25 May 2019, Kathmandu
Nepal is developing county with an agricultural economy. It is dependent on remittances, which amount to as much as 30% of GDP. Agriculture is the mainstay of the economy, providing a livelihood for almost two-thirds of the population but accounting for less than a third of GDP.
It is half a century that planned development began in Nepal. Although progress has been made in some important areas, the expected achievements could not be realised, mainly in ensuring stable macroeconomic growth and overall welfare of the people by raising their living standard and taking the country out of the category of ’least developed countries’ under international norms.
CONTEXT
A new government, backed by a historic majority in Parliament, took up office on February 15, 2018. This follows elections for all three tiers (local, state and federal) of the state architecture defined by the new constitution, marking a protracted but successful conclusion of a political transition that began with the signing of the Comprehensive Peace Agreement in November 2006. State governments largely mirror the coalition at the center. At the sub-national level, funds, functions and functionaries hitherto managed by the central, district and village authorities are moving to the seven new states and 753 local governments for which new legislation, institutions and administrative procedures are being formalized as constitutionally prescribed. Meanwhile, the central level authority is being streamlined with a focus on oversight. These exercises at state restructuring are expected to result in improved outreach and service delivery but will likely take time before they become fully operational.
Significant adjustments need to be made to the government structure. They include amending over 400 existing acts, restructuring the civil service at all levels, devolving fiscal management, and determining the division of funds, functions, and functionaries between various levels of government.
RECENT ECONOMIC DEVELOPMENTS
Nepal grew by 6.3 percent in FY2018 despite less favorable monsoons and the easing of rapid growth that ensued following the trade blockade in FY2016. Data released by the Central Bureau of Statistic (consisting of a revision of the FY2017 growth rate and an updated estimate for FY2018), show that growth has been strong, despite the external shock from floods. In mid-August 2017, the worst flood in decades destroyed 64,000 hectares of standing crop, contributing to an estimated reduction in the agriculture growth rate from 5 to 2.8 percent (in FY2017 and FY2018, respectively). This contributed to a reduction in overall GDP growth from 7.9 to 6.3 percent in FY2018. Government revenue continued to perform well but spending also picked up significantly in FY2017 compared to previous years. Nevertheless, ambitious expenditure targets envisioned in the budget have not been met and the quality of spending has not improved with 60 percent of the capital spending occurring in the last quarter. Also, spending pressures have increased in the first half of FY2018 due to fiscal transfers, as well as spending on elections, capital goods and the transition to federalism. High inflation in the past two years has moderated sharply due to moderating inflation in India and improving supply side constraints.
Inflation slowed to 4.2 percent (y-o-y) in December 2017 but increased to 6 percent (y-o-y) in March 2018 owing to a sharp uptick in vegetable prices. Meanwhile, credit growth slowed to 16.7 percent (y/y) in early 2018 compared to its peak of 31.9 percent in 2017; but deposits growth continued to decline, pushing up interest rates. On the external side, the cumulative effect of a sharp trade balance deterioration and a slow growth of remittances is putting significant pressure on the current account. Economic activity, affected by the worst floods in decades, is particularly affecting agriculture output. This contributed to the slowdown in growth from its peak of 7.9 percent in FY2017 to an estimated 6.3 percent in FY2018.
DEVELOPMENT HURDLES
1. Political instability
Due to an absence of politic stability and consistency, there seen many kinds of up and down in the country economic which show the effects on the country and people. The country is depended upon the governmental help and the government depends upon the countrymen. So the government if adopts the policy which is beneficial to the people then it is easy to direct the nation in the developing path. But in the context of Nepal, since2063, there is not the establishment of a new constitution after the dissolved of the old constitution.
2. Lack of education
As we know that there is not any strict on the teachers and the leader if they do any kinds of work which is the law and the nation. Like the corruption on several things have not been even got transparent and published due to the power. So these are the poison which is making the country poison. To make the country poison free first there should be the implementation of the law and the crime and the criminal should get punished. The problems in the education are also seen very much in the remote area.
