The Economy Of Nepal And How You Can Contribute?
“The economy” is a very commonly used but immensely complex phrase. The term encompasses anything from buying food at home to international relations worldwide. The sheer application of economics around us, hence, demands that we be informed about it.
The economy of Nepal is much like that of any other developing nation: agriculture is driven, primary sector heavy, large income inequality, and full of foreign debt. But what can we do to change it? How should every individual work such that the economy improves? In this article, we will look into the forces driving the economy of Nepal and how you can help.
Table of Contents
The Current Economic Status of Nepal
As mentioned earlier, the state of Nepal aligns with most other developing countries. Nepal is not at rock bottom, but it is no China either, we are a long way from making our place in the world. There are several factors that make up an economy, given below are the ones most relevant to Nepal.
The GDP of Nepal has been steadily increasing over the years, Since 1980 the GDP per capita has grown from USD 404 (1980, IMF) to USD 2,842. This is by no means an impressive number, but there is some good news. In the past 2-3 years, Nepal has experienced unprecedented economic growth with over 8.2% growth in 2017 followed by 6.7point growth in 2018 and 6.9 points in 2019.
As of 2018, 21.6% of Nepalis fall under the poverty line and the unemployment rate was 3.2 in 2017. The poverty rate is especially concerning, but unemployment is relatively low compared to past years
27% of the GDP is fueled by agriculture, a number that has rapidly declined in the past two decades. Industry fuels 13.5% and services make up 59.5%. Among the service sector, remittance alone made up 27.8%, a huge number for any economy. You can see hence that the economy of Nepal is primarily dependent on agriculture and remittance, which together make up the majority (57%) of our economy.
Balance of Payment: Trade deficit
I am fairly certain that you have heard about Nepali foreign debt at one point in your life. Nepal performs very poorly on the Balance of payment issues, mainly due to huge imports backed by very little exports. It is important to note though, that Nepal is actually at a current account surplus as of July 2020.
Don’t be confused, the current account is not the same as the Balance of trade. Nepal still incurs a huge trade deficit of 76 billion dollars (CEIC July 2020), and Nepal was at an overall deficit until just last quarter too. However, due to the huge inflow of remittance, and other factors, Nepal is currently at a surplus of 1.7 billion dollars overall.
Remittance and its importance
An important factor to consider while studying the economy of Nepal is remittance. Remittance impacts were more than just the GDP of Nepal. As we saw earlier, it has important implications in the current account too. The inflow of foreign currency from Remittance more or less fuels the federal reserve of Nepal (accumulation of foreign currency), and without remittance, the economy would take hits in almost all macroeconomic sectors, in addition to the loss of household income.
Everything Wrong With Economy of Nepal
If the growth rate is high, and GDP is growing, doesn’t that mean our country is in a good state? Well, yes and no. While it is true that Nepal is developing at a pace faster than ever before, that does not mean that the economic status of Nepal is good. You can think of it this way: we are so far off from development that even at a rapid pace, we will still have a long way to go.
That being said, there are several factors that led to our underdeveloped state and others that are hindering further growth of the economy which we will discuss now.
The civil war and subsequent political unrest
While the Maoist insurgency ended over a decade ago, the effects of the 10-year long war are still painfully apparent. At the height of the war at around 2002-2006, the growth rate of Nepal went as low as 0.12 (2002, World Bank) and averaged at around 3 percent per year. The damage to infrastructure and constant fear and intimidation hindered growth, the effect of which we see even today. After the war up until the promulgation of the constitution in 2015, frequent strikes and political instability haunted the economy of Nepal. This also gave room for more corruption, the implications of which we will discuss later.
The earthquake and economic blockade
The 2015 earthquake shook the economy of Nepal very badly, and the blockade imposed by India afterward only amplified that effect. In 2016, Nepal recorded a growth rate of only 0.58%, the lowest since 2002. While Nepal was very quick to recover in 2017, the almost stagnant economy did affect several private sectors of Nepal, not to mention the huge loss of life from the earthquake.
Corruption and negligence
This is, of course, the public’s (least) favorite, and most evident reason for the state of the economy of Nepal. Corruption is rampant in Nepal and even now, the government of Nepal is hardly accountable to the Nepal people. Negligence is apparent in damaged roads, failing infrastructure, lack of proper services, and little to no welfare payments for the unemployed, and needy. 16.5% of people live below the poverty line (2019, Global times), a substantial number, and a growing challenge for Nepal as the effects of the pandemic unfolds. The data widely contrast the government response to tackle this: absolutely nothing.
How Individuals Contribute to the Economy
After all this, you might feel like a powerless force in a hugely complex economy. It is actually much simpler than that. In its very core, the macroeconomy is just the sum of its microeconomic counterpart. You, as an individual, still control the economy away. The absolute summation of every household, every supplier, every community, and the overarching government ultimately decides the fate of any economy.
Save money in Bank accounts
As an individual, small steps like putting money in Banks instead of holding cash can do a lot to stimulate the economy. When you save money in banks, they will invest that money in other sectors. That will, in turn, contribute to the economy of Nepal by building more jobs, providing higher supply and so much more.
Don’t stay unemployed
There are many people who stay unemployed by choice. If you are able to find a job, don’t just sit around. You yourself are a resource too, and by not doing anything you are contributing to the wastage of economic resources on a larger scale.
Stay politically active
I get it, politics is not for everyone. But it is still your responsibility to be informed about your nation’s government and choose appropriate ruling bodies. Voting is the cornerstone of any economy, and you should strive to actively hold your government accountable to you.
Spend money if you can
If you have the money you can spend, do it. It’s as simple as that. Many Nepali people have a trend of saving property and assets for their children, even though they have the ability to spend it. Doing this will keep money off the economy, ultimately hampering growth and development.
This was a pretty intense article, and even though I have kept it as simple as possible, you might not understand everything. The situation of Nepal is pretty apparent to everyone, and the factors I have laid out hopefully gives you a basic insight into how we reached where we are now. If you want to contribute something to the Economy Of Nepal, just follow the steps given in the last section, and you will be doing a lot more than you think.
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