Our average annual growth since 1990 has been a miserly four percent
The decade-long insurgency (1996-2006) badly affected the country's economy, with an estimated GDP loss of 2.5 percent a year during the period. But ten years after the restoration of peace, the country continues to be plagued by political instability. Development works have been halted. Industries and other business establishments are struggling. Existing business establishments are either closed or partly operational because of three reasons: continued political instability, power shortage and most recently, the blockade.Our annual average growth rate since 1990 has been between 3.5 percent and four percent, and per capita income today is US$ 730. A quarter of the population lives under absolute poverty. Job opportunities are rare, unemployment rampant.
According to an estimate, above 46 percent of total population is either unemployed or underemployed. Foreign job is the only option for many. Tourism is unable to take momentum. Import outweighs exports, resulting in a huge trade deficit. Nepal, as such, has a number of challenges to becoming self-reliant.
It is the responsibility of the political parties to raise the country's economy to bring it at par with other countries in South Asia. For this, it must aim for seven to eight percent growth. Five sectors—hydropower, tourism, herbs, agriculture and education—will be vital to achieving this goal. But political stability followed by good governance, transparency and accountability are the pre-conditions.
Electricity consumption and economic growth are related. Progress in one leads to progress in the other. Research conducted by this writer shows one percent increase in GDP leads to increase in electricity consumption by three percentage points. It indicates that three more units of electricity are required to produce an extra unit of output. Thus the anticipated economic growth rate of around seven or eight percent requires uninterrupted power supply. Currently, there is a rampant power outage. Nepal has potential for 42 GW power. Nature gives us this potential, to use it and export it. But hardly two percent of our hydro potential has been harnessed.
The recent blockade by India has shown that Nepal is effectively an India-locked country. Thus our export costs are high, which makes it hard for us to gain a competitive edge in the international market. For it is difficult to make Nepali goods available in the international market. But Nepali goods have good demand in neighboring countries. There are big markets in India and China. Nepal can balance its international trade by exporting goods to these countries.
Tourism is another good source of foreign exchange. Tourists from neighboring and third countries come to Nepal to witness nature's bounties. Nepal has a great scope of becoming the destination country for global tourism, if we can develop more tourist sites. Today, Nepal is exporting its active and most productive manpower. If well harnessed, tourism can stanch this great outflow. If Nepal can attract more Indian and Chinese tourists, tourism would greatly boost our economy.
Topography divides Nepal into three main parts: Tarai in the south, and mid-hill as well as high mountains in the north. These parts have their own peculiarities. High mountains are rich in herbs. Locals there have harvested herbs in an unorganized manner. If we could streamline this process, there is another huge potential for growth.
As medicine industries are growing, there is high demand for Himalayan herbs. Nepal can export this commodity by air as well as by land. If Nepal is able to harvest and export these life-saving products, Nepal could capture the medicine market not just in the neighborhood but right around the world.
Nepal's agriculture should be developed in a way that can provide adequate food for the growing number of mouths. Today, a large volume of agricultural commodity—rice, flour, edible oil, fruits, vegetables, meat, etc—is being imported. We can produce them in our own country and substitute imports. For this we need to develop irrigation facilities, in both small and large scales, in hills and Tarai. Suitable agri-products need to be identified for each of the three topographical belts. The return from agriculture sector would not only meet the demand of a particular belt but also meet the demand for food for the entire country. We need to have the right policies (and implement them) to make Nepal self-reliant in agricultural products.
But education is the key. Economic development depends on availability of qualified manpower. Human resource development in turn depends on the presence of sound educational institutions. The government should take steps to establish specialized educational institutions to produce quality technocrats who will be needed to develop these sectors.
The author is a professor at the Central Department of Economics, Tribhuvan University