3. Unequal distribution of health
The government eyes should be equal to the every people of the country. The country holds the full responsibility of all the countrymen. The country where there are fewer people is very harmful and more is too harmful. So there is made of rule for the production of a child in limits and also beyond the rule order. The government of Nepal has not the equal eye in their thought while distributing the national income. Nepal government distributes the national income not equally. There is the supply or distribution of the wealth more to the rich people and less to poor people which make the rich more rich and poor richer.
4. Lack of establishment of industrialization
It is also the major reasons for the not development of Nepal. Nepal has not the large market and presence of political order and the people oppression has made the investor depressed to invest in Nepal market. The industrialization is also the main factor which forwards the country economic to the path of development. The country holds many sources and income like as the many herbs and shrubs, timber and many raw materials, but due to proper un-utilization, all the available resources are going day by day vanished. The government has not sawn any interest to cultivate and announces the investment of such resources to make the country stable.
5. Landlocked Status
Nepal is the country of stone which even not try to stretch and become flexible because it is pressured by the two big rocks that are INDIA and CHINA. The country has not touched any sea, that makes the country obligated to import the raw material from the India only. The Nepal have to do and act according to the instruction of India. All the Nepalese factory and industry are running with the dependency of Indian raw goods. So, this also the one of the major reason for which the abroad investor don’t want to invest in the country and also there is the presence of political pressure and external pressure.
6. Lack of employment opportunity or poverty
This is also the major causes have made the consequences of undeveloped. Un-development of the country means the un-improvement of people living standard and lifestyles. The country is resisting the national expenditure by taking the loan from the Asian Development Bank and word back. So there is a loan on every Nepalese head of about rupees twenty thousand. The country is not investing the investment in productive sectors and not creating the job which makes the youth employed and the income starts to grow.
OPPORTUNITIES
With a stable government and an ambitious economic plan, Nepal is, for the first time in decades, in a position to dream big and to carry out a long-term vision that includes more and better services and opportunities for people.
Things are moving in the right direction. Extreme poverty is expected to decline from 15 percent in 2010 to a 10 percent in 2019, based on a poverty line of $1.90 a day.
The goal of becoming a middle-income country by 2030 — in just 11 years – is possible. But Nepal will have to grow fast enough to achieve that goal — by some estimates by as much as 8 percent a year – to further reduce poverty and boost growth. This will require enormous levels of resources and investment. Infrastructure investment alone will need to be around 12 percent of GDP or more per annum — roughly four times the current levels.
Nepal needs to expand its sources of finance. Nepal needs more financing than the government and Nepal’s development partners such as the World Bank Group can provide.
This will require opening up as many sectors as possible – particularly sectors where the injection of technical and managerial know-how from across the world has helped so many countries increase their productivity.
And Nepal needs to create the kind of conditions that enable the private sector and investors – whether foreign or domestic – to operate efficiently and effectively, to grow, and to see a profit.
It also means improving governance and ensuring transparency and accountability in implementing public investment projects and facilitating private ones.
In addition to infrastructure investments, key reforms will be needed to strengthen and update the legal and regulatory framework for public-private partnerships (PPPs), one-stop investor services, and e-government services for citizens.
Making it easier to operate a business would enable the private sector to generate new sources of growth and revitalize existing sources of growth in sectors with high potential for job creation, such as tourism.
Nepal is still in many ways a development frontier. Highways, airports, power plants, digital infrastructure, and rapid transit systems will not be built overnight.
There are opportunities for Nepal’s growth mainly through development of hydro sector and expansion of market as a “bridge” between two giant economies of the world – India and China. The political class should realise this immense opportunity knocking Nepal and resolve the political tensions at the earliest for the sake of peace, development and well-being of all Nepalese people.
Thus, Nepali youths are capable and ready for some major changes. But the first thing to realize is that we need not seek opportunities in other countries, and we must stop the brain-drain. If tried, a grand change awaits all Nepalis.
