the 500,000 tech-enabled jobs within a decade.
The estimate comes from the Nepal Association for Software and IT Services (NAS-IT), which describes the figure as a “best estimate”. The most recent comprehensive study of Nepal’s IT exports was conducted in 2022 by the Institute for Integrated Development Studies (IIDS), which placed ICT exports at approximately $515 million at the time.
Applying an average annual growth rate of around 20 percent, which industry leaders say reflects current market trends, the figure would approach $900 million to $1 billion after three years of compounding growth.
“As an industry practitioner, I am very confident we have reached that billion-dollar number,” said Gaurav Pandey, president of NAS-IT. “And the survey data will be available by the end of the year. For now, the figure is based on industry growth patterns and multiple informal assessments.”
Industry representatives say Nepal’s export earnings come from a mix of software development, IT outsourcing, artificial intelligence services, healthcare data analytics for US firms, and home loan data processing for Australian companies.
“Nepal has become a preferred destination for Australian home loan processing,” Pandey said, noting that more than a dozen companies employ thousands of workers in that segment alone. Similar clusters have emerged in US healthcare data analytics, while companies such as Fusemachines are active in artificial intelligence services.
Pandey acknowledged, however, that there is no official mechanism to fully track these earnings through the central banking system.
“The issue with Nepal Rastra Bank is that payments often come in labelled as remittance,” he said. “It becomes very difficult to distinguish whether the money is payment for IT services or personal remittance. It’s a procedural challenge.”
Because clients abroad frequently mark transfers simply as remittances, tracking export revenue through official banking channels becomes complicated. As a result, industry bodies rely on internal growth observations and extrapolations rather than consolidated central bank data.
Alongside export growth, industry leaders estimate that around 100,000 people now work in Nepal’s IT sector. The 2022 IIDS survey had estimated more than 70,000 professionals at the time.
“Based on hiring trends and freelancing growth, if employment grows at around 18 percent annually, it could reach 500,000 within a decade,” Pandey said.
However, detailed breakdowns, such as gender participation, salary ranges or full-time versus freelance distribution, are not yet available. He noted that 90 percent of IT employment remains concentrated in Kathmandu, reflecting the clustering of colleges, firms and business infrastructure in the capital.
Shreesh Tripathi, research assistant at IIDS, and Pandey both point to the Nepali diaspora as a central force behind the sector’s recent expansion. “Many Nepalis have returned to start their own tech-enabled companies, and are examples of how this sector can grow,’’ Tripathi said.
SumX and K&A Engineering firms are founded or led by returnees who now employ dozens or even hundreds serving foreign clients. He also mentioned that, ‘‘IIDS has launched initiatives such as ‘The Decade of Nepali Diaspora’ to bridge the gap between Nepal and its global diaspora.’’ Another initiative, ‘Magnificent 100+’, also highlights the stories of outstanding Nepali diaspora members who are contributing globally.
Beyond diaspora-driven growth, industry leaders argue that sustained expansion will require deeper institutional reform and foreign investment.
Foreign direct investment remains limited, and they say Nepal must offer stronger incentives and regulatory stability to attract global tech firms.
Pandey pointed to the early entry of foreign banks, such as Nabil Bank (formerly Nepal Arab Bank) and Standard Chartered Bank Nepal (formerly Nepal Grindlays Bank) as examples of how foreign participation helped transfer skills and best practices. “We need FDI companies in tech for knowledge transfer,” he said. “We cannot only learn by making our own mistakes.”
Policy predictability is another concern. “Tax rates change every year,’’ he said. “We need stability for at least 10 to 15 years.”
Meanwhile, Tripathi stressed that without urgent curriculum reform, Nepal’s digital ambitions will stall. ‘‘It’s time to include emerging technologies such as artificial intelligence at earlier grade levels,’’ he said, and adopt a “human plus AI” approach to prepare the next generation for a technology-driven economy.
The challenges Nepal faces mirror broader global trends. According to the UNDP ‘Next Great Divergence Report’, the world stands at a crossroads where countries that harness digital transformation, education reform and innovation policies will move ahead, while those that do not risk widening inequality and failing further behind. The report underscores that digital divides and skill gaps are among the biggest risks facing developing economies in the decade ahead.
That insight echoes across Nepal’s emerging tech discourse. As Niraj Bhusal, digital governance expert, writes on X: ‘‘AI won’t cancel growth—it’ll reshape it… Nepal’s opportunity isn’t low-wage work, it’s AI-enabled services and becoming part of the global AI value chain.’’ But realising that opportunity requires education systems, labour markets and policy frameworks to adapt at pace or risk being left behind.
For Nepal, that means going beyond celebrating export milestones to building the human capacities and institutional conditions that make sustained growth possible or face the very divergence the UNDP warns about.