Nepalese Economy in The Current Scenario:Challenges and Suggested Measures

Name: Bibek PoudelCA Final

Hatemalo Nepali Students Group

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CONTENTS

Introduction of Nepalese Economy

Nepalese Economy at a Glance

Current World Economy

Competitive Advantages

Challenges of Nepalese Economy

Suggested Measures

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INTRODUCTION

Least DevelopedRelies Extensively on

Foreign Aid

Agricultural Dominance

Heavily Dependent on Remittances

Sluggish Economic Growth Rate

High Unemployment Rate

Nepalese Economy at a GlanceGross Domestic Product (GDP) - $ 19.4 billion

Labor Forces Contribution in GDP

Agriculture 70% Agriculture 36.8%Industry 9% Industry 14.5%Services 21% Services 48.7%

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GDP Growth Rate - 3.60 %

Per Capita Income - $ 692

Unemployment Rate - 40%

Population below poverty line - 25%

Inflation Rate - 9.9%Import - $ 6.33 billionExport - $1.06 billion

Public Debt - 31% of GDP

HDI - 0.54

Current World Economy

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Countries GDP (Billion $)

GDP Growth Rate (in %)

Per Capita Income ( in $)

United States 16800 1.60 53,143

China 9240.3 7.40 6,807

Japan 4901.5 2.00 38,492

Germany 3634.8 0.50 45,085

France 2734.9 0.30 41,421

United Kingdom

2521.4 1.80 39,351

Brazil 2245.7 2.50 11,208

Russia 2096.8 1.30 14,612

Italy 2071.3 1.8 34,619

India 1876.8 5.00 1,499

Switzerland 650.4 2.00 80,477

Bangladesh 129.9 5.80 900

Nepal 19.4 3.60 694

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Economy of Other CountriesBangladesh- Rapidly growing market- based Economy. - Decreased its dependency on foreign grants and loans from 85% (In 1988) to 2% (In 2010) for its annual development budget.- Dramatic increase in foreign direct investment (FDI).- The government set up several export processing zones to attract FDI.- $21.5 billion i.e. 80% of Bangladesh’s export earnings came from the garment industry.Switzerland- Landlocked country and geographical features similar to ours.- One of the least corrupt countries.- Stable, prosperous and high-tech economy. - One of the wealthiest country in the world in per capita terms.- Services like banking, tourism etc. consists most important part of economy. - Home to several large MNCs like Glencoe, Nestle etc.

United States- World's largest national economy.- Has Abundant natural resources, well developed infrastructure and high worker productivity.- Leader in scientific research and technological innovations.- An industrial power although service sector constitutes 80% of GDP.- World's top producer of corn and soybeans although agriculture accounts for just under 1% of GDP.

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China- World's fastest-growing economy since economic liberalization in 1978. - Relying largely on investment- and export-led growth to pull itself out of poverty.- High productivity, low labor costs and relatively good infrastructure have made it a global leader in manufacturing. - Annual average GDP growth between 2001 and 2010 was 10.5%. - World's largest recipient of inward foreign direct investment (FDI). - As of 2013, 47% of China's National Output is devoted to investment.

Competitive AdvantagesTourism

-Boasts 8 of the 10 highest mountains along with the highest mountain of the world, Mt. Everest.-Lumbini, the Birthplace of Lord Buddha, Pashupatinath, the world's largest temple of Shiva and many other World Heritage Site lie here.-Wilderness and adventure activities like bungee jumping, paragliding, rafting , mountain climbing, trekking, mountain flights, and Jungle Safari.

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Hydropower

-Second richest country in inland water resources. -Perennial nature of rivers and steep geography of country provide ideal conditions for the development of hydropower. -Huge hydropower potential of estimated 83,000 MW of which 40,000 MW is considered to be technologically and economically viable.

Medicinal Herbs (Jadibuti)

-Rich Bio-diversity, Reservoir of rare Medicinal Plants-Potential to bring Nepal on international map of Herbal Products Prominence.

Challenges of Nepalese Economy Political Instability and Transition Phase Mass poverty and Inequality Lack of Physical Infrastructure Widespread Unemployment Stagnation of Agriculture Landlocked Geographical Location Low Level of Savings and Investment Underutilization of Natural Resources Alarmingly Increasing Dependence on Imports Growing Inefficiency and High Corruption Poor Implementation of Reform Programs Persistent Power Shortage

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The government should effectively work to attract FDI for initiating mega-projects in priority areas by creating investment-friendly environment conditioned to enduring peace and stability in the country.

Tax system must be made simple, transparent and competitive to attract FDI and promote indigenous investments. In this context, several Special Economic Zones (SEZ) should be set up by government to attract foreign investment.

Integration with Global Economy looking for New markets and opportunities and decrease the alarmingly high dependence on imports.

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Suggested Measures

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Government should have definite plans and policies to encourage the people to invest a larger part of GDP rather than spending. There are many potential areas in Nepal for Investment.

To transfer excessively dependent extra population from agriculture to more productive non-agriculture sector by creating employment opportunities and thereby reducing extent of poverty.

A scientific land reforms system should be introduced with a view to increase productivity of agriculture. The new constitution must have the provision for ensuring “food security” as a fundamental right.

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