Population Growth
An Obstacle For Development

By Tanka Raj Niraula

THE task of development for a Least Developed Country (LDC) is big and urgent, and, it is obviously difficult to achieve this job with rapid population growth. The view presented by the classical economist Thomas Robert Malthus was the first on its right to create such pessimism regarding high population growth rate. There is great inter-link between per capita output and population. But the relation between them is negative. In nutshell, the theory of Malthus can be summarized as a race between technical progress and population. In the beginning, technical progress increases production but finally, due to law of diminishing returns, population growth overpowers technical progress and stagnation occurs. This theory is mainly practical for the agricultural output. According to him, agricultural production increases in arithmetic progression whereas population growth tends towards the geometric progression.

For any effect, there remains a cause. The social background of Malthusian theory goes back to the French Revolution. By 1798, many of the evil effects of the industrial revolution were showing themselves. Unemployment, poverty, disease and hungers were already the problems. This was the immediate cause for the Malthus’ pessimistic outlook. The theory is still relevant to the LDCs. Therefore, there is an urgent need to check the population explosion as soon as possible.

Now the world’s population has crossed the barrier of six billion and mostly this population inhabits in the developing world. Then, what will be the economic and social effects on levels of living, national and personal esteem and freedom of choice- that is on development? The increase in population is not simply a problem of numbers but a problem of human welfare too. Some issues regarding the consequences of population growth can be categorized as improving the levels of living of the people, employment opportunities, and supply of food. It will be more difficult especially for the LDCs to provide essential social services including housing, transport, sanitation, health, nutrition and security. It will be very hard in coping with the vast increase in the labour force. Food sufficiency is needed not only to meet the demand of growing population but also to improve nutritional levels to the point where all humans can have an adequate diet.

Many development economists argue against these negative scenarios as well. They are in support of high population growth. The reason behind it is that it stimulates more efforts and output. As due to high population, there will be competition among the labourers, which results in high economic growth because of increase in productivity. They too point to the fact that apart from draught areas, population nowhere appears to have approached the capacity of the land to support it. Whether or not adequate food production is achieved, however, depends a great deal on the government’s making resources available, pursuing appropriate pricing policies, ensuring necessary research, and developing an infrastructure for transport, storage and marketing. But these reasons do not cover the full facet of population growth. Only the Arabian countries like Iraq, Iran etc. are supportive to high population growth, because they lose many of their people on wars.

One thing is unequivocally clear that population growth has adverse effect on development. The most immediate and important aspect to be affected is the per capita income. It is sheer arithmetic, which suggests that with a given growth of National Income, the increase in the population affects unfavourably to the rise in the per capita income. Another aspect of the adversely affected development process is the saving and investment. The capacity to save is reduced. Governments find it difficult to generate surpluses because there is a continuous increase in their expenditure on such items as law and order and other social services. Another harmful consequence of rapid growth in population is attributed in natural resources. Large size of population causes much damage to the availability and the proper use of natural resources. Land, the biggest component of natural resources, as for example, comes under much strain. The land-man ratio worsens. There is sub-division and fragmentation of holdings, making none viable for farming. Due to over-dependence on land for survival, forests begin to be cleared up for agricultural activities. The employment scenario too realizes the negative impact. Labour supply increases at a fast rate. These additions, instead of proving an asset, are in fact liability for the reason that capital per worker will decrease. According to the theory of Demographic Transition, many third world countries are now in the second stage that is stage of low death rate and high birth rate. Nepal too faces the same problems due to large population as contrast of its size to absorb it.

As proved by our national achievement, population growth is a major barrier for development. The basic characteristic of our economy is cited as sluggish growth rate, stagnant agriculture and rapid population growth. Nepal’s economic growth rate is around 3 per cent per annum on average but population growth rate is 2.5 per cent. High population growth rate is resulted in massive unemployment and underemployment. The total population was 23.4 million in 1999 as compared to 14.5 million in 1980. The average unemployment rate seems to be more than 5 per cent while underemployment in the rural areas is reported to be over 40 per cent. The increasing pressure on land for agriculture and habitat to the growing population has resulted in rapid deforestation. In 1964, about 45 per cent of the total area were covered by forests. This area declined to 43 per cent in 1979 and in 1986 it still declined to 37.4 per cent. Recent survey revealed that only 29 per cent of total land are covered by forest in 1998. During the period of three decades, the rate of deforestation estimated to be 1.3 per cent. The vicious circle in the hills generated by population growth, poverty and environmental degradation has also resulted in the exodus of hill population towards the Terai, which is itself constrained by population expansion, limited agricultural land, increasing urbanization and resettlements, degrading natural resources and diminishing prospects of new employment generation.

Lastly, arriving at a pragmatic justification, the high growth of population has done much more harm than the good to the nature and ultimately to mankind since development itself is for the people.

