SUBJECT: ECONOMICS (126), HSEB

CLASS: 11

TRINITY INTERNATIONAL COLLEGE

Dillibazar, Kathmandu, 2014/15

PART 'C'

NEPALESE ECONOMY

UNIT: 8 NATURAL RESOURCES OF NEPAL (2)

UNIT: 9 HUMAN RESOURCE (11)

UNIT: 10 AGRICULTURE (17)

UNIT: 11 POVERTY (22)

UNIT: 12 INDUSTRY (25)

UNIT: 13 TRANSPORTATION AND COMMUNICATION (32)

UNIT: 14 FOREIGN TRADE (37)

UNIT: 15 GOVERNANCE FINANCE (40)

UNIT: 16 DEVELOPMENT PLANNING (43)

Prakash Rai, prdon2006@yahoo.com

UNIT: 8 NATURAL RESOURCES OF NEPAL

8.1 Water Resource(Role/Importance, Potentiality, and Current Situation)

8.2 Forest Resource(Role/Importance, Current Situation, Causes and Consequences of Deforestation)

8.3 Mineral Resource(Role/Importance and Problems)

8.4 Environment and Natural Resources Management

8.1 Water Resource

Role/Importance of Water Resource in Nepal

(i) Development of Agriculture: Adequate provision of irrigation is essential to develop agricultural sector. It is because irrigation helps to diversify crop, to increase production and to modernize agriculture. Development of agriculture sector depends directly on water resource. Development of hydro-electricity helps agro-based industries.

(ii) Development of Industry: A large amount of energy is needed to develop industrial sector. Heavy machineries for large-scale industries cannot be operated without adequate energy. Nepal is facing energy crisis. Nepal cannot afford diesel and thermal plant for energy. That is why, generating adequate hydroelectricity from rivers of Nepal can develop the industrial sector of Nepal.

(iii) Development of Tourism Industry: Nepal is rich in rivers, lakes, waterfalls, and ponds. Water resource has made Nepal beautiful. So many tourists visit Nepal for rafting, boating, fishing, etc. Potentiality of generating hydroelectricity is high in Nepal. If Nepal is able to generate hydroelectricity, it helps to develop transportation, communication, hotels, etc. These are essential in the development of tourism industry.

(iv) Promotion of Employment: Nepal is rich in water resource. Nepal can generate a huge amount of hydroelectricity. Hydroelectricity helps to develop agriculture, industrial, and tourism sectors of nation. Many water resource projects can be run in different places of Nepal. Consequently, employment opportunity increases in nation.

(v) Protection of Forest Resource: More use of firewood as the fuel-energy is one of the main causes of rapid deforestation in Nepal. Development of hydroelectricity substitutes the fire-wood as the fuel-energy. In this way, water resource protects the forest resources of Nepal.

(vi) Drinking and Other Purposes: Water is essential for the existence of living beings. People and animals drink water to exist. People use water to bathe, to wash, and to clean.

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Further, development of hydroelectricity facilitates the use of modern amenities like heater, fan, telephone, refrigerator, washing machine, radio, and so on. Use of these amenities makes life of human beings comfortable and easy.

Potentiality of Water Resource in Nepal

The main sources of water in Nepal are rivers, lakes and underground water. Nepal is the second largest country in terms of potentiality of hydroelectricity. It has been estimated that 83,000 MW hydroelectricity can be generated from the water resource of Nepal. Out of this, 42,000 MW is economically feasible/viable.

There are almost 6,000 rivers in Nepal. Among main rivers, about 40,360 MW hydroelectricity can be generated from Karnali and Mahakali River, 15,720 MW from Gandaki, 17,900 MW from Koshi and 9,020 MW from other rivers.

Most of the rivers of Nepal flow from mountain to hilly regions with high speed. So, potentiality of hydroelectricity is high in Nepal.

There are numerous lakes in hilly regions of Nepal, which are also the source of rivers. The main lakes of Nepal are Rara Tal, Phewa Tal, Rupa Tal, She-phoksundo Tal, etc.

Current Situation of Water Resource in Nepal

The main uses of water resource in Nepal are to generate hydroelectricity, to irrigate the land and to provide drinking water. The current position of water resource is as follows:

(i) Hydroelectricity: The main use of water resource in Nepal is to generate hydroelectricity. Nepal has potentiality of generating 83,000 MW hydroelectricity, of which about 700.0 MW has been produced from various projects, which is only 0.84 percent of total potentiality. The major completed hydroelectricity projects are as follows:

Projects CapacityKaligandaki-A 144 MWMarsyangdi 69 MWKhimti 60 MWKulekhani-I 60 MWKulekhani-II 32 MWTrishuli 21 MWChilime 20 MWGandaki 15 MWDeughat 14.1 MWModi 14 MW

Table: Completed Hydroelectricity Projects

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(ii) Irrigation: Another important use of water resource is to irrigate the field. Out of total arable land (26,41,000 hectare), irrigation command land/area is 17,66,000 hectare only. Of the total irrigation facilities, about 82 percent is surface irrigation and 18 percent is underground irrigation. Now, some irrigation projects are in operation. Government of Nepal and the Agricultural Development Bank (ADB/N) are the major parties currently engaged in irrigation development.

(iii) Drinking Water: The pure drinking water is a basic need of people. But, majority of Nepalese people does not get pure drinking water. Only 80 percent people have got the drinking water facility in Nepal. In rural areas, 71.3 percent (14.5 million) and 72.6 percent (2.5 million) of urban population have access to drinking water supply. The major sources of drinking water in Nepal are piped water, tube well, spring, and others. Piped water constitutes about 50 percent of the total drinking water supply in Nepal.

8.2 Forest Resource

After water resource, forest is the second largest natural resource in Nepal.

Year Area Covered by Forest(Percent)1964 45 1979 43 1986 37.4 1998 29 2005 25.4

Source: Ninth Plan Document(National Planning Commission)

Role/Importance of Forest Resource in Nepal

(i) Source of Fuel: In Nepal, forest is the main source of fuel. 64 percent households use firewood as the fuel. Most of the rural people of Nepal lack electricity facility. So, they use firewood as the fuel for cooking.

(ii) Source of Water: Generally, larger the forest resource, higher the rainfall and vice versa. In other words, there is positive relationship between forest and rainfall. Forest helps to maintain continue flow of water in river, canal, pynes, and tap. It means forest is the main source of irrigation and drinking water.

(iii) Protection of Environmental Degradation: Nepal is suffering from environmental pollution. The environmental degradation affects seriously to human beings, animals, birds, insects, and plants. The expansion, development, and conservation of forest are essential to maintain clean environment and ecological balance. According to experts of forest sector, at least 43 percent of total area should be covered by forest area for ecological balance.

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Ecological balance keeps human beings healthy. Adequate forest resource helps to maintain clean environment. It means forest minimizes the pollution.

(iv) Control of Soil Erosion and Landslide: Forest absorbs water of rainfall, which in turn controls floods, landslides, and soil erosion. If flood, landslides, and soil erosion are not controlled, the fertility of soil will decline. The adverse effect of flood and landslide on crops is checked by forestation. Hence, forest is regarded as the natural insurance against flood, landslide, and soil erosion.

(v) Promotion of Tourism Industry: Nepal has various national parks with forest, which have given shelter to many animals, plants, birds, and insects. Forest is the main hunting spot and it increases natural beauty. These are the main attraction for tourists.

(vi) Source of Raw Materials: Forest resource is the source of raw materials of many industries like herbals, medicines, paper, rubber, furniture, etc. It means forest resource plays vital role in developing industrial sector. In Nepal, forest based industries can be developed by enhancing forest resource. As a result, employment opportunity and income level increase.

Causes of Deforestation in Nepal

(i) High Population Growth Rate and Migration: Population growth rate is high in Nepal. So, more land, fuel, and houses are needed. For this, forest is being destroyed. Due to high population growth rate and limited resources, the level of unemployment and poverty is increasing in Nepal, which in turn compels the people to migrate from rural to urban and from Mountain/Hilly to Terai region for better opportunity. Migrated people settle down by deforesting.

(ii) Major Source of Fuel: In Nepal, majority of total fuel is received from forest resource. 64 percent households use firewood as the fuel. Firewood is mainly used for fuel in rural areas of Nepal. The alternative sources of fuel such as hydroelectricity, solar power, etc. have not adequately developed. Therefore, the pressure on forest could not decline in Nepal.

(iii) Lack of Employment Opportunity: Unemployment has become one of the serious problems in Nepal. Many unemployed people depend upon forest for their livelihood. Generally, farmers are unemployed during winter season. So, they sell wood and firewood illegally.

(iv) Lack of Awareness about Forest Resource: Majority of people of Nepal is not well educated. So, they are still unaware about the role of forest resource and consequence of deforestation. As a result, forest is being destroyed by fire each year.

