New Nepal: From the streets to the state

In the autumn of 2025, the Himalayan nation of Nepal found itself at a precipice, its future shrouded in the smoke rising from the embers of the Singha Durbar government complex. 

What began as a youth-led digital protest against a sweeping social media ban quickly morphed into a nationwide revolt, the most significant upheaval in a generation. This was not a mere riot but a rupture, a tearing of the socio-political fabric that had held, however tenuously, for nearly two decades. 

The "Gen Z movement," as it came to be known, toppled a government and sent a discredited political class fleeing from power, leaving behind a nation grappling with both immense destruction and a once-in-a-generation opportunity for rebirth.

The crisis, born from the deep-seated frustrations of a generation denied a future, has plunged Nepal into profound uncertainty. Yet, within this trauma lies an opportunity. The collapse of a sclerotic and corrupt system has cleared the space for a fundamental reimagining of the Nepali state and its relationship with its citizens. 

With the respected former Chief Justice Sushila Karki at the helm of an interim government, the nation stands at a critical juncture. This moment must not be wasted on a simple restoration of the old system with new faces. Instead, it must be seized to break decisively from the failed "Remittance-Patronage" model of the past and embark on a bold, new trajectory.

Anatomy of a generational revolt

The spark that ignited the flames of protest was the government's abrupt ban on 26 major social media platforms, including Facebook and X (formerly Twitter). While the official justification was regulatory compliance, the public perceived it as a blatant attempt to silence dissent. For the youth of Nepal, this was an assault on their very world. 

In a nation where nearly two million citizens work abroad, their remittances constituting a third of the GDP, these social media platforms were the vital, low-cost lifelines connecting families separated by continents. They were also a burgeoning marketplace for young entrepreneurs, a space for creative expression, and a platform for civic engagement. The ban was not just censorship; it was an economic and social amputation.

The state's heavy-handed response to the initial peaceful protests, resulting in dozens of deaths and over a thousand injuries, acted as an accelerant, turning simmering anger into a raging inferno that engulfed the entire nation. However, the fuel for this fire had been accumulating for years, crystallised by a potent and viral narrative: the "Nepo Kid" campaign. Months before the protests, TikTok videos began to systematically expose the opulent lifestyles of the children of politicians and their cronies.

 Luxury cars, extravagant foreign holidays, and designer clothes were juxtaposed with the grim reality faced by most Nepali youth: chronic unemployment and forced migration for menial jobs abroad. In a country with a per capita income of around $1,400, this flagrant display of wealth, widely seen as the fruit of corruption, made the abstract concept of "elite capture" infuriatingly personal.

This was a distinctly 21st-century movement. Inspired by recent youth-led uprisings in Sri Lanka and Bangladesh, it was leaderless, decentralised, and organised organically online with hashtags like #EnoughIsEnough. The slogans that echoed through the streets of Kathmandu and beyond—"Shut down corruption and not social media," "No More Nepo Babies"—were a wholesale rejection of the entire political class that had played a game of musical chairs with power since the monarchy was abolished in 2008.

The damages of the uprising

While the Gen Z movement was a powerful expression of popular discontent, the 48-hour agitation that followed the initial protests was marked by widespread violence and destruction, causing immense damage to both public and private property. The private sector, in particular, bore the brunt of the violence, with losses exceeding Rs240 billion, approximately 4% of Nepal's GDP.

Corporate houses and businesses became primary targets for the destructive elements that hijacked the initially peaceful protests. The Chaudhary Group (CG), one of Nepal's largest conglomerates, suffered extensive damage. The private residence of billionaire Binod Chaudhary was vandalised and set on fire. The CG factory in Satungal and the CG Motors showroom in Thapathali were also attacked, with vehicles being set on fire and vandalised. The properties of his brothers, Basant and Arun Chaudhary, were also targeted. 

The IME Group, another major business house, saw its Chandragiri Cable Car base station in Kathmandu, the Maulakalika Cable Car in Nawalparasi, and several Global IME Bank branches attacked, resulting in infrastructure damage worth billions.

