The unprecedented victory of the communist party in the election held in 2017 has soared public aspirations of development in the federal Nepal. Poliitical instability was projected as a major impediment in achieving the development goals. So, the general public firmly believed that the government with at least 5 years of mandate can make drastic change in the nation. In fact, overnight change was anticipated. From a technical point of view, this is a very justified perspective. The government commanding two-thirds majority can make new laws and amend existing laws for expediting the development works. Moreover, the authority to remove all the hindrances in development is vested in the government. Having said that, it is equally important to analyse other factors- role of bureaucracy, the much needed change in attitude and behaviour of the policymakers that have a direct bearing on the development outcomes.
A critical assessment of the economic performance of the government in the past two years indicates that things have neither improved significantly nor worsened. While the economic growth rate in the past two years have been impressive, the pertinent question of sustaining the growth over at least 8-10 years from now looms large. The national goal of graduating from the status of Least Developed Country (LDC) to a developing one by 2022 still requires some proactive economic activities. With the current per capita income of $1000, it is still a far fetched dream. The economic recovery in the aftermath of the April 2015 earthquake which boosted various rebuilding activities became pivotal in accelerating the growth rate.
Improved power supply, steady flow of remittance, seasonal agricultural yield among others have left positive impacts. However, in the absence of a long term investment strategy in productive sectors- agriculture, industry, tourism, a reliable source of continuing the rising growth rate is an area of concern. A clear roadmap for transforming the nation is still missing although the finance minister has repeatedly assured the general public of the country’s economy making brisk progress. The question of sustainability is a pertinent one. With the deadline of meeting the SDGs by 2030 remaining little more than a decade, finding resources to fund the development goals require some innovative thinking on the part of the government.
On the trade front, widening trade deficit is a matter of big concern. While the export of Rs. 1 billion in Nepali economy has been recorded, an import of Rs. 10 billion exists which clearly indicates the gruesome trend. Amid this scenario, Nepal has achieved 12.02 per cent reduction in the trade deficit in the first quarter of the current fiscal year 2019-20. Increase in palm oil exports and cardamom and decrease in the import of ginger, wollen carpets, non-alloey steels among others have been recorded in this first quarter.
Managing underground economy which currently comprises about 50 per cent has remained overdue. This calls for reforming our existing public finance administration. Developing incentive structures to bring the economic activities under the formal sector could be in the form of a flexible tax administration, debureaucratising the procedures of registration and renewal of any company or investment, easy access to credit and the like.
The news of a much improved ranking in the World Bank Doing Business Index needs to be analysed critically. Jumping from 110th position to the 94th position, Nepal received a good score in this year’s World Bank index. However, it is significant to note that the index has limited criterias which exclude the major macroeconomic parameters to provide a true picture of the larger economy. Improvement in access to credit information by expanding the coverage of the credit bureau has been attributed as a major reason for this giant leap. Effective dealings with construction permits, improved border trading, enforcing contracts among others have also contributed for achieving a positive result.
In light of the above instances, a major breakthrough in economic thinking is inevitable. Formulation of economic policies based on ground realities evidenced by research should be accorded due importance. Instead of focusing on a handful of populist decisions, economic decisions with a far sighted vision should be pursued. This requires some audacity on the part of the finance minister and his team to break the existing status-quo.
Massive investment in infrastructures and the creation of capital goods should be the top priority. Timely completion of the national pride projects will lay a strong foundation for ensuring economic prosperity. Effective implementation of a reward and punishment system, adoption of new technologies for simplifying the business procedures, outsourcing specialised functions to non-partisan experts are equally important. With 2020 already declared Visit Nepal Year, making it a grand success should be on the top priority of the government to generate more employment in the country.
(The author is a member of the Social Science and Research Faculty at NIMS.)
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