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(v) Inappropriate Government Policy: Government had distributed forest in the name of housing and rehabilitation program for landless people by deforesting. In addition to this, establishment of institutions, road construction and other development activities also destroyed forest. Further, the forest resource preservation and development policy of Government of Nepal is not clear and appropriate. Timber smuggling is also one of the causes of deforestation.

Consequences of Deforestation in Nepal

(i) Natural Calamities: Deforestation leads to flood, landslides, deficiency of rainfall, and various diseases. In this way, deforestation creates the situation of natural calamities and then natural/ecological balance is adversely affected.

(ii) Environmental Degradation: Forest helps to keep environment clean. According to experts, at least 43 percent of total land should be covered by forest for ecological balance. So, deforestation has negative impact on environment.

(iii) Disappearance of Rare Animals and Plants: Deforestation also leads to disappearance of rare animals and plants. It causes deficiency of wood, firewood, raw materials, etc. Wild animals and bio-diversity resources decrease due to deforestation in Nepal.

(iv) Adverse Effect on Agriculture: The forest resource is related to agriculture in many ways. The deforestation causes soil erosion, over and under rainfall, deficiency of water, which in turn decrease the productivity and production of soil. Therefore, deforestation affects agriculture adversely.

(v) Adverse Effect on National Economy: Due to the deforestation, government has to invest a huge amount of budget on forestation and environment balance. Supply of raw materials of forest based industries declines and then such industries have to face the shortage of raw materials. As a result, both government revenue and national income decline.

(vi) Adverse Effect on Tourism Industry: Deforestation destroys natural beauty, bio-diversity, and rare animals and birds. It also pollutes environment. Consequently, earning of foreign currency declines along with the fall in number of tourists.

8.3 Mineral Resource

Nepal is rich in mineral resource. She has many kinds of minerals like iron, copper, limestone, natural gas, coal, lead, magnesite, etc. Few minerals are being used to some extent by using available resources. Majority of them are still remaining unutilized and underutilized due to various bottlenecks.

Role/Importance of Mineral Resource in Nepal

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(i) Raising National Income: Various goods can be produced in a large scale by establishing industries based on mineral resource. Production of goods in large scale increases national income and employment level. As a result, income and living standard of people go up.

(ii) Utilization of Human and Water Resource: Industries based on mineral resource utilizes human and water resource. For the prosperity of nation, large-scale industries based on mineral resource must be operated. Human resource and hydroelectricity are essential in order to develop such industries.

(iii) Making Country Self-dependent: Industries based on mineral resource produce various kinds of commodities needed to nation and people. So, establishment of such industries minimizes and substitutes imports and promotes exports. As a result, unfavorable balance of trade and payment improves. It makes nation self-dependent.

(iv) Raising Government/Public Revenue: Government receives public revenue in the form of sales tax, excise duty, value added tax (VAT), export tax, royalty, etc. form industries. Therefore, more medium and large-scale industries based on mineral resources mean more government revenue. Hence, establishment of medium/large scale industries based on mineral resource increases the government revenue.

(v) Development of Agriculture Sector: Medium/Large scale industries based on mineral resources produce agricultural machineries, tools, chemical fertilizers, and insecticides, which help to develop agriculture sector. So, mineral resource must be utilized properly through the establishment of medium and large-scale industries for the development of agriculture sector of Nepal.

Problems of Mineral Resource Development in Nepal

(i) Inadequate Capital: A huge amount of capital is required to develop mineral resource. But, the sufficient capital is not available in Nepal. Therefore, Nepal could not conduct the large-scale industries based on mineral resources.

(ii) Lack of Technical Manpower: Technical knowledge and technical manpower are essential in order to develop and utilize mineral resource. Nepal lacks such knowledge and manpower. It is dear/expensive to import technical knowledge and technical manpower.

(iii) Lack of Infrastructure: Infrastructure like transportation, communication, energy, etc. are essential to conduct projects and industries related to mineral resource. Most of the mineral resource is found in hilly region, where it is very difficult to make available infrastructure facilities.

(iv) Lack of Market: Purchasing power of Nepalese people is very low. So, domestic market of the products of industries based on mineral resource is narrow. Nepal is not able

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to expand international market for the products of mineral resource. That is, international market of products of mineral resource is also narrow.

(v) Defective Government Policy: Government policy regarding mineral resource is not appropriate and effective in Nepal. There is lack of adequate statistical data. Government of Nepal has adopted open door policy for private/foreign investment but the policy and legal provisions are neither adequate nor clear cut.

8.4 Environments and Natural Resources Management

Environment includes entire factors in the surface, such as, air, water, soil, living creatures, mines, etc. Natural resources consist of all things given by nature on, above, and under the surface of the earth. In fact, the environment is the sum total of natural resources and living beings. Human beings use natural resources by using their knowledge and labors. It is because natural resources fulfill the human wants. Natural resources also balance environment.

The concept of development has been changing according to time and circumstances. Few decades ago, economic development referred to the maximum exploitation of natural resources. But, at present, economic development refers to the exploitation of natural resources considering environmental balance (without polluting environment).

A country cannot get sustainable development without protection of environment. Therefore, government should launch various programs for the balance of environment with community’s participation. Natural resources management refers to proper utilization of natural resources with respect to environmental preservation.

According to National Planning Commission (NPC), “According to concept of sustainable economic development, resources management means to meet the present and future demand and need without depletion the existing stock of resources”.

The main urban environment problems are solid waste, drainage and sewerage problem, air pollution, river and water pollution, noise pollution, overcrowding and congestion. The main rural environmental problems are destruction of forest, flood, landslide, soil erosion, and decrease in productivity of soil and loss of bio-diversity.

For Sustainable Management of Natural Resource

(i) The productivity of land should be improved through optimal utilization of manure and adequate irrigation.

(ii) Proper utilization of water resource.

(iii) Government should launch appropriate policies and programs for forestation.

Every nation of the World has different types of natural resources. Natural resources are the property of nation. Nepal also has different types of natural resources. Natural resources can be classified into two

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groups, namely, (i) Renewable resource, which can be recycle after the use, such as, grasses, forest, wild and domestic animals, trees, air, water, solar energy, etc. and (ii) Non-renewable resource, which cannot be recycle after the use, such as, mineral resource(iron, petroleum products, copper, etc.)

Causes of Natural Resources Degradation in Nepal

(i) Deforestation: Deforestation is one of the main causes of natural resources degradation. Forest resource is being destroyed because of high population growth rate and migration, maximum use of firewood as fuel for cooking, and lack of awareness.

(ii) Unscientific Urbanization: Because of unscientific urbanization and lack of disposal facilities, pollution is increasing in the urban areas. Especially, in Kathmandu valley, drainage is linked with the rivers. It has polluted water. Consequently, various aquatic animals and plants are being destroyed gradually.

(iii) Use of Chemical Fertilizer: Nowadays, most of the farmers of Nepal are using chemical fertilizers in order to increase agricultural production in unscientific way. As a result, many animals and plants are being affected adversely.

(iv) Establishment of Industries: Establishment of industries is also responsible in polluting environment. There is no any provision for the control of pollution. Consequently, the air pollution is increasing in Nepal.

(v) Increase in the Number of Vehicle: The number of vehicle is increasing day by day in urban areas of Nepal. But, road condition is not good to face the pressure of such increasing number of vehicles. Further, the traffic system is also not scientific. As a result, air pollution is high in urban areas.

Consequences of Environment Pollution in Nepal

(i) Air Pollution: Air is being polluted due to the use of energy, smoke from vehicle, and industries. The polluted air causes breathing related diseases, such as, hypertension, high blood pressure, cough, etc.

(ii) Water Pollution: Environmental pollution pollutes water. Polluted water harms human health and it lowers the agro-production. People suffer from water borne diseases, such as, typhoid, diarrhea, etc. due to the consumption of polluted water. Amount of underground water declines due the environmental pollution. It causes scarcity of water for drinking, bathing, irrigation, etc.

(iii) Loss of Bio-diversity: Environmental pollution reduces bio-diversity. It disturbs the ecosystem and genetic resources. Bio-diversity plays central role in the evolution of ecosystem.

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(iv) Adverse Effects on Agriculture: Deforestation is one of the examples of environmental pollution. The deforestation causes soil erosion, landslides, flood, and drought. As a result, productivity and production of the agriculture sector decline. Problem of over rainfall and under rainfall occur due to the deforestation. Timely rainfall does not occur. Rainfall is the main source of irrigation in Nepal.

(v) Adverse Effects on Industries: Some industries are based on forest resource in Nepal. For example: Paper industry, Medicine industry, Furniture industry, etc. Raw materials of these industries are obtained from forest. So, these industries have to be closed down due to the deforestation. It will affect employment and government/public revenue adversely. Consequently, export of nation goes down and then foreign exchange earnings declines and balance of trade becomes worse.