The retail sector was also severely affected. Twelve stores of the popular Bhat-Bhateni Supermarket chain were completely burned, and nine others were vandalised or looted, with initial damage estimates around Rs 50 billion. This has led to the loss of livelihoods for over 8,000 employees. 

The offices of Kantipur Publications in Thapathali Business Park and Tinkune were targeted by arson and vandalism. Other businesses, including Captain Rameshwar Thapa's Annapurna Tower, Simrik Air's building, and showrooms of Tata Motors, Hyundai, Suzuki, and Mahindra, were also attacked.

Multinational companies and foreign investments were not spared. The Hilton Hotel in Kathmandu was burned down, and the telecommunication service provider Ncell suffered damages exceeding Rs 1 billion from arson and looting. The financial sector was also hit hard, with over 65 branches of banks and financial institutions looted or burned nationwide. Numerous ATMs were destroyed, posing a risk of a liquidity crisis.

The destruction was not limited to the capital. Industrial hubs like Biratnagar, Birgunj, Itahari, Pokhara, Dhangadhi, Dang, and Surkhet also witnessed widespread violence and destruction. Sensitive government structures, including the Parliament building, Singha Durbar, the Supreme Court, the Prime Minister's residence, and the President's Office, were vandalised. The private residences of senior political leaders and the Governor of Nepal Rastra Bank were also attacked.

While the initial protests were a genuine expression of Gen Z's frustration with corruption and lack of opportunities, the subsequent violence and destruction were reportedly instigated by other political actors who sought to exploit the situation for their own ends. This has raised concerns about the ability of the state to maintain law and order and protect private property, which could have a chilling effect on foreign investment.

The rot within: A State built on exile and impunity

The 2025 crisis was not an isolated event but a systemic failure, with its roots deeply embedded in the flawed political and economic model established after the 2006 peace accord. The post-conflict settlement created what can be termed a "Remittance-Patronage State"—an unstable model where mass youth out-migration served as a political safety valve. The resulting flow of money was not invested in national development but managed through political patronage networks that enriched a small elite.

For over a decade, Nepal's economy has been predicated not on building domestic industry, but on exporting its people. In the 2024-25 fiscal year alone, over 839,000 labour exit permits were issued. This inflow of foreign currency fuelled a consumption-and-import boom, benefiting those in power while hollowing out the country's productive capacity. 

The social cost has been immense, with an "absent population" leading to abandoned villages and a fraying social fabric. The most direct consequence is a debilitating youth unemployment crisis, with rates hovering around 20%. 

Nepal's education system, with its outdated curricula, produces graduates who are functionally unemployable, creating a tragic skills mismatch. For those who do find work, over 90% are in the informal economy, defined by low wages, no security, and no future.

This economic dysfunction is the deliberate outcome of a political system built on elite capture and a foundational culture of impunity. The failure to deliver transitional justice for the atrocities of the 1996-2006 Maoist insurgency was the state's original sin. 

By prioritising political compromise over accountability, it sent a clear message that power provides immunity from the rule of law. The systemic corruption that fuelled the 2025 protests is a direct continuation of this legacy. Tens of thousands of complaints of serious human rights violations remain unaddressed, a lingering shadow that has undermined faith in all state institutions.

A fork in the road: Lessons from Sri Lanka and Rwanda

As Nepal charts its course, the experiences of two other nations offer powerful, contrasting lessons. Sri Lanka's recent economic collapse is a cautionary tale. A toxic cocktail of populist policies, massive tax cuts, and weak governance led to an economic implosion and a popular uprising in 2022. 

Its recovery has been a painful, IMF-dictated course of austerity, restoring macroeconomic stability at a huge social cost, with poverty nearly doubling. The key lessons for Nepal are stark: fiscal discipline is non-negotiable, and independent institutions like a central bank are a critical bulwark against political profligacy.

