14 August 2026, NIICE Commentary 12659
Shradha Arjyal Joshi
As the twenty-first century unfolded, the foundations of economic power underwent a quiet, tectonic shift. Wealth is no longer confined solely to natural resources, military strength, or towering industrial factories. A new force, more profound and transformative, is rooted in education, technological innovation, and scientific research. In this new era, ideas have become more valuable than raw materials contemporary economists call it the birth of the “knowledge economy”.
Has knowledge truly become the defining force of modern civilization? Long before western theorists began speaking of a “knowledge economy,” Eastern philosophy had already placed knowledge at the center of human progress. Ancient Sanskrit literature captures this idea with striking clarity:
“Vidya nama narasya rupam adhikam pracchanna-guptam dhanam;
Vidya bhogkari yesah sukhakari vidya gurunam guruh.”
The wisdom portrayed in the ancient Sanskrit stanza acquires renewed relevance to this century as well. It portrays learning not merely as a source of livelihood, but as the foundation of dignity, reputation, happiness, and wisdom itself. In many ways, the philosophy behind today’s knowledge-driven global economy echoes these ancient insights: that societies prosper not just through military might or natural resources alone, but through the cultivation of human intellect, innovation, and education. Knowledge has become an important aspect of growth and value creation. A knowledge-based economy emphasizes innovation, technology, institutions, and skilled human capital for productivity and competitive edge. The World Bank Institute defined the knowledge economy which creates, distributes, and utilizes knowledge to enhance its growth and development. Nepal is now testing whether it can convert this philosophy into economic reality. With the establishment of the Ministry of Science, Technology and Innovation, the government has shown willingness to reframe its development model.
Every year, the World Intellectual Property Organization (WIPO) and its partners publishes the Global Innovation Index, a metric in tracking how effectively the country commercializes new ideas. Here and now, it is used as the benchmark for evaluating innovation policy in the world. South Korea ranked in the global top four in the 2025 edition. This achievement is a result of long-standing strengths on research concentration and business R&D. It’s significant investments in areas of science and education stood as a transformative pillar to overcome post-war poverty.
Economic progress generally depends on capital, labor, technology, and natural resources. In this regard, the growth and development of national economies are also greatly influenced by human capital. As defined by economist Samuelson and Nordhaus, human capital refers to the stock of useful and valuable skills and knowledge accumulated by people in the process of their education and training. Finland underwent a similar metamorphosis, shifting from an agriculture-based economy in the late 1950s to a forerunner of the microelectronic revolution by the 1990s. The Finnish approach to the development of a knowledge-based economy centers around developing the education, research, and innovation policy agenda (World Bank 2014).
As per the census of 2021, people of 16-40 age make up to 42.56% of Nepal’s population, demonstrating it as a crucial demographic wealth. Yet this large share of advantage continues to be understood through the lens of labor migration. During mid-February to mid-March, remittance inflows reached Rs.188.64 billion in Nepal, highlighting the economy’s cavernous dependence on remittances. The country’s large share of human capital has contributed more to the development of destination countries than to its own. However, Nepal’s young population can be mobilized not just as a workforce for today’s economy but also as an essential foundation for growth and the nation’s sustainable development. The transition from a remittance- dependent to a knowledge-driven economy demands significant alternation in development priorities.
Each year, thousands of Nepali students complete their graduation in science, engineering, IT, management, medicine, etc. These students, professionals, and skilled workers are leaving the country for better education and job opportunities, ultimately leading to a loss of valuable human capital. This is a serious problem for the country, as it is bound to export a pool of talent abroad. Due to a lack of sufficient capital in R&D and the absence of a domestic startup ecosystem, emigration becomes not a choice but a necessity of economic survival for young minds. The country’s inability to marshal youths into productive innovators is of great economic and social concern.
Mahabir Pun, a social entrepreneur and founder of the National Innovation Center, served as the education minister in the 2025 interim government. His appointment under Prime Minister Balendra Shah to lead the newest ministry of Science, Technology and Innovation has heightened public expectations and attempts to mark a shift in the development paradigm. For more than a decade, he has been a fierce critic of the state’s ignorance in innovation and technology. Similarly, his leadership will test whether Nepal’s institutionalization of science and technology can deliver results beyond policy rhetoric. However, it’s the institution that is held capable and responsible for long-term change, not merely an individual.
At the state center policy Nepal’s knowledge economy demands strong institutional mechanisms, capital assurance, and mobilization of human capital. The country gets thousands of graduates each year, yet the industry still struggles to foster science, technology and innovation. Research and development are intended to bring forth real solutions not limited to classroom study, journals, and publishing. Building an innovation ecosystem requires the government to work hand in hand with professionals, academicians and the private sector. At this crucial stage of development, the newest ministry has been handed greater responsibilities of R&D, innovation and promotion towards technological advancement. Countries like South Korea, Singapore and Israel transformed universities into innovation hubs. Nepal’s universities have mostly remained rigid teaching institutions.
Research itself cannot create growth, rather its application does. Nepal’s sustained economic transformation should be based on continued practice of research and development, generating knowledge, fostering innovation and building productive human capital inside the country. Minister Pun’s experience in innovation and digital transformation, eco-tourism, at the community level can act as a valuable foundation for Nepal’s aspiration to a knowledge economy. There remain mounting challenges: less efficient research institutions, lower investments from the private sector in R&D and weak digital infrastructure. These constraints need to be addressed from a broad policy level to leap into the economic horizon of technology and innovation. Science and Technology education must be made an integral part of the education system at all levels. Public investment in research needs to expand to transform ideas to marketable products. Establishing a ministry is definitely a political milestone but it is only a prologue. Nepal’s aspiration on the science and technology horizon requires building a state where knowledge is labelled not just as a silent academic pursuit but as the literal foundation for development.
Shradha Arjyal Joshi is a Development Professional focusing on Political Economy and Resource economics.