(vi) Adverse Effects on Tourism Industry: Due to the deforestation, natural beauty declines, air pollution increases, rare animals, birds, insects and plants disappear, and bio-diversity destroys. Tourists hesitate to visit/travel in polluted areas, i.e., tourism industry is affected badly by the environment pollution.

(vii) Adverse Effects on Plants and Animals: Various plants cannot flourish due to the deforestation. The deforestation leads to the destruction of habitat of wild animals and birds. Consequently, tiger, elephant, lophophorous, pheasant, etc. may disappear.

(viii) Other Effects: Natural calamities like flood, landslides, drought, etc. occur due to the deforestation. People are compelled to lose wealth and life because of natural calamities. The rivers, pond, pynes, and taps dry up. There is no regular rainfall. Climate does not become in favor of human beings, animals and plant. Consequently, practical life of living beings becomes difficult.

Measures/Suggestions for Natural Resource Management

(i) Forestation: Forestation helps to prevent soil erosion, landslides, flood, and drought. For this, various forestation programs should be launched.

(ii) Scientific Use of Natural Resources: Mineral resources are limited in Nepal. We cannot increase the stock of mineral resource as per our wish. Therefore, we have to use this resource rationally for sustainable development.

(iii) Enactment of Legal Provision: The rules and regulations must be transparent and they should be implemented effectively. Legal provision is most urgent to utilize mineral and forest resource of Nepal.

(iv) Environmental Education: Almost all people depend on the natural resources in different ways. But, most of the people of Nepal are not aware about the importance of natural resources. So, they should be familiarized with the importance of natural resources via environmental education.

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(v) Establishment of Reserve Areas: To protect various types of wild animals and plants, various reserve areas should be established. This is helpful for ecological balance as well.

UNIT: 9 HUMAN RESOURCE

9.1 Role of Human Resource

9.2 Current Population Situation

9.3 Human Development Indicators

9.4 Causes and Consequences of High Population Growth and Remedial Measures

In ordinance sense, human resource implies all the population of the country. But, only healthy, educated, and skilled manpower is called human resource/capital in economics.

According to National Planning Commission, “Human resource is the knowledge, skill, efficiency, physical and mental capacity to do work inherent in the people of the country”.

9.1 Role/Importance of Human Resource in Nepal

(i) Utilization of Natural Resource: The exploitation of natural resources is possible only with the mobilization of skilled and unskilled manpower. The utilization of natural resources increases the national income and employment level. Thereafter, per capita income and living standard of people rise. Most of the natural resources could not be utilized in Nepal due to the lack of adequate human capital.

(ii) Development of Agriculture and Industry Sectors: Modern technology should be used to develop agriculture and industry, which is possible only by human resource. Skilled manpower is necessary to produce the qualitative goods/services at lower cost.

(iii) Social Development: A good/civilized society is the symbol of human resource development. Human resource development makes the society aware about rules and regulation, right and duties, and so on. A good/civilized society is the property of nation as well as the whole human beings.

(iv) To Remove Economic Backwardness: Human resource development means to increase the efficiency of labors and to mobilize labor. Efficient manpower utilizes available resources properly, which in turn increases production, employment level, income, and living standard of people.

(v) Reformation of Traditional Culture and Value: Traditional culture and value may be the obstacle of economic development of developing countries like Nepal. The educated

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people reform such culture and value, which in turn gears up the pace of economic development.

9.2 Current Population Situation of Nepal

(i) Size and Growth of Population: According to National Population and Housing Census- 2011, population of Nepal is 2,64,94,504, which comprises 1,28,49,041(48.49 percent) male and 1,36,45,463 (51.51 percent) female. The actual population growth rate is 1.35 percent, which was 2.25 in 2001.

(ii) Distribution of Population: According to National Population and Housing Census-2011, the distribution of population on the basis of geographical regions is as follows:

Geographical Regions Size of Population PercentMountain 17,81,792 6.73Hilly 1,13,94,007 43.00Terai 1,33,18,705 50.27Total 2,64,94,504 100.00

As per given table, 6.73 percent population live in Mountain region, 43.00 percent live in Hilly region, and 50.27 percent live in Terai region.

(iii) Population by Age Group: According to National Population and Housing Census-2011, population of Nepal by age group is as follows:

Age Group Percent0 – 4 and 60 + Above 18.965 – 14 24.0415 – 59 57.00Total 100.00

The given table shows that economically active population (15-59) covers 57 percent of the total population whereas 24.04 percent belongs to 5 – 14 age group. Similarly, 0 – 4 and 60 + above group covers 18.96 percent.

(iv) Density of Population: According to National Population and Housing Census-2011, density of population in Nepal is 180 per square kilometer. Kathmandu district has the highest population density(4416) whereas Manang has the lowest population density(3). 83 percent people of Nepal live in rural areas and 17 percent live in urban areas. Population

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density in urban areas equals to 1,381 per square kilometer and in rural areas 153 per square kilometer. Likewise, population density in Mountain region is equal to 34, in Hilly region 186 and in Tarai region 392 per square kilometer.

(v) Population by Religion: As per National Population and Housing Census-2011, the population of Nepal by religion is as follows:

Religion PercentHindus 81.3Bouddha 9.0Islam 4.4Kirant 3.1Christian 1.4Prakriti 0.5Others 0.3Total 100.0

(vi) Population by Mother Tongue: As per National Population and Housing Census-2011, the population of Nepal by mother tongue is as follows:

Mother Tongue PercentNepali 44.6Maitheli 11.7Bhojpuri 6.0Tharu 5.8Tamang 5.1Newari 3.2Others 23.6Total 100.0

9.3 Human Development Indicators

Human development refers to the development of overall situation, such as, health, education, sanitation, average life expectancy, daily calorie for human, income, poverty situation, condition of women, human security and environment, etc.

United Nation Development Program (UNDP) has designed Human Development Index(HDI), which is one of the indicators of economic development. HDI ranges from 0 to 1.

0 to 0.54 → Low level of human/economic development

0.55 to 0.70 → Medium level of human/economic development

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0.71 to 0.79 → High level of human/economic development

0.80 and Above → Very high level of human/economic development

According to Human Development Report(HDR)-2014 of UNDP, HDI of some countries is as follows:

Countries HDI Value HDI RankNorway 0.944 1Australia 0.933 2Switzerland 0.917 3Netherland 0.915 4USA 0.914 5Japan 0.890 17China 0.719 91India 0.586 135Nepal 0.540 145Pakistan 0.537 146Ethopia 0.435 173Sierra Leone 0.374 183Nizer 0.337 187

HDI includes 3 aspects of human life, namely, (i) Life Expectancy, (ii) Educational Attainment, and (iii) Income for Decent Living.

Major Human Development Indicators

(i) Life Expectancy at Birth: It is the expected life span of a man at birth. It depends upon the infant mortality rate and age of death. If infant mortality rate is high and age of death is low, the life expectancy will be low and vice versa. Life expectancy at birth can be regarded as the indicator of longevity, which depends on the level of nutrition, health service, and living standard.

(ii) Educational Attainment: It is also one of the major indicators of human development. It includes literacy rate, school enrollment rate, and mean year of schooling. This helps to increase the efficiency of human being. Both technical and non-technical educations are important for the development of a country.

(iii) Per Capita Income: It is another major indicator of human development. Higher the per capita income, higher will be the human development and vice versa. Per capita income can be calculated by dividing national income by the total number of population. Therefore, national income should be increased in order to increase per capital income.

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(iv) Fulfillment of Basic Needs: Basic needs of life include foods, shelter, clothing, education, and health service. These needs should be adequate for the human development. That is, higher the basic needs availability, higher will be the human development and vice versa.

(v) Maternal Mortality Rate: Maternal mortality rate refers to the number of mother, who dies during the birth of child. Lower the maternal mortality rate, higher will be the human development and vice versa.

9.4 Causes and Consequences of High Population Growth and Remedial Measures

Causes of High Population Growth in Nepal

(i) High Birth Rate: Fertility rate is high in Nepal. It means the number of child given birth by a woman is high. At present, it is 2.6 per woman.

(ii) Low Death Rate: Death rate as compared to birth rate is low in Nepal. The crude death rate is 8.7 per thousand whereas the birth rate is 24.3 per thousand. The average life expectancy is 68.4 years.

(iii) Early Marriage: Although early marriage is illegal in Nepal, the tendency of early marriage has not finished yet. Especially, in rural areas of Nepal, boys and girls get married before 20 years. Due to early marriage, the fertility period is longer. As a result, population growth rate is high.

