An Exercise towards Debt-led Growth And Poverty Alleviation

Prof.Dr. Madan Kumar Dahal, HoD, Economics Department, T.U

The main objectives and policies envisaged in the budget for FY 2004/05 are primarily directed towards establishing peace, reducing extent of poverty, and providing relief to ultra poor, disabled, senior citizen, widow, dalit, backward community and weaker section of the society. This is an evidence of sincere efforts towards poverty alleviation with distributive justice. There has been shift in priority from energy and transport development to education sector in which resource allocation is estimated to be 16.0 percent of total expenditure and 3.5 percent of GDP, which is in biggest magnitude in recent years. The earmarking for principal and interest payments account for 18.0 percent of total expenditure. Revenue is estimated be Rs. 70 billion, which is 13.0 percent of GDP. However, additional resource mobilization through improving efficiency of tax administration is minimal confined to Rs. 4 billion only. This shows that government is indifferent and less responsive to effectively mobilize internal resources revenue in this FY. The fiscal deficit is likely to cross 8.0 percent of GDP, while overall budgetary deficit is estimated to be higher than 5.0 percent. This is indicative of excessive dependence on internal as well as external loans to attain projected growth rate of 4.5 percent, for Nepal is striking for debt-led growth for a long period. The share of indirect tax is estimated to be as high as 60.0 percent, while the contribution of income tax, a premier component of direct tax, is merely 15.0 percent. This is a manifestation of underdeveloped economy, which calls for gradual change in the existing revenue to GDP ratio in favor of direct taxes.

The economy is passing through a downswing phase of recession engulfed by conflict, inefficiency and corruption. This requires productive use of resources, for ours is an economy with diminutive size of GDP, sluggish economic growth rate, and inordinately low per capita income. It is extremely difficult to attain sustainable, broad based high growth rate of 4.5 percent with small resource allocation under capital expenditure (Rs. 32 billion) for FY 2004/05. Therefore, moderately a bigger size of investment is required to address recession by attracting FDI and mobilizing private sector, a vehicle for economic development. The civil servants and others obtaining their salary and benefits from exchequer are hard hit, because there is no provision for pay hike as expected and desirable to boost up their morale, vigor and vitality. This might lead to some degree of inflation that must be put under control. Growth could be achieved by initiating mega-projects, which will take care of poverty alleviation. However, success of this budget will depend on the quality of governance and ability of the government to translate the vision and programs envisaged in the budget into action. There is no scope for being ambitious about the current budget, which is the outcome of uncertainty and risk attributing to conflict. 

Budget Erasing People's Confidence

Prof. Dr. Hari Bansh Jha, Senior Economist, T.U

Before the budget for the fiscal year 2004-05 was presented by deputy prime minister and finance minister Bharat Mohan Adhikari, people had certain expectations from him that he would make a budget that would be pro-poor, pro-peasant, pro-rural and also pro-peace. However, the budget not only belied all these hopes of the people but it also eroded their confidence in the government of Sher Bahadur Deuba in general and CPN-UML in particular.

Budget failed to have programme for the development of peripherial Terai. By investing in infrastructural projects like in road, irrigation, railways, transportation, communication and other needed sectors, this region could have proved engine of Nepal's economic growth. Finance Minister Adhikari could have learnt lesson from communist China, which developed its economy through the development of Special Economic Zones and Coastal Economic Zones. Any investment in Terai in agriculture, industry, trade or commerce will have multiplier effect on the national economy.

The transferring of money from one heading to the other in the budget in regard to education, health and some other social sectors are not likely to have any meaningful impact in meeting people's aspirations. There is little that the budget developed innovative ideas in generating income of the poor and those living in the rural areas. Budgetary allocation for the development of rural and remote areas is insignificant.

The budget will take the national nowhere. Even there is no prospect of peace to return to the country just by setting certain amount for this. What is needed to restore peace is to have honesty, dedication and commitment for this cause. Budget has once and for all lost the opportunity of reducing the misery of the people be it related to economic, political, security or other spheres. But the lack of vision in the budget for the improvement of the situation of the common mass of the Nepalese population will cost the concerned bodies heavily. 

Budget should bring Peace and Stability

Mohan Gopal Khetan, Chairman, Gorkha Brwery, Nepal

Let's not forget that the nation has the first ever-largest budget presented last Friday. The total budget outlay at Rupees 111.68 billion represents a staggering increase of over nine billion rupees over the previous year's budgetary allocation.

