National 4 (Spotlight Weekly)

“Remittances Play A Major Role In Reducing Poverty”

— Dr. Shankar Sharma

Dr. SHANKAR SHARMA, vice chairman of National Planning Commission, has been working in the commission for the last eight years serving in different positions. Recently, the preliminary analysis of Nepal Living Standard Survey Report revealed a drastic reduction of poverty in Nepal. Sharma spoke to KESHAB POUDEL on various issues regarding the initial report on poverty reduction disclosed by the survey. Excerpts:

There is a growing debate over the recent report on poverty reduction. Is it the final outcome or just an initial report?

The observation shows that the poverty has declined significantly. This result is more or less final meaning that most of the indicators and data will be published within one week. What we are trying to do is to refine the calculations for the poverty line. How many people are there below the poverty line? Those sorts of head counting are going on. We have checked it several times and we are checking it again. All renowned experts from the World Bank and private sector have done it. After doing all these things, we want to make sure that there is no lapse. The result is scientific and confirms what we were saying.

If Nepal's level of poverty has declined significantly over the last decade, is it not a major achievement in Nepal's development experiment?

It is absolutely a major achievement. This is a point of celebration. Over the last four-five years every body has been saying that Nepal is lacking behind in a number of things including agriculture, non-agriculture and industrial sectors. When we saw the data, we really were surprised over the achievements made during this decade in all these sectors. I am proud for all of us that the country has done some significant progress. What we have seen in the last eight years is that the growth we have achieved was broad-based. There have been substantial improvements in the agriculture sector and substantial increase in the consumption as well as income in the poor quartiles. We also have some problems. All groups in this analysis have gained in terms of consumption and income but the income inequality and consumption inequality are still major issues in the country. It is the time of celebration in the sense that all the groups of the people have made some progress. We have also analyzed socio-economic issues like health, education, livelihood and those kinds of things. We can see significant improvements in all these areas.

What is the status of poverty now?

We will publish the number within two months. For now, I can only say that it has gone down significantly compared to 1996 data when the poverty incident was 42 percent.

Who has done this study?

In 1995/96, the people from outside the country conducted the study. This time the government also used the Central Bureau of Statistics but the sampling frame, sampling size, the overall analysis, the questionnaires, and every other thing have been carried out by world-class experts from the World Bank as well as consultants.

If the incident of poverty has declined significantly over the last seven years, why not the experts, politicians and economists working during that period come out to own this achievement?

I think people will do that after the final publication of the result. I am sure that a lot of people will defend it. There are a large number people who have already questioned the outcome. They hold the view that how such thing (poverty reduction) is possible when the country has been passing though a very critical phase of insurgency. When the outcome was presented in front of us, we had also raised several such questions. The calculations were done more than one hundred times before they were presented to us. The team has already checked and rechecked to see that the observation was correct.

At a time when governments around the world are calling for poverty reductions, how do you see the achievement made here what message it will send to the other parts of the world?

It will have major impacts. I would say there are two or three things that we can probably attribute to it. One is the export-, which has gone up by 15 percent per annum. I am talking about the situation until 2002/03. After 2003, conflict has intensified and our growth, exports, manufacturing outputs have also gone down. If we can talk about the early 1995/96 or early 2003, this is the period when our exports had gone up. If we see minutely, our agriculture export has gone up significantly let's say from about 20 percent to 35 percent. The share of agriculture has gone up from 20 percent to 35 percent. It means the growth rate has increased significantly. The growth has been observed not particularly in food-grain but in the livestock and livestock product, vegetables and honey. Those kinds of high value production including off-season vegetables started to increase. Secondly, the remittance coming from not only India but also third countries grew substantially. The share of India has declined over the last seven-eight years and the share of third countries has gone up.

What is the contribution of remittances?

Per Household remittance income has gone up from Rs.15, 000 to Rs.35.000 during the last seven years of between 1995/96 to 2003. It is very significant. If you look at the data of last four years 2001-2004, the number of people who have gone abroad has increased from 700,000 to 1.1 million.

What about internal reasons for the decline in poverty?

Apart from the two external reasons that I cited above, there were a number of things we could attribute to improvement in internal situation. If we compare the first survey of 1996 or the present one, the percentage of irrigated areas has gone up from 40 percent to 64 percent. Agriculture wage has gone up by hundred percent during the past seven years. That is very significant. What we have seen in Nepal is the agriculture incomes have gone up and agriculture exports have improved. The total contribution to GDP from agriculture has also gone up. So the per-capita income from agriculture has increased by 1.1 percent during the early 1990s and by 3.3 percent in the late 1990s. These are some of the things, which probably helped in reducing the poverty.

How do you evaluate the poverty alleviation programs in the last seven years?

The analysis shows that there are two areas, which helped a lot to improve the poverty situation in the country. One is the expansion of road networks. If we compare to total length of road comparing it with 1995/96 to 2003/04, it has increased by almost 50 percent. In other words, there has been addition of more than 5000 kilometers of roads during that period. Its relations with the agriculture production is that within the radius of three kilometers from the road areas, we see a lot of production and productivity growth in high value crops likes off season vegetables etc that are exportable to the market – nearest urban market or other markets. Within the radius of eight kilometers, we can see some improvements in the farming of cash crops and grains.

What about other sectors?

Another important sector has been the micro financing. If we leave the last two years when the situation has really worsened, the micro-financing program has made a lot of contribution. If we talk about the early seven or eight years’ period, agriculture credit went from 9 percent of GDP to 15 percent of GDP. This means that in real terms it has increased by four folds. In addition to that the irrigation facilities have also increased from 40 to 64 percent. After the deregulation of fertilizer policy, the fertilizers used have gone up by almost100 percent because there were no supply constraints.

As you said the country has made significant progress, what Nepal needs to do to sustain it?

We have seen broad-based economic growth as the rural activities have also increased. We are doing detailed study on each and every aspect of the determinants in poverty reduction in Nepal. That will help us and guide in improving our policies. What we have seen is that the diversification and commercialization of agriculture and infrastructure development including irrigation and road helped a lot. We need to continue micro-credit program. Most important aspect is remittances. For the foreseeable future remittances will also play a major role in reducing the poverty. We have to think about increasing the value addition on laborers. Frankly speaking, infrastructure development is now in reverse gear since the past two to three years. This is very disturbing news for us. However, the remittances are still doing well.

What are the other areas of improvement?

There are also improvements in health, drinking water and education sector. It is very good news that 98.5 percent of the people does not have to walk half an hour to get the water anymore. Although there are some isolated cases of difficulties, it is the result of total development. Similarly, we can see the satisfaction of the people in service given by health and education sectors. There has been tremendous improvement in the people's perception in that they have expressed satisfaction. If we talk about the number of people to get the road access, it improved from 58 percent in 1996 to 68 percent in 2004. The access to primary school and health post has increased. The enrolment of female in the school level and literacy rate has also increased.