(iv) Lack of Education: Most of the people of Nepal are not well educated. So, they do not have knowledge about the importance of family, need of small family and other responsibilities. Due to the lack of education, they do not receive the information of family planning and other areas. As a result, population is increasing at alarming rate.

(v) Religious Belief: Many people of Nepal believe that parents go to hell if they do not have son. Therefore, in the absence of son, parents are ready to take risk of bearing more daughters.

Polygamy, poverty, high child mortality rate, joint family system, open border, and migration are also the causes of high population growth.

Consequences of High Population Growth in Nepal

(i) Unemployment: Employment opportunities cannot increase as population increases. That is, unemployment problem generates due to the high population growth, which may be the cause of social and political instability.

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(ii) Deforestation: People destroy forest in order to fulfill the requirement of growing population (Food, Shelter, and Clothing). High growth rate of population is one of the main causes of deforestation in Nepal.

(iii) Unsystematic Urbanization and Pollution: High growth of population generates unemployment problem. Therefore, people migrate from rural areas to urban areas in search of employment. It has become one of the obstacles of systematic urbanization and clean environment.

(iv) Fragmentation of Land: In Nepal, parents’ property is allocated to sons and daughter. Therefore, high population fragments the land into many pieces. It is difficult to apply modern technology in the fragmented or small size lands.

(v) Declining Social Facility: Government of Nepal has to allocate a large amount of budget for social sector every year. But, such budget may not be adequate if population increases rapidly. Consequently, social facilities decline.

Besides these, scarcity of land, low saving, and low investment are also the consequences of high population growth.

Remedial Measures of High Population Growth in Nepal

(i) Spread of Education: Most of the people of Nepal are not well educated. So, they do not know about the causes and consequences of high population growth. Government of Nepal should make aware them about the causes and consequences of high growth of population through education. There is inverse relationship between female education and fertility rate. So, female literacy rate should be increased.

(ii) Family Planning Services: The family planning service should be implemented effectively. The program should be made adequate even in rural areas of Nepal. The couple should be involved in family planning program by giving economic incentives, such as, monetary reward, free schooling facility, preference in job, etc.

(iii) Long Term Population Planning: The government of Nepal has to formulate long term plan for population management. This gives the long-term vision to design the appropriate population program.

(iv) Control of Immigration: Due to the open border with India, Indian and Bhutanese people are entering in Nepal. Consequently, population of Nepal is increasing rapidly. So, government of Nepal should strictly implement immigration rules and regulation.

(v) Health Care: Due to high child and infant mortality rate, people of Nepal give birth to more children. Therefore, adequate health facilities should be provided so that parents feel secure their children.

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Besides these, early marriage, polygamy, and religious belief should be discouraged as far as possible.

UNIT: 10 AGRICULTURE

10.1 Characteristics, Importance, and Problems

10.2 Sources of Agricultural Finance

10.3 Nature and Problems of Agricultural Marketing

Agriculture sector plays an important role in Nepalese economy. It is because agriculture is the main source of national income and the majority of Nepalese people depend on agriculture.

10.1 Characteristics, Importance and Problems of Nepalese Agriculture

Characteristics of Nepalese Agriculture

(i) Low Productivity: Productivity of Nepalese agricultural sector is low because of the use of inferior seeds, limited use of manures, traditional method of production, etc. The productivity of agricultural sector could not be increased in Nepal due to various bottlenecks.

(ii) Subsistence Cultivation: The main purpose of farming is subsistence oriented. Most of the farmers of Nepal are working for their livelihood alone. Hence, farmers grow crops by subsistence motive rather than commercial. That is, farmers produce agricultural goods only for daily consumption but not for sale.

(iii) Based on Monsoon: Due to the lack of adequate irrigation facility, agriculture of Nepal is based on monsoon. In Nepal, monsoon rain is found irregular

(iv) Small Size of Land Holding: According to Nepalese system/tradition, parents’ property is allocated to sons and daughters. Consequently, a land is fragmented into many small pieces. The small size of land holding is, economically, not viable for commercial purpose. It disrupts mechanization and modernization of agriculture.

(v) High Pressure on Land: The majority of people of Nepal (2/3) depend on the agriculture sector. That is, pressure of people on land is high in Nepal. Industrial sector of Nepal is not able to reduce the pressure on land.

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Besides these, illiteracy of farmers, inequality of land distribution, majority of food grain production, lack of storage and marketing facility, inadequate irrigation facility, use of old technique, and lack of agricultural research are also the characteristics of Nepalese agriculture.

Importance of Nepalese Agriculture

(i) Creation of More Employment Opportunity: Development of agriculture helps to reduce poverty through employment generation. In the development of agriculture, labor-intensive technique is used. It generates direct and indirect employment to unskilled, semi-skilled and highly skilled manpower. That is why, agriculture sector must be developed to solve the unemployment problem of Nepal.

(ii) Supply of Food and Local Wants: Agriculture is the main source of food items for Nepalese people. Industries, based on agriculture sector, produce those goods like mate, dhaka cap, doko, namlo, broom, etc., which are used daily by local consumers. Such goods play important role to daily activities of house. In this way, development of agriculture sector supplies the wants of local people.

(iii) Source of Raw Materials: Many industries are based on the agro-based raw materials, such as, furniture, paper products, textiles, handicrafts, medicines, etc. That is, agriculture sector provides raw materials to many industries like timber, cotton, sugarcane, tobacco, tea, food grains, milk, herbs, leather, bamboo, jute, straw, etc. As a result, producers/farmers of such raw materials get benefit.

(iv) Reduction of Regional Disparity: All parts of development countries like Nepal are not developed equally due to the various reasons. As a result, political instability and migration problem may arise. Cottage/Small scale industries, based on agriculture, helps to reduce such disparity.

(v) Basis of Foreign Trade: Agriculture is the basis of foreign trade. Foreign trade in Nepal is mostly agriculture based. Jute, oilseeds, tea, bones, skins, rice, pulse, tobacco, live animals, etc. are the main exportable items of Nepal. Nepal can get foreign exchange by exporting agro-based products.

(vi) Maintains Environment Balance: Agriculture promotes healthy environment by providing greenery in the country. It helps to preserve bi-diversity and even can be helpful in preventing soil erosion.

Problems of Nepalese Agriculture

(i) Lack of Adequate Irrigation Facility: Due to the inadequate irrigation facility, farming in Nepal is highly dependent on monsoon, which is a kind of gambling. Consequently, productivity and production of land could not increase.

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(ii) Traditional Technology: Traditional technology is still adopted in farming of Nepal. Most of the farmers are unknown about improved seeds, tools, insecticides, etc. Farmers are illiterate. So, they are unable to use modern technology.

(iii) Lack of Agricultural Credit: Most of the farmers of Nepal live in rural areas and they are poor. Therefore, they need loan. But, there is no adequate financial facility in rural areas of Nepal. Consequently, farmers could not be encouraged.

(iv) Lack of Marketing and Storage Facility: Due to the lack of adequate marketing system, farmers are compelled to sell their products at low price. They are also compelled to sell their products during harvest period at lower price due to the lack of proper storage facility. Existing stores are not systematic. So, thousand tons of food grains are destroyed by insects, mouse, etc.

(v) Lack of Agricultural Research: In Nepal, very few agricultural researches are done. Only such researches are not adequate for the development of agricultural sector.

10.2 Sources of Agricultural Finance in Nepal

The source of agricultural finance can be divided into two categories as:

(i) Organized Sources: Organized source includes agricultural development bank, commercial banks, rural development bank, and co-operative societies.

Co-operative movement was initiated in 1953 A.D. with the concept of self-help through mutual help. Later, co-operative bank was established in 1963 A.D. and it was converted into Agricultural Development Bank (ADB/N) in 1968 A.D. Now, ADB/N is playing vital role in financing agriculture sector.

Commercial banks are other source of agriculture financing. Rural Development Banks were established in 5 development regions with an objective to provide micro-credit to poor people. According to Rural Credit Review Survey (RCRS) of Nepal Rastra Bank, only 20 percent of indebted household get the facilities from institutional sectors. The interest charged by this sector is 14 to 17 percent.

(ii) Unorganized Sources: Unorganized source includes local moneylenders, landlords, friends, relatives, businessmen, etc. Although the rate of interest is high in unorganized sector, borrowing process is very simple.

According to “Rural Credit Review Survey (RCRS)” of Nepal Rastra Bank, the unorganized sources of agriculture finance are land owners, village money lenders, merchants, agriculture traders, friends and relatives, etc. According to the survey, unorganized sector covers 86 percent of total rural credit.

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10.3 Nature and Problems of Agricultural Marketing in Nepal

Nature of Agricultural Marketing in Nepal

There is no organized marketing system in Nepal. Most of the farmers produce and consume themselves. Some farmers sell their surplus products to local shopkeepers. They also sell their products in the local market. The local market is called ‘Hat Bazar’. Generally, ‘Hat Bazar’ opens weekly, bi-weekly or monthly. In some parts of rural areas, barter system is still prevalent.

