National 9 (Spotlight Weekly)

Truth Be Told

Amid predictions of less than one percent growth this year, the Nepalese economy is forced to run fast just to stay where it is

By SANJAYA DHAKAL

The latest economic data released by the Central Bureau of Statistics (CBS) stated that there would be less than one percent growth of Gross Domestic Product (GDP) in the current fiscal year - the lowest rate for the last 18 years. The growth rate estimated by the CBS (0.76 percent) is considerably lower than the projected population growth rate of 2.5 percent.

The projected economic growth rate when seen vis-a-vis the population growth rate means that it would bring down per capita income and increase poverty.

"It is strange that there is no tradition in the country of telling the people what exactly it means by declining economic growth rate," said Dr. Raghab Dhoj Panta, a prominent economist. "They just say that the growth rate has declined to 1 percent from 6 percent but fail to describe what it means."

According to estimates by Dr. Panta, less than one percent growth rate as against the projected growth rate (by Ninth Five Year Plan) of 6 percent means the total production in the current fiscal year would come down by around Rs. 20.55 billion. This would amount to a per capita loss of Rs. 891.

Further, it would increase the budget deficit this year by another Rs. 2.5 billion. Dr. Panta notes that as the CBS estimates another 450,000 people would enter the country's labor force in the next one year, the national income has to increase by at least Rs 8 billion if only to maintain the per capita income at present level. "And this would need the development expenditures worth at least Rs 40 billion," he projects.

Dr. Panta points to grim scenario that given the average of 2 percent growth in the National Income in the last five years (of the Ninth Plan), it would take another 35 years to double it (the national income) if the growth rate remains the same. Likewise, he predicts that since the average growth rate in agriculture has been around 2.7 percent in the last five years and since the population growth rate is 2.5 percent, there has been only 0.2 percent increase in the per capita of people depending on the agriculture sector, which incidentally covers 85 percent of Nepalese population. "Therefore, if the present trend continues, it would take another 375 years to double the economic activities in our agriculture sector," he said.

Dr. Panta believes that the primary aim of the forthcoming budget for the fiscal year 2059/60 should be to "at least prevent further deterioration".

Despite the grim projection by economists like Dr. Panta, officials believe that this has been an exceptional year and that things would improve once peace is restored. "Everybody knows that this year has been exceptional for Nepal. Lots of incidents and events occurred which pushed the economy down.

But facts and figures of this year should not be taken as a basis to project for another 35 or 375 years," said Dr. Prakash Sharan Mahat, an advisor to the prime minister and a newly appointed member of National Planning Commission (NPC).

Dr. Panta, on the other hand, asserts that though the economic problem deteriorated this year, the "seeds had been sown a long time back". He argues that the unjustified increase in salaries of government employees by the budget of fiscal year 2057/58 was one of the reasons for the present problem. "Then government made a mistake by increasing salaries by a whopping 75 percent on average. And now the government is failing to meet its regular expenditures through its regular incomes."

Apart from the salary increase, the wrong policies and programs and the lack of peace and security has ht the economy, said Dr. Panta. He believes that now as the government is unable to make any development investment, it must take help from the private sector. "Otherwise our economy will continue to fall freely."

Rajendra Kumar Khetan, industrialist and second vice president of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI), too, believes that it is high time government listened to private sector. "Nepal has never experienced institutionalized industrialization. The process has always been random. Therefore, the FNCCI has submitted a compilation of suggestions to the government to improve the economy," he said. Among others, the federation has asked the government to cut unproductive expenses, strongly mobilize revenue and encourage exports.

At a time when the government is embroiled in bitter political battle and is neck-deep in its fight against the insurgents - and when there is no finance minister - will anybody pay heed to the demands of the economy?