Nepal is lagging behind in the use of artificial intelligence (AI). Like other developing and emerging countries around the world, the use and interest in AI is slowly growing in Nepal, according to a study report by Microsoft's AI Economy Institute.

While AI is entering the center of economic and social activities around the world, developing countries, including Nepal, are lagging behind in its use, according to a report titled ‘Global AI Adoption in 2025: A Widening Digital Divide’. The report also pointed out that the growing gap in AI technology use between developed and developing countries has increased the risk of the digital divide deepening. 

According to the report, Nepal is ranked 76th out of 147 countries in ‘AI diffusion’, i.e. the global expansion of AI use. Although not ranked, the report has evaluated working-age users based on their use of generative AI technologies and tools such as chatbots, digital assistants and content creation systems. 

Nepal’s position in this is seen to be below the global average. This indicates the existing weaknesses in digital infrastructure, skills and policy arrangements in Nepal. However, Nepal’s AI use and expansion rate is more positive than that of countries in the South Asian region except India.  According to the

report, about 13 percent of Nepal’s working-age population uses generative AI technologies and tools. Although usage has increased slightly compared to the beginning of 2025, Nepal still lags behind countries that have already deeply embedded AI technology in education, business, and public services. The report notes that AI adoption will slow in countries with disparities in internet access, device costs, and digital literacy. This situation still exists in Nepal’s large population.

The United Arab Emirates (UAE) leads the world in AI adoption. India ranks 64th on the list and China ranks 61st. Among South Asian countries, Bhutan and the Maldives are not on the list. Nepal’s gap is wide when compared to the world’s major economies. The United States ranks 24th, while some developed countries, including Singapore, have AI adoption rates many times higher than Nepal’s.

The report says that countries that have invested in digital infrastructure, skills development, and clear regulatory frameworks at an early stage have been able to expand AI faster and more widely.

The report shows that AI use is growing rapidly in high-income countries, while most low- and middle-income countries are confined to the bottom of the list. This risks further widening global digital inequality, the report concludes.

Countries with high AI use are gaining productivity and competitive advantages, but the report finds that the use and expansion of AI in countries like Nepal is more limited to personal use by employees, students and others than in government, institutional or commercial settings. 

Similar concerns were also reflected in the Human Development Report 2025 released by the United Nations Development Programme (UNDP) a few months ago. The main theme of the report is AI and inclusive development. The report links the Human Development Index (HDI) to the relationship between technology and AI, pointing out the potential for AI to improve education, health and service delivery. However, the report also warns that AI can further increase inequality if access to technology and skills are limited.

The Microsoft report notes that policy readiness is crucial for AI adoption and expansion. Countries with national AI strategies, effective regulation, and public investment in skills appear to be at the top of the list.

In Nepal, although a national AI policy has been developed, development partners have expressed concerns that the responsibility for digital transformation is divided among various ministries and agencies, with the emphasis on control over regulation. Policy ambiguity and lack of coordination have long been cited as major obstacles to inclusive expansion in the technology sector. 

Both reports note that interest in AI is growing in developing countries. The gradual increase in the use of AI ‘tools’ in education, content creation, and digital work indicates that the underlying demand is strong. According to the Microsoft report, this demand can be converted into widespread adoption and expansion if infrastructure and policy barriers can be removed.