At first, there is no link between the progress review of the ongoing TYP and the approach paper. The policy and other deficiencies highlighted in the review are simply ignored while devising approach for the coming three fiscal years. In the goal, by emphasizing on dignified and gainful employment, reduction of economic disparity and abolition of social deprivation aims at reducing poverty to 21 percent by the end of TYP from present level of 25.4 percent. It adds that by means of improved living conditions through sustainable growth, this will be possible. To begin with, the targets of 21 percent based on new poverty estimates of 25.4 percent are highly questionable, which are simply based on income poverty elasticity that comes out at 0.25 based on a historical data. If this could have been the case, during 1985-90 and 1992-97, poverty would have reduced drastically as the growth rate was above 4.8 percent at that time. But 1996 and 2004 survey data show that poverty remained at 42 percent throughout this period.
More worryingly, the food price has jumped continuously in Nepal. Studies show that with 3 percent food price rise in poor countries, the poverty among vulnerable groups rises by 1.6 percent. Additionally, in recent years, income inequality has risen in an unprecedented way amidst slowdown in the economy with capital-intensive sectors flourishing for some years. Therefore, the bases of poverty estimates and subsequent targets are misleading. Similarly, despite so much propaganda on dignified or gainful employment in the approach paper, employment calculation is also simply based on historical employment elasticity of 0.60.
Insensitivity to address the root of the deepening economic crisis and internalize the required reforms and changes in the socio-economic front are the most objectionable aspects of the approach paper.
Thus, the targets set by relying on simple old mechanistic tools ignore the perceived changes as claimed by the approach paper. This means that sustainable growth, equitable-based development and abolition of social deprivation coined and kept in the paper are simply for intellectual consumption without linkages with goals and targets. This becomes more clear when the strategies, methods of calculating investment targets followed by resource allocation issues and related aspects are closely examined.
The worst part of the approach paper is that the strategies included are not strategies as such. They are primarily repetition of goals. Nowhere the strategies to augment gainful employment, reduce poverty, enhance balanced development and socio-economic transformation have been clearly spelt out. It has been approached that the inclusion of some catchy words will be sufficient to deceive the people to a large extent.
The method to calculate the investment requirement and techniques used to fix sectoral resource allocation pattern, including bifurcation between the government and private sector, are highly questionable. The fixation of plan outlay technique is the same as the first plan. Given the fixed sectoral target and calculated incremental capital output ratio again based on questionable investment and accumulated capital data, the investment requirement has been derived. It, as obvious, cannot address distributional and sustainable growth issues. A more rigorous and roust technique was essential to address asset-related issues and issues associated with access to resources or employment and identify the role of energy so crucial to make the plan coherent with the coined words as stated above. Such a necessity was hardly felt. Above all, in the absence of private and government investment sectoral data series, how the sectoral allocation was made is anybody’s guess. Despite mention of facilitating proposed federal system, no attempt to introduce fiscal federalism was made. Bifurcations of community sector and resources allocation from the regional distribution point of view were not recognized. Likewise, in an alarming situation of externally-driven crisis, assessment on the likely impact of plan outlay and proposed finances on saving-investment gap as well as trade and current account gap was not felt necessary. This additionally corroborates how the approach paper has downplayed the looming crisis in the economy.
When the resource allocation pattern is examined by sector, it is another manifestation of status quo approach. It has been globally recognized that unless production sectors are revitalized with a big priority, the mismatch between hyper-services sector and lagging production sector can generate crisis any time. This needs augmentation of investment in the productive sectors backed by clear-cut policies. Implicitly, this demands changes in development paradigm and shift in policies in a way that the internal demand-led growth gradually picks up. The evaporation of exports is also demanding that some concrete policies to promote sustainable exports along with a strategy of enhancing internal demand-induced growth and development is essential. This is the message of global financial crisis. Nowhere in the paper such a necessity has been realized.
Therefore, insensitivity to address the root of the deepening economic crisis and internalize the required reforms and changes in the socio-economic front are the most objectionable aspects of the approach paper. Simply coining of popular words amidst ritualistic approach tells us that if the present paper is used for the detailed plan, this will halt progressive transformation course of the society. Indeed, pushing a system of bypassing the political consensus process so far maintained is a big mistake from the standpoint of internalizing the transformational approach in the paper.
(Writer is former member of National Planning Commission.)
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