(i) Seasonal: Both agricultural production and marketing are seasonal in rural areas of Nepal. Farmers are compelled to sell their products at lower price immediately after harvesting due to the lack of storage facility.

(ii) Small Size of Market: Most of the farmers of Nepal are working for their livelihood alone. That is, farmers grow crops by subsistence motive rather than commercial. So, the volume of marketable surplus products is very low and then the size of market is small.

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Sources of Agricultural Finance

Organized Source Unorganized Source

Agricultural Development Bank

Commercial Banks

Rural Development Banks

Co-operatives and Financial Institutions

Village moneylenders and landlords

Merchants and Traders

Friends and Relatives

(iii) Pre-dominance of Intermediaries: Agricultural marketing of Nepal is pre-dominated by intermediaries. Intermediaries visit door-to-door of farmers and purchase their products at very lower price and sell the same products consumers at higher price. In this way, intermediaries make substantial profit.

(iv) Individualized Marketing: Rural farmers are compelled to sell their products individually. It is because they are not organized. As a result, their bargaining capacity is weak.

(v) Inadequate Number of Market Centre: Agricultural market centers are not adequate in hilly and mountain regions. People have to walk long distances for hours to reach the nearest market centers.

(vi) Poor Marketing Network: Agricultural markets of Nepal are not well integrated due to the geographical difficulties and lack of adequate transportation and communication facility. Generally, there is food surplus in Terai region whereas food deficit exists in hilly and mountain regions.

Problems of Agricultural Marketing in Nepal

(i) Lack of Transportation and Communication Facility: Lack of transportation and communication facility is one of the major obstacles for the development of agriculture marketing. More time is needed to reach products in market and transportation cost is high due to the lack of adequate transportation facility. In this context, farmers cannot get reasonable price for their products.

(ii) Lack of Storage Facility: Due to the lack of proper storage facility, farmers are compelled to sell their products immediately after harvest at low cost. Available/existed storage facility is not scientific. So, insects and pests destroy grains.

(iii) Lack of Information and Advertisement: Information and advertisement system is not fully developed in all over the country. Farmers cannot get appropriate information about the situation of agricultural marketing. Due to the lack of adequate information and advertisement, consumers do not know about the agricultural products.

(iv) Lack of Adequate Financial Institutions: Most of the farmers of Nepal are poor. So, they need adequate credit facility. But, there are not adequate financial institutions in rural areas of Nepal. Farmers are compelled to borrow loan from un-organized money market at a high interest rate.

(v) Non-uniformity of Weights and Measures: Although government declared metric system of weight and measure, there is no uniformity in all over the country. In most of the parts of Nepal, traditional system ("dharni", "mana", "pathi", etc.) is being followed. But, traditional system is not reliable and appropriate.

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Besides these, lack of grading and standardization facility, adulteration, and existence of middlemen are also the problems of agricultural marketing.

UNIT: 11 POVERTY

11.1 Concept of Poverty and Characteristics of the Poor: Rural and Urban

11.2 Causes of Poverty

11.3 Measures of Poverty Reduction

11.1 Concept of Poverty and Characteristics of Rural and Urban Poor

Concept

Poverty is the state of lacking minimum basic needs of life, i.e., food, cloth, and shelter. Poverty means inadequate income, malnutrition, lack of social services like education, health care, sanitation, and lack of social and political status.

According to World Bank, “Poverty is the inability to attain a minimal standard of living”

Poverty can be classified into two groups as:

(i) Absolute Poverty: The situation of very low level of income and consumption, malnutrition, high death rate, low living standard is called absolute poverty. Those people, whose income is below poverty level, are called absolute poverty.

(ii) Relative Poverty: The relative poverty is the poverty compared to other countries, i.e., the gap between rich and poor country is called relative poverty.

Characteristics of Rural and Urban Poor in Nepal

(i) Settlement Pattern: Most of the poor people of Nepal live in rural areas and they entirely depend on the agricultural sector. But, their agricultural products are not sufficient to meet basic requirements (Food, Shelter, and Cloth). The locations of rural poor people are basically in the low productive areas, where farm is highly dependent on monsoon. Most of the poor people of urban areas are migrated from rural areas for better

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opportunities. They are often landless. Their settlement areas are generally over crowded, polluted, lack of sanitation, low physical facilities, etc.

(ii) Income Pattern: Poor people are unskilled laborers. So, they are compelled to sell their labor at low wage. That is, income of poor people is low. The land, owned by poor people, is usually of low quality and low productivity. Agriculture is the main source of income for poor people. Poor people of Nepal are not free from inherited and increasing indebtedness.

(iii) Consumption Pattern: Generally, a poor man spends about 70 percent of his income on food consumption alone. Children of poor family suffer from various diseases and malnutrition due to the lack of adequate foods. Poor people consume mostly food of low protein and vitamin, such as, cereals (wheat, barley, oats, etc.).

(iv) Demographic Features: Poor people are not aware about the causes and consequences of over population. They prefer to bear more children. It is because more children mean more earning for them. Consequently, child labor is common in Nepal. Poor woman has to face cultural, social, legal, and economic obstacles. The average life expectancy of poor people is low.

(v) Status of Poor People: The status of poor people in the society is low. Generally, the lower caste people are poor in Nepal. Most of the poor people are illiterate. So, they cannot get good job. Fewer social services are available to the poor people. They are, more or less, passive in politics.

11.2 Causes of Poverty in Nepal

(i) High Growth of Population: The population growth rate is high in Nepal. But, the economic growth rate is low. Consequently, unemployment is increasing day by day. Income of people is low due to underdeveloped economy of Nepal.

(ii) Subsistence Agricultural Sector: Due to the lack of adequate irrigation facility, agriculture of Nepal depends upon monsoon. Farmers do farm with subsistence motive rather than commercial motive. That is, farmers produce agricultural goods only for daily consumption but not for sale. So, they are unable to be free from poverty.

(iii) Slow Industrialization: The pace of industrialization is slow in Nepal. Hence, employment opportunities could not increase. So, people have to remain unemployed and under-employed. Unemployment is the root cause of poverty.

(iv) Unequal Distribution of Income: There is severe inequality of income distribution in Nepal. The gap between rich and poor is great. Rich people get most of the fruit of economic development. Consequently, poor people remain poor.

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(v) Ineffective Plan Implementation: Objective of various plans was to alleviate poverty. But, the plans could not be implemented effectively. That is, executive aspect of plan is weak. Consequently, aim of the plan could not be achieved.

Besides these, lack of social mobilization, non-utilization of local resources, and low rural development are also the causes of poverty in Nepal.

11.3 Measures of Poverty Reduction in Nepal

(i) High Economic Growth Rate: A country should increase economic growth rate to get various targets. For this, both agricultural and industrial sectors should be developed. Consequently, production, income, and employment level increases, which are essential to alleviate poverty.

(ii) Development of Human Resource: Human development is the major component of economic development. Due to inadequate human resource development, the pace of economic development is very slow. That is, we are not able to establish large-scale industries. Therefore, government of Nepal has to give more emphasis on human resource development.

(iii) Emphasis on Social Sector: Government of Nepal should invest adequately on social sector, such as, education, health, sanitation, malnutrition, etc. Various social programs should be launched. It increases productivity, production, employment, and income and then poverty level declines.

(iv) Equal Distribution of Income and Wealth: Unequal distribution of income and wealth is one of the main causes of poverty. Therefore, Government of Nepal should try to distribute income and wealth in favor of poor people through fiscal policy. For this, Government of Nepal has to make and implement progressive taxation policy. According to progressive tax policy, high tax rate is imposed for rich people and low tax rate is imposed for poor people. Collected revenue should be spent for the betterment of poor people.

(v) Transfer and Safety Nets: There should be transfer and safety net for old and disable people, widow, unemployed people, etc. That is, government should make provision of old age allowance, unemployment allowance, widow allowance, etc. So, Government of Nepal should allocate a large amount of budget as a transfer and safety nets.

(vi) Public Employment Scheme: The public employment scheme should be launched effectively. Special public work programs like small irrigation projects with labor-intensive technique are very useful to reduce the poverty. Execution of such programs increases the

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employment and income of the poor people. At the same time, it also develops the underdeveloped areas of the country.

UNIT: 12 INDUSTRY

12.1 Cottage and Small Scale Industries (Importance and Problems)

12.2 Medium and Large Scale Industries (Importance and Problems)

12.3 Tourism Industry (Role, Prospects, Problems, and Remedial Measures)

12.4 Current Status of Public Enterprises

Industrial sector plays vital role in developing economy of the country. Agriculture sector alone is not sufficient in order to gear up economic growth and development. Therefore, both industrial and agricultural sector should be developed simultaneously for the prosperity of nation’s economy.