Nepal’s Trade with India

By Dr. Suman Kumar Regmi

IN SPITE of the substantial increase in Nepal’s overseas export, trade deficit with India still prevails. So, Nepal has to follow such policy which will speed up the export to both India and overseas countries. It seems that countrywise export trade diversification has not led to remarkable export growth in Nepal. Nepal’s planning lacks knowledge and skills in the methodology and techniques of trade sector planning. So, Nepal needs cooperation in economic planning.

As Nepal is landlocked, greater attention is paid to the development of air transport to support the enlarged overseas trade. Air transportation of Nepalese export has been increased after 1985 and Nepal has already opened up air transportation in private sector . The relationship between Nepal and India is age old and has witnessed the test of time. Nepal-India economic cooperation, however, is mainly confined to trade. But if the economic cooperation between Nepal and India has to be further expanded and made more deeply rooted, there should be greater cooperation between the two countries in new areas. In order to go reality, the ideas of Nepal and India bilateral economic cooperation should be covered with a strategy, for development of all sectors as India has made remarkable progress in all sectors of development. Nepal-India economic cooperation should be based on the need to create Nepal’s export and development.Collective marketing of products of joint Nepal-India ventures, particularly in the overseas countries’ markets can be made in the areas of employment and income generating areas and monetary and fiscal policies of cooperation. In addition to trade and joint ventures, regional and international market sharing arrangements have been identified for the other nature of cooperation. Another area of cooperation between Nepal and India can be specified at a general level in the areas of market intelligence leading to market sharing and market integration in relation to the products of Nepal-India joint ventures in the form of regional and international market sharing arrangement.

Thus, some of the areas for economic cooperation between the countries can be in the form of trade, joint venture and joint international marketing. Nepal was completely closed to industries before the fifties. However, overseas investment has been welcomed after 1980. Initially, Indian cooperation with Nepal in the areas of industrial development started with the setting up the Patan Industrial Estate. In Nepal, joint investment has utilized the local materials which will have added value and in the process of creating necessary skills. In order to promote cooperation in industrial development, special encouragement needs to be given for the setting up of Nepal and India joint ventures as per the Memorandum of Understanding (MOU) of Dec 6,1991 including of amendment of 1996 and 1999. Joint ventures should aim at harnessing the abundant water resources potential of Nepal. There is urgent need for conducting industrial potential survey in Nepal at the earliest for attracting joint ventures thereby increasing export from Nepal not only to India but also to overseas. Under the different export incentive system implemented at different period of time, attractive incentives were given to the foreign traders to encourage export and import trade away from India to the third countries.

No doubts, for certain exportables items of Nepal, there is no market in India. Besides, the exports of some items may fetch higher prices in the third countries as compared to India. However, there is no range of export of certain goods at lower prices in third countries which could have fetched higher prices in India. Export of goods of Nepal to third countries undoubtly brings hard currency.

Nepal has highly dependent economy. The trend of trade relation with India is decided by the food and cash crops in Nepal .Our export to India has been mostly covered by agricultural related products including rice in negligible amount. The trade relation between these two countries is determined by the harvest in Nepal. Needless to say, if there is no foodgrains production, there is hardly any foodgrain trade with India. The trade of foodgrain of Nepal with India is also influenced by the harvest of India. Some of the considerations for the export promotion of Nepal should also be taken into account by India while thinking about the export promotion of Nepal. The main areas of matters to be thought by India can be plausibly suggested. India should consider the long term separate transit treaty for Nepal. India should not create regular irritants in transit sector for Nepal. India should provide the facilities of Generalised system of Trade preferences (not the GSP ) for the export promotion of Nepal. India should allow Nepal to construct her own port near Calcutta port and India should arrange to allow train upto that Nepalese port. India through mutual understanding can conduct trade with Nepal on MFN basis. India can join hands with Nepal for the joint investment in the export oriented ventures of Nepal. India should also open another port facility to Nepal other than at Calcutta.

The exchange of traders and industrialists has been regarded as the basis of strengthening trade and economic cooperation. In order to increase more export to India, export promotion programmes have to be launched. Still, we have to increase numbers of total exportable products to India. If we look at the structure of foreign trade between the two countries, export to India is that lower import from it. India is the largest market in the SAARC region. So, we can export more products to India. In order to promote bilateral trade between Nepal and India, bothway exchange of trade delegation is fruitful for enhancing bilateral trade relation. India still is a major trade partner of Nepal. But considering the low base, progress has not been satisfactorily in terms of volume, commodity composition, relative shares in relation to trade to third countries. In the areas of economic relationship , the link between the two countries has, however, remained confined to trade.

Thus, under the treaty of trade , India has agreed to provide more liberal access into India for Nepalese industrial products. But Indian industrialists could laugh at the Nepal’s low amount of exports. Time has now come for the expansion of Nepalese exportable base. As Nepal is landlocked , its relation with India is important as most of its import and export has to be carried through India. Nepal-India trade is governed at recent years by the treaty of Dec 6,1991, including amendment of 1996 and 1999.