In sharp contrast, Rwanda offers an inspirational lesson in national transformation. After the 1994 genocide destroyed its social and economic fabric, Rwanda embarked on an ambitious state-building project guided by a long-term national plan, "Vision 2020". It embraced a "developmental state" model, building a strong, capable bureaucracy to guide the economy, pursuing a zero-tolerance policy on corruption, and strategically attracting investment. 

Crucially, it understood that security and national reconciliation were the non-negotiable foundations upon which economic prosperity had to be built. The Rwandan renaissance demonstrates the power of a unifying national vision and a capable state to heal a nation and drive development. Nepal now faces a choice between these two paths: a minimalist, reactive course correction or a fundamental, proactive national transformation.

A blueprint for a new Nepal

The path forward requires an integrated, three-pillar strategy to transform Nepal from a "Remittance-Patronage State" into a modern, productive, and inclusive "Developmental State".

Forging a new national purpose: The interim government's mandate cannot simply be to be "not corrupt". Integrity is the entry ticket to legitimacy, but Nepal needs a positive, forward-looking vision. 

Drawing from the Rwandan experience, it should initiate a broad, nationwide consultative process to draft a "Nepal Vision 2050". This new social contract must be anchored in "National Developmentalism"—a pragmatic ideology focused on building a productive, innovative, and globally competitive economy. 

This also means decisively addressing the unfinished business of the Maoist conflict. The transitional justice process must be revitalised, pairing credible, top-down investigations with bottom-up, community-led reconciliation initiatives to finally heal the nation's wounds and restore faith in the rule of law.

An economic paradigm shift: To tackle the youth employment crisis, Nepal must move from exporting labour to creating opportunity at home. This requires a national strategy that links industrial policy with human capital development. The state must actively promote investment in labour-intensive sectors like agro-processing, light manufacturing, and sustainable tourism. 

Simultaneously, it must radically overhaul its vocational training system to make it demand-driven and responsive to the needs of the private sector. Nepal can scale up proven local models, such as the "Employment Fund," whose results-based financing model achieved a 90% employment rate for its graduates. Fostering an entrepreneurial ecosystem through education, access to finance, and one-stop support hubs is also essential.

Rebuilding trust: The success of any reform agenda hinges on restoring the shattered confidence of both Nepali citizens and the international community. 

The appointment of Sushila Karki, a figure of unimpeachable integrity, is a powerful first step. This moral authority must be translated into immediate, concrete actions: radical transparency measures, independent audits of state enterprises, and a depoliticised anti-corruption commission. 

By embedding integrity into its core economic value proposition, Nepal can attract the responsible, long-term investment needed to fuel its development, shifting the international conversation from aid to partnership, from fragility to opportunity.

The engine of transition

This ambitious agenda cannot be implemented by a transitional government alone. To anchor the reform process and provide essential expertise, Nepal needs a new institutional mechanism: a "Transition Support Group". Composed of the nation's leading independent think tanks, public intellectuals, and trusted civil society organisations, this body would operate as a non-partisan, technocratic engine. 

Its mandate would be to provide evidence-based policy advice, facilitate the national dialogue for Vision 2050, and act as an independent watchdog to ensure accountability.

It would institutionalise the very spirit of the Gen Z movement—collaborative, evidence-based, and demanding of transparency—channelling the revolutionary energy of the streets into the patient work of building a better state.

The path to a "New Nepal" will be long and fraught with challenges. It will require sustained political will, active citizen participation, and steadfast international support. The sacrifices made on the streets of Kathmandu demand nothing less. 

The crisis has created a clear mandate for profound change. It is now up to this generation of Nepalis to build a future where the promise of peace, dignity, and prosperity is finally realised for all. The fires of September 2025 have cleared the ground; now, the seeds of a new Nepal must be sown.

Sketch: TBS

Prof Ujjwal K Chowdhury, a university professor and commentator on international affairs, based out of Kolkata. He can be reached at ujjwalk.chowdhury@gmail.com.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.