As per Industrial Policy-2010, industries can be classified into 5 categories. They are as follows:

i. Micro Enterprises

ii. Cottage Industries

iii. Small Scale Industries (Industries having fixed capital up to Rs. 5 crore)

iv. Medium Scale Industries (Industries having fixed capital of Rs. 5 - 15 crore)

v. Large Scale Industries (Industries having fixed capital of more than Rs. 15 crore)

12.1 Cottage and Small Scale Industries (CSSI)

Importance/Role of Cottage/Small Scale Industries in Nepal

(i) Creation of more Employment Opportunities: Cottage and small-scale industries help to reduce poverty through employment generation. In cottage/small scale industries, labor-intensive technique is used. Consequently, more laborers get employment. In this way, cottage/small scale industries create more employment opportunities.

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(ii) Supply of Local Wants: Cottage/Small scale industries produce those goods like mate, dhaka cap, doko, namlo, broom, utensils, etc., which are used daily by local consumers. Such goods play important role to run daily activities of house. In this way, cottage/small scale industries supply the wants of local people.

(iii) Exploitation of Resources: Cottage/Small scale industries are based on the local raw materials, such as, woods, herbs, stones, leathers, bamboos, jutes, straws, etc. Such raw materials are generally produced from agricultural sector. Thus, cottage/small scale industries utilize local raw materials. As a result, producers of such raw materials get benefit as well.

(iv) Alternative Source of Income: Most of the people of developing countries like Nepal live in rural areas and depend on agriculture. That is, agriculture is the main occupation of rural people. In such economy, cottage/small scale industries may be the alternative source of income.

(v) Reduction of Regional Disparity: All parts of developing countries like Nepal are not developed equally due to various reasons. As a result, political instability and migration problem may arise. Cottage/Small scale industries help to reduce such disparity.

(vi) Low Capital: Entrepreneurs of developing countries like Nepal have no adequate capital to establish medium/large scale industries. But, cottage/small scale industries can be established easily with small amount of capital. Therefore, cottage/small scale industry may be suitable for developing countries like Nepal.

(vii) Source of Foreign Currency: Commodities produced by cottage/small scale industries reflect the traditional arts, culture, and skills of the nation. For example, handicrafts, woolen shawl(pashmina), paper products, readymade garments, woolen carpet, jewellery, idol, etc. Foreigners may prefer and buy such commodities. That is, cottage/small scale industries help to earn the foreign currency. Nepal is rich in traditional art, skill, and culture. So, cottage/small scale industries may be the reliable source of foreign currency for Nepal.

Problems of Cottage/Small Scale Industries in Nepal

(i) Lack of Adequate Market: In fact, market of commodities produced by cottage/small scale industries could not flourish/expand due to various reasons, mainly due to the lack of advertisement, promotion, and market research. That is, there is no adequate market for commodities produced by cottage/small scale industries. As a result, entrepreneurs of cottage/small scale industries are being discouraged.

(ii) Traditional Technology: Nepalese entrepreneurs of cottage/small scale industries use traditional technology rather than modern technology. As a result, cost per unit is high whereas production per labor is low. Such commodities cannot compete with other commodities in the market.

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(iii) Lack of Promotion: There is no concrete effort for the promotion of goods produced by cottage/small scale industries in Nepal. Entrepreneurs of cottage/small scale industries have no sufficient budget for advertisement and market research. Physical infrastructure, such as, transportation, electricity, communication, etc. could not be developed adequately in Nepal. Consequently, cottage/small scale industries could not promote.

(iv) Lack of Raw Materials: Generally, raw materials of cottage/small scale industries are produced in rural areas(agricultural sector). But, producers of such raw materials are being discouraged due to the lack of support of government. Therefore, entrepreneurs of cottage/small scale industries are facing the scarcity of raw materials.

(v) Lack of Skilled Manpower: Majority of people, living in developing countries like Nepal, is not well educated. In such countries, more emphasis is given to general education rather than technical and vocational education. So, there is no adequate skilled manpower needed for the development of cottage/small scale industries.

(vi) Lack of Protection: Protection is essential for goods produced by cottage/small scale industries. But, government of Nepal is unable to protect such goods through tariff and quota. As a result, goods produced by cottage/small scale industries are unable to compete with other imported goods in the market.

(vii) Inadequate Financial Institutions: After the introduction of market oriented economic policy, financial institutions have grown up like mushroom in Nepal. But, most of them are located in urban areas. It indicates that there are no adequate financial facilities to establish cottage/small scale industries.

12.2 Medium and Large Scale Industries (MLSI)

Importance/Role of Medium/Large Scale Industry in Nepal

(i) Raising National Income: Medium/Large scale industries produce goods/services in large quantity. Production of goods/services in large quantity increases national income and employment level. Consequently, income and living standard of people also rise.

(ii) Utilization of Resources: Due to the lack of development of medium/large scale industries, the available resources could not be used in Nepal. The development of medium/large scale industries leads to proper utilization of mineral resource, forest resource, human resource, water resource, etc.

(iii) Making Country Self-dependent: Medium/Large scale industries produce various commodities needed to nation and people. So, establishment of medium/large scale industries minimizes and substitutes import and promotes exports. As a result, unfavorable balance of trade and payment improve.

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(iv) Raising Public/Government Revenue: Government receives revenue in the form of sales tax, excise duty, value added tax (VAT), export tax, etc. from industries. Therefore, more medium/large scale industries mean more government revenue. Hence, establishment of medium/large scale industries increases the government revenue.

(v) Development of Agricultural Sector: Medium/Large scale industries produce agricultural machinery, tools, chemical fertilizer, and insecticides. Some medium/large scale industries are based on the raw materials produced from agricultural sector. For example, Jute industry, Sugar industry, Textile industry, etc. Hence, medium/large scale industries help to develop agriculture sector.

Problems of Medium/Large Scale Industries in Nepal

(i) Lack of Adequate Capital: A large amount of capital is needed to establish medium/large scale industries, which is beyond the capacity of Nepalese entrepreneurs. Income level of people is low but propensity to consume is high. That is, they save less. Consequently, capital formation/accumulation is low.

(ii) Lack of Adequate Market: In fact, market of goods produced by medium/large scale industries could not expand due to the various reasons. That is, market of such goods is limited. Even the market of Nepalese carpet and readymade garment has become narrow due to high custom and lack of quota free facility. As a result, entrepreneurs of medium/large scale industries are not being encouraged.

(iii) Lack of Adequate Infrastructure: Adequate physical infrastructure is essential to establish medium/large scale industries. But, many areas of Nepal are still lacking adequate physical infrastructure due to geographical difficulties and financial problems. Therefore, entrepreneurs are not ready to establish more medium/large scale industries.

(iv) Lack of Skilled Manpower: Skilled manpower is essential for the development of medium/large scale industries. Skilled manpower produces qualitative goods at lower cost. But, such type of manpower is not available in Nepal because more emphasis is given to general education rather than technical and vocational education.

(v) Lack of Clear and Appropriate Government Policy: Government policy should be clear and appropriate in order to flourish medium/large scale industries. Industrial policy often changes along with the change in government, which discourages national and international investment.

(vi) Lack of Adequate Financial Institution: Adequate financial institutions, which give long term loan of huge amount to entrepreneurs, are needed to establish medium/large scale industries. But, there are no such financial institutions.

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12.3 Tourism Industry

Tourism industry is a kind of industry, which provides various services to tourists. So, the tourism industry includes hotel and lodge, travel and trekking agency, rafting, restaurant and bar, guide, hot air ballooning, mountaineering, gliding, etc.

Role/Importance of Tourism Industry in Nepal

(i) Source of Foreign Currency: Nepal is naturally beautiful and rich in art and culture. Therefore, potentially of development of tourism industry in Nepal is high. That is, tourism industry may be reliable source of foreign currency for Nepal.

(ii) Development of Cottage Industry: Commodities produced by cottage industries reflect traditional art, culture, and skill. So, tourists prefer and buy such goods (idol, Nepali cap, ornaments, etc.). As a result, entrepreneurs of cottage industries encourage expanding and developing cottage industries.

(iii) Raising Employment Opportunities: If tourism industry flourishes/expands, the number of hotel and lodge, travel and trekking agency, rafting, guide, etc. increases, where many people get direct as well as indirect employment. The promotion of employment increases the income of people, which in turn raises the living standard of people as well.

(iv) Promotion of Trade: Tourists may buy various goods produced in the country and carry to their country. Some goods are imported in order to develop tourism industry. In this way, tourism industry helps to promote international trade.

(v) Exchange of Art and Culture: Exchange of art and culture takes places between foreign tourists and Nepalese people. That is, tourism industry plays vital role in the exchange of art, culture, and views, which in turn increases diplomatic relationship.