Let me tell you that in such an adverse condition and the situation wherein the country is in, the government under Sher Bahadur Deuba could have not brought a budget superior to the one what has been recently presented before the nation.

Let's hope that the budget brings in peace what has already become a rare commodity. The budget at a cursory glance is neither that good nor that bad. The situation perhaps compelled the establishment to frame such a budget. On an average, the budget is good.

Let us all hope that the budget brings about a political stability which has been made chaotic by those who claim that they were the champions for the restoration of the system.

However, I completely disagree with the government's shortsightedness on having excluded so many taxable items which could have seen an increase in the imposition of the tax and excise duties. For example, only Cigarettes and Alcohol items have been brought under the ambit of tax increment. It should have done so on so many items which it has not.

By and large the budget is all right. Let's see how the implementations of the projected policies work. For, in Nepal, it is the implementation portion that is weak to the extent that one feels that it is already defunct.

A peace budget as the minister prefers to call it, thanks that the new fiscal policy also talks of establishment of a peace secretariat and allocates funds for providing relief and rehabilitation of the conflict ridden victims. This should be taken as a positive aspect.

Religious-Pilgrimage tourism must be promoted

Sri Banbari Lal Mittal, Intellectual/Businessman, Nepal

To me the fresh budget appears to have been guided by the idea that peace has got to be restored at any cost. This is a very positive aspect of the budget. Secondly, the budget also clearly hints that development activities have now go to the villages. This is really praiseworthy.

I suppose the government would have thought that since all along the past thirteen years of the new system the leaders' raised the hopes and the aspirations of the people but on ground those aspirations were shattered and hence the idea of allocating money for the development of the areas which remained totally neglected as regards development. This is a good move as when the money enters the villages, it would have its positive impact on the creation of peace in an otherwise conflicting situations.

The other factor that has impressed me much is that the budget now talks, better late than never, of the upliftment of the Dalits and the rest of those who had been so far mercilessly "excluded" from the mainstream politics and participation in the system. If development, education, employment, and health facilities approach those neglected areas, naturally it would have a very positive impact there.

The government encourages the private sector participation in the BOOT scheme. This scheme is "build-own-operate-transfer" theoretically is a superb idea. However, how the scheme would work will have to be watched.

I don't understand as to why the government still owns corporations that have become almost like white elephants. If monopoly portion is scrapped from some of the government owned corporations, the corporations are just a heap of ash for they can't stand for well over a minute competitions from other similar corporations being run under private sector..

Talking of RNAC, the government plans to make its share public. However, if the government continues any linkages with the RNAC under its new scheme, it would be yet again a disaster. Government's involvement means bureaucratic interference and a mean to fill the corporation with their party cadres.

The government has failed to instill a sense of encouragement in the minds of the people, businessmen, and industrialists on how to provide the needed momentum in order to expand nation's economic activities in a vibrant manner.

It would have been nice if the government would have brought into effect a scheme that insured the investments coming in for the transport sector. Unless the investors become confident of their investments, they will hesitate to invest money in any scheme.

As regards tourism, till today we have limited the scope of tourism in the country. We have so many places, for example, Gosain Kund, Damodar Kund, Man Sarovar, Pathivara temple, Tilicho late and so many places in Ilam which remain yet to be explored. We can proceed with the idea of Religious-Piligrimage and can attract tourists who believe in Hinduism and Buddhism. Expansion of Religious tourism enhances cultural linkages and later sends all good messages across the world.

Last but not the least, I am happy that there has been some scheme for those who have been affected by the insurgency. Sending the family members of the affected family members to foreign countries is a good idea. This would at least make the family to earn their livelihoods.

Let me conclude by saying that the government must prioritize the areas or the sectors which demand urgent attention and the people need them urgently.

Little here and little there is not a fiscal program

Shrish Rana, Political analyst

It has become conventional to reserve opinions on government fiscal policy yearly by expressing reservations on its implementation. Yearly also academics and intellectuals deem budget with terms such as ambitious, populist and the likes.

I for one, look to the key sectors of industry, commerce and finance and observe the lack of enthusiasm there.

A little here and a little there is certainly not the fiscal program essential to lift the bogged economy. There is nothing new as these responses suggest.

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