Nepal in the early 1990s was predominantly a rural-agricultural society, where more than 90 percent of the people lived in rural areas and depended on farming as a source of livelihood. Even in settlements designated as urban areas, the rural-urban distinction easily was blurred; approximately 50 percent of urbanites outside the three cities in the Kathmandu Valley were engaged in farming for their livelihood. Even in the Kathmandu Valley cities, 30 to 40 percent of city dwellers were agriculturalists. In this sense, most urban areas were economic extensions of rural areas, but with an urban manifestation and a commercial component. Farming was the dominant order of society and the mainstay of the economy, a situation that was unlikely to change, given the extremely sluggish pace of economic transformation.

The basic social unit in a village was the family, or paribar, consisting of a patrilineally extended household. The extended family system should not, however, be construed as a necessarily harmonious form of village life. Many extended families broke apart as sons separated from parents and brothers from each other. At the time of separation, the family property was equally divided among the sons. If parents were alive, they each received a share. Family separation generally occurred in cases where the head of the household was less assertive and domineering, when the father died, or when all the sons married. Unmarried sons normally did not separate from their parents; if the parents were deceased, unmarried sons usually stayed with their older brothers. Because family separation always resulted in a division of family landholdings, landholdings were extremely fragmented, both geographically and socially. Sometimes, family separation and resulting land fragmentation turned into a bitter feud and led to legal disputes.

Beyond the immediate family, there existed a larger kinship network that occasionally involved sharing food. This network also was an important means of meeting farm labor needs, especially during the planting and harvesting seasons, when labor shortages were common.

Above the kinship network was the village, which functioned as a broader unit of social existence. Some villages were no more than hamlets made up of just a few houses; others were sizable communities of several neighboring hamlets. In more populous villages, the caste groups contained occupational low (untouchable) caste groups, such as the Kami (ironsmiths who make tools), the Sarki (leathersmiths), and the Damai (tailors and musicians), who fulfilled the vital basic needs of the village as a fairly selfcontained production unit.

Villagers occasionally pooled their resources and labored together to implement village-level projects, such as building irrigation ditches or channels, or facilities for drinking water. If a household could afford to hire farm labor, it usually relied on the mutual labor-sharing system called parma, which allowed villagers to exchange labor for labor at times of need.

Although farming traditionally ranked among the most desirable occupations, villagers frequently encouraged some of their children to leave in search of civil service, army, and other employment opportunities. Individual migration was often the result of a family decision and an important economic strategy; it not only served as a safety valve for growing population pressures but also generated cash incomes, thereby averting any undue economic crises in the family. Well-to-do village families usually pushed their children to obtain civil service jobs as a means of climbing the bureaucratic ladder and of developing valuable connections with the elite political structure.

Farming was the most important source of livelihood in rural areas, but the scarcity of land placed severe constraints on agricultural development. Landholding was the most important basis for, or criterion of, socioeconomic stratification. The 1981 agricultural census data identifies five classes of peasantry: landless and nearly landless, people with no land or less than half a hectare; subsistence, those with half a hectare to one hectare; small, holders of one to three hectares; medium, people with three to five hectares; and large, farmers of more than five hectares.

In terms of production relations, the first two classes were dependent on large landowners for survival. Small landowners, on the other hand, were relatively independent; they did not have to depend on the large landowning class for survival, especially if they were involved in circular migration as a source of supplementary cash income. Nor did they regularly employ members of the first two classes. Landowners of medium-sized plots were independent of large landowners. Their engagement in wage laboring or tenancy farming was sporadic, if present at all. In some cases, they employed others during peak farming seasons. The large landowning class regularly employed farm workers and benefited from the existence of excess labor, which kept wages low. In general, the situation of landholders was exacerbated by the archaic nature of farming technology and the absence of other resources. It was not surprising that rural poverty was widespread.