Prospects of Tourism Industry in Nepal

(i) Natural Beauty of Nepal: Nepal is naturally beautiful country. Mountains surround the northern part of Nepal. Nepal has pleasant rivers, waterfalls, lakes, and rare-animals and birds. She is very rich in natural resources and bio-diversity. So, tourists visit various parts of Nepal frequently.

(ii) Religious and Historical Places: Most of the people of Nepal are Hindu. There are many temples and religious places like Pashupatinath temple, Krishna mandir, Muktinath, Manakamana, Janakpur, Lumbini, Gosaikunda, Holesi, etc. There are various historical places as well. For example, Kastamandap, Gorkha palace, Bhaktapur durbar square, etc. These temples and places have become center of attraction for tourists.

(iii) Climatic Variety: Nepal has different climate in different parts of the country due to altitudinal differences. The climate of mountain is cold; it is moderate in hilly region, and

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hot in terai region. Tourists can enjoy by traveling various part of the country as per their interest.

(iv) Ancient Art and Culture: Nepal is the country of multi-castes, multi-languages, and multi-dresses. Therefore, Nepal is rich in art and culture. As a result, Nepal is able to attract many tourists.

(v) Cheaper Place: Nepal is cheap place in terms of travel cost and cost of living as compared to other countries. So, tourists can enjoy many facilities in cheaper cost. It helps to increase the number of tourists in Nepal.

(vi) Unique Place for Recreation: Nepal offers various activities for adventurous and recreational works, such as, bungee jumping, mountaineering, rafting, trekking, hot air ballooning, gliding, etc. Tourists may come in Nepal to experience such activities. In this way, potentiality of the development of tourism industry is high in Nepal.

Problems and Remedial Measures of Tourism Industry in Nepal

(i) Lack of Adequate Transportation and Communication Facility: Nepal lacks adequate transportation and communication facility. Consequently, tourism industry could not develop satisfactorily in Nepal. Tourists are unable to visit many parts of Nepal due to the lack of adequate transport and communication. Hence, government as well as private sector should develop transportation and communication sectors adequately.

(ii) Lack of Adequate Information and Publicity: Nepal is naturally beautiful and rich in culture. But, many people of the world do not know Nepal and her beauty due to the lack of adequate information and publicity. As a result, number of tourists could not increase as expected. Hence, government and private sector should make concrete effort for more information, publicity, and peace and security.

(iii) Pollution: Nepal is suffering from pollution, which has become one of the causes in reducing number of tourists. It means many tourists hesitate to come Nepal frequently due to the pollution. Hence, pollution should be controlled and minimized in order to develop tourism industry.

(iv) Lack of Recreational Centers: In Nepal, most of the tourists come for pleasure and entertainment. Therefore, more recreational centers are required to develop tourism industry. Hence, government as well as private sector should develop adequate recreational centers in tourism areas of Nepal.

(v) Lack of Adequate Qualitative Hotel: Tourists prefer to live in qualitative hotel but many parts of Nepal lack such hotels. Therefore, many tourists hesitate to visit Nepal.

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Hence, government of Nepal should make special effort so that private sector excites to establish qualitative hotels in various parts of the country.

12.4 Current Status of Public Enterprises in Nepal

Government of Nepal has taken privatization as an integral part of its economic liberalization policy. Privatization started from FY 1992/93. Thirty (30) public enterprises have been privatized till now. They are as follows:

S.N. Name of the Public Enterprises Privatized Year1 Bhrikuti Paper Ltd. 19922 Harisidhi Bricks and Tile Factory Ltd. 19923 Bansbari Leather and Shoe Factory Ltd. 19924 Nepal Film Industry Ltd. 19935 Balaju Textile Industry Ltd. 19936 Raw HideCollection and Processing Ltd. 19937 Nepal Jute Development Co. Ltd. 19938 Nepal Bitumen and Barrel Industry Ltd. 19949 Nepal Lube Oil Ltd. 199410 Tobacco Development Company 199411 Nepal Metal Company 199612 Raghupati Jute Mills Ltd. 199613 Nepal Bank Ltd. 199714 Nepal Tea Development Ltd. 200015 Agriculture Project Service Center Ltd. 200116 Biratnagar Jute Mills Ltd. 200217 Himal Cement Industry Ltd. 200218 Cottage Handicraft Sale Emporium Ltd. 200219 Nepal Coal Ltd. 200220 Hetauda Textile Industry 200221 Nepal Transport Corporation 200222 Butwal Power Company 200323 Birgunj Suger Factory Ltd. 200324 Agriculture Tools Factory Ltd. 200325 Bhaktapur Bricks Factory 2004

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26 Lumbani Suger Factory 200627 Nepal Rosin and Turpentile Ltd. 200628 Agriculture Lime Industry Ltd. 200629 Nepal Drilling Company 200630 Nepal Tele-communication Company Ltd. 2006

Now, there are 37 Public Enterprises in Nepal. Out of them, 19 are in profit, whereas 18 Public Enterprises recorded loss during FY 2012/13. Most of the Public Enterprises are operating below their capacity. Share of government of Nepal and loan investment in all Public Enterprises by the end of FY 2012/13 amounted Rs. 107.66 billion and Rs. 106.50 billion respectively, but the return on the investment for the government is very insignificant/low.

UNIT: 13 TRANSPORTATION AND COMMUNICATION

13.1 Role of Transportation and Communication

13.2 Means of Transportation and Communication

Transportation and communication play vital role in economic development of a country. Transport refers to the act of carrying goods and living beings from one place to another place whereas communication refers to convey of message and information all over the world. Both transport and communication may be the symbol of economic development.

13.1 Role of Transport/Communication in Nepal

(i) Foundation of Agriculture and Industrial Development: Transport helps to carry final goods at market and to bring raw materials from market to production place. Communication helps to get information about market structure of goods and services. In this way, transport and communication stimulate the agriculture and industrial sector.

(ii) Proper Use of Natural Resource: Since Nepal is rich in natural resources; such resources can be properly utilized by developing transport and communication. But, due to the lack of adequate transport and communication facility, natural resources of Nepal could not be utilized entirely and properly.

(iii) Planned Development: Transport and Communication are the pre-requisites of development projects. Targets of economic development cannot be achieved without transport and communication. Both transport and communication are essential to mobilize capital, labor, and other factors of production.

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(iv) Development of Tourism Industry: It is difficult to develop tourism industry without adequate transportation and communication facilities. There are many tourism areas in Nepal. If transportation and communication facilities can be developed adequately in such areas, number of tourists increases in Nepal. Hence, development of transportation and communication is essential to enhance tourism industry.

(v) Reduction of Regional Imbalance: Transport and communication help to develop all regions of the nation equally because these are the pre-requisites of development. As a result, people can get equal fruit of development. In this way, transport and communication help to reduce regional imbalance.

(vi) National Integration and Defense: The development of transport and communication enhances national integration. Transport and communication make easy to exchange culture, languages, thoughts, etc., which are major factors of national integration. Transport helps to carry out arms, weapons, and commando forces to all parts of country and communication helps to convey the required information within a very short period of time. In this way, transport and communication play significant role for national security.

13.2 Means of Transport and Communication

Means of Transportation in Nepal

Road Transport: It is one of the major means of transport in Nepal. Road construction is very difficult in Nepal. It is because Nepal is hilly and mountainous country.

The major highways of Nepal are Mahendra Highway, Tribhuvan Highway, Araniko Highway, Prithivi Highway, etc. The number of highway is increasing slowly but the number of vehicle is increasing rapidly day by day in Nepal.

Present road facility is given in the following table:

S.N Type Up to mid March, 20141 Blacktopped 10659 Km2 Gravelled 5940 Km3 Earthen(Fair Weather) 8666 KmTotal 25265 Km

Total number of vehicle in the country is equal to 16,87,478 till mid-March, 2014. Vehicle density per kilometer has reached 67.

Railway Transport: Nepal does not have high potentiality for railway service. It is because many mountains and hills cover her. Terai region has some potentiality to extent railway service but due the

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lack of adequate capital and technical knowledge, it could not be developed. The Janakpur-Jayanagar railway (JJR) was established in 1936 A.D., which is in operation in 51 Kilometer track.

After the establishment of Department of Railway in FY 2010/11, programs including Mechi-Mahakali Electric Railway, Kathmandu Valley Metro Project, and Indian Government assisted Railway Program have been initiated through the Railway and Metro Development Project. In the FY 2012/13, preparation of detailed study report of Simara-Bardibas section under the Mechi-Mahakali Electric Railway project and 135 Km Simara-Birgunj Link railroad has been completed. Similarly, starting from this FY 2012/13 subsequent to appointment of consultant, work is underway for preparation of Detailed Report for Simara Butwal Section (179 Km) of Mechi-Mahakali electric railway and Butwal-Bhairawa(Lumbini) Link (44 Km). Likewise process is underway for selection of consultant for the preparation of Detailed Study Report of Butwal Gaddachauki section (421 Km). The feasibility study of Kathmandu Valley Metro (77.28 Km) is completed. Implementations of these projects are expected to facilitate public transport, generate employment opportunities and contribute significantly to national economy through the enhancement of economic activities.

Ropeway Transport: The ropeway, between Kathmandu and Hetauda, established in1964 A.D., has 42 Kilometer of cable way. Now, government of Nepal has decided to stop its operation due to the lack of proper repair and maintenance. A cable car service(3.1 Kilometer) between Kurintar of Chitwan district and Manakamana of Gorkha district is built and operated by private sector.

Trolley Bus: The trolley bus service(established in 1974 A.D.) was in operation in 13 Kilometer route between Tripureswor and Suryabinayak. Now, government of Nepal has stopped trolley bus service.

Air Transport

Nepal is mountainous and hilly country. So, air transport provides important service to people. Currently, total number of airfields(small and large) has reached 55, which consists of 1 international airport, 3 hub, and 51 other airport and total number of helipads authorized by Nepal Civil Aviation Authority(NCAA) for operation by private sector has reached 120. 42 private airlines companies have reached AOC(Air Operator Certificate). Out of these, 19 airlines are in currently operation.

As per government policy of promoting private sector participation in transport sector, various airlines have been established in Nepal, such as, Yeti airlines, Buddha airline, Gorkha airlines, Cosmic airline, etc.

S. No. Description

Numbers by

Mid-March2013

Numbers by

Mid-March2014

1 Nepalese Airlines with International Flights 2 2

2 International Airlines in Nepal 26 29

3 Country with Bilateral Air Service Agreement

36 36

4 Domestic Airlines (Fixed wing + Rotor 17 17

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wing)

5 International Airport 1 1

6 Domestic Airport 54 54

7 All-Season Airports 19 20

8 Total Number of Domestic Airports in Operation

35 35

Means of Communication in Nepal

Postal Service: The postal service is the oldest and foremost among the nation’s means of communication. Currently, there were 3,992 post offices, including 1 general post office, 5 regional post offices, 70 district post offices, 842 illaka post offices, and 3074 additional post offices.

Telecommunication: There have been both quantitative and qualitative growths in telecommunication services together with rise in the number of telecommunication service providers and users with availability of newer and most modern telecommunication facilities. All VDCs of Nepal have now access to telephone service. By mid-February 2014, the total number of telephone subscribers reached 2,30,06,799 with telephone density of 74 percent while the internet subscribers during the same period stood at 69,16,138 with its density of 30.7 percent.

Table: Comparative situation of statistics

Radio Broadcasting: Radio Nepal, established in 1951 A.D., is the oldest mass communication media with countrywide coverage. Its broadcast under short wave transmission can be heard all over the

Types of Services FY2010/11

FY2011/12

FY2012/12

Till mid-March 2014

Total Number of Telephone

13163649 16971477 21332278 23006799

PSTN 608979 633258 647405 653851

Mobile Telephone 11602814 15056109 17996125 19310912

ADSL Internet 68343 95623 114534 119285

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country. About 70 – 80 percent of the population can enjoy its service now under the medium wave transmission. Radio Nepal has medium wave broadcasting stations in all 5-development regions of the country. These stations broadcast their programs in national languages and the news in Nepali, English, Sanskrit, Hindi, Rai-Bantawa, Limbu, Maithili, etc. 404 private sector agencies/companies are now operating

Television Broadcasting: At present, there are altogether 24 television channels in operation. Out of 24 channels, government runs 2 and 22 are run by private sector. Nepal Television (NTV) broadcasts its program for 24 hours every day through its 15 broadcasting centers located in different places of the country. To provide NTV service throughout the country, a provision of earth satellite has been made. A total of 790 licenses have been issued to operate cable television services to private sector.

Description

Fiscal Year

2010/11

2011/12

2012/13 2013/14

FM Radio Regular Transmission

330 328 372 404

Television Regular Transmission

15 18 23 24

Cable Television 714 744 773 790

DTH 9 1 1 1

Table: Comparative situation of statistics

Newspapers: By mid-March 2014, the total number of newspapers registered in various districts was 6,847. Out of these, 599 are daily, 2,594 weekly, 442 fortnightly, 2061 monthly, 578 quarterly, 80 half yearly, 87 annually and 406 other publication.

TypesFiscal year

2010/11

2011/12

2012/13

2013/14

Daily 399 426 569 599

Weekly 2086 2213 2497 2594

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Fortnightly 392 408 432 442

Monthly 1868 1981 2014 2061

Quarterly 495 518 564 578

Half Yearly 68 72 78 80

Annually 82 83 83 87

Others 275 290 453 406

Total 5665 5991 6690 6847

Table: Comparative situation of statistics

UNIT: 14 FOREIGN TRADE

14.1 Growth of Foreign Trade

14.2 Composition of Foreign Trade

14.3 Direction of Foreign Trade

14.4 Problems of Foreign Trade

Foreign trade is the exchange of goods/services between one country to another country. It creates mutual benefit between countries. Generally, a country exports those goods/services, which can be produced at lower cost and imports those goods, which cannot be produced cheaply at home country.

14.1 Growth of Foreign Trade in Nepal

The history of foreign trade in Nepal had started before unification. Initially, trade of Nepal had been done with Tibet and India only. But, after the treaty between Nepal and East India Company, foreign trade extended with British and other countries as well. After the establishment of democracy in 2007 B.S., foreign trade is running systematically with various countries and volume of trade has also increased.

(Rs. in billion)

FY Export of Goods(X) Import of Goods(M) Balance of Trade(BOT) = X - M2011/12 74.3 461.7 -387.4

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2012/13 76.9 556.7 -479.82013/14 90.3 708.7 -618.4

Table: Growth of Foreign Trade in Nepal

This table reveals that total export was Rs. 74.3 billion and total import was Rs. 461.7 billion during FY 2011/12. During FY 2012/13, total export was only Rs. 76.9 billion and total import was Rs. 556.7 billion. Similarly, total export was Rs. 90.3 billion and total import was Rs. 708.7 billion during FY 2013/14.

In FY 2011/12, total import exceeds total export by Rs. 387.4 billion, i.e., balance of trade was -Rs. 387.4 billion. In FY 2012/13, it was Rs. 479.8 billion, i.e, balance of trade was -Rs. 479.8 billion. Likewise, it was Rs. 618.4 billion in FY 2013/14, i.e., balance of trade was -Rs. 618.4 billion in FY 2013/14.

14.2 Composition of Foreign Trade in Nepal

Composition of foreign trade comprises the amount of export/import and nature and types of goods. Nepal exports jute, pulse items, sal seeds, ginger, live animals, food, carpet, readymade garments, handicrafts, herbs, etc. and imports finished goods, raw materials of industry, machinery equipment, chemical fertilizers, petroleum products, medicines, etc.

(Rs. in million)

Categories Export(X) Import(M)

Food and Live Animals 18089.0 61119.0

Tobacco and Beverage 214.0 4449.0

Crude Materials Inedible 3279.0 21365.0

Mineral Fuel and Lubricants 8.0 119471.0

Animals and Vegetable Oil and Fats 156.0 17552.0

Chemicals and Drugs 3852.0 64243.0

Classified by Material 39858.0 109566.0

Machinery and Transport Equipment 519.0 100203.0

Miscellaneous Manufactured Articles 10938.0 32659.0

Not Classified 3.0 26114.0

Total 76917.0 556740.0

Table: Export and Import, FY 2012/13

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As per given table, the major exported goods from Nepal are classified by materials, food and live animals, miscellaneous manufactured articles and crude materials and inedible. The major imported goods are mineral fuel and lubricants, classified by materials, machinery and transportation equipment, and chemicals and drugs.

14.3 Direction or Trend of Foreign Trade in Nepal

(In percent)

Countries 2011/12 2012/13 2013/14Export Import Total Export Import Total Export Import Total

India 66.8 64.8 65.1 66.3 65.9 66.0 65.8 66.7 66.6Other Countries 33.2 35.2 34.9 33.7 34.1 34.0 34.2 33.3 33.4

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Table: Direction of Foreign Trade

The share of trade of Nepal with India was 65.1 percent and with other countries was 34.9 percent in FY 2011/12. In FY 2012/13, it was 66.0 percent with India and 34.0 percent with other countries. Likewise, it was 66.6 percent with India and 33.4 percent with other countries in FY 2013/14.

14.4 Problems of Foreign Trade in Nepal

(i) Landlockedness: Nepal is landlocked country. Therefore, it is difficult to trade