Economic Growth

SOME good news and some not-so-good news are contained in the section on Nepal in the Economic and Social Survey of Asia and the Pacific-2001, a regular survey by United Nations’ Economic and Social Commission for Asia and the Pacific (UNESCAP) released Tuesday. Somewhat glad tidings come in the form of the reported growth in some sectors of the economy that enabled Nepal’s Gross Domestic Product to post a six per cent rise in 2000, two per cent up on the 1999 figures. This became possible due to increases in sectors, among others, like agriculture, non-agricultural, manufacturing and service. These four sectors grew by five, 6.6, 12 and six per cent respectively. The sub-sector of electricity, gas and water also rose by over 16 per cent, as new hydel projects were operationalised. Though upturn in different sectors have contributed to pushing the GDP up, in the Nepalese context it is still the improvement in agricultural sector that vitally affects the ultimate GDP growth. Nepal was fortunate in the year just gone by in having a favourable weather. Positive or negative GDP growth figures in any year painfully brings home the fact that smiles of rain gods matter as much as any other human intervention in raising Nepal’s GDP, because agriculture, which accounts for a huge 40 per cent share of the total output, is heavily dependent on rains from heavens. The growth trends in sectors like service and manufacturing give some room for hope in their further expansion, but without helpful policy measures that won’t happen. Trade deficit, as always, continues to be the bad news for the Nepalese economy. In 2000, the deficit amplified by almost seven per cent to just under 15 per cent of GDP. Imports bill continued to balloon, rendering almost immaterial even robust growths in exports. The latter’s projected increase by 45 percent in 2000 was swallowed by a further 22 per cent increase in the imports. Invariably, the huge increase in import figures had to do with a massive 27 per cent increase in imports from India, Nepal’s main trading partner. Unless the positive trend in Nepalese exports both to India and other countries is given an active thrust by the government and unless import-substitution industries are promoted, the ever-yawning trade deficit will continue to plague the Nepalese economy. In broader terms, contours of the Nepalese economy can only be positively altered, if the government gives a strong commitment, as the survey appeals for, to development financing, macro-economic balance, trade diversification, population growth control and acceleration of the pace of financial and corporate sector restructuring.