Digital Infrastructure Development and Its Role in Bridging Nepal’s Urban-Rural Economic Divide

Abstract

The study examines how the development of digital infrastructure creates economic disparities between urban and rural areas in Nepal. The researchers employed a mixed-methods research design to assess economic impacts, using primary data collected from 46 businesses and 33 individual respondents, combined with national reports. The researchers used various testing methods, including Kruskal-Wallis testing, Wilcoxon signed-rank testing, Mann-Whitney post hoc analysis, OLS regression, K-Means clustering, and bootstrap confidence interval analysis to measure digital readiness and payment system usage in urban areas and in areas with partial rural and complete rural status. The research showed that businesses achieve higher revenue growth through the adoption of digital technology, raising their earnings from NPR 132609 to NPR 170978. The urban area had the highest digital payment adoption rate of 72.95%, followed by somewhat rural areas at 45.87% and rural regions at 19.64%, while the Kruskal-Wallis test indicated significant differences (H = 36.87, p < 0.001, η2 = 0.811). The OLS regression model accurately predicted revenue growth, explaining 65.5% of the variance (R2 = 0.656, F = 40.90, p < 0.001), with the Digital Readiness Index as the primary predictor (β = 0.325, p = 0.007). The study showed that user confidence in digital payment systems increases with continuous system use, as users maintained a strong association between their system usage and confidence levels over multiple years (ρ = 0.962, p < 0.001). The study demonstrated that internet reliability cannot predict revenue growth because companies need to develop their digital readiness first. The study results showed no differences in revenue growth between urban areas and their neighboring rural regions (p = 0.237), while rural residents demonstrated moderate confidence levels (p = 828). The research tested nine hypotheses, with five confirmed and four unproven, thereby providing a comprehensive understanding of how digital infrastructure affects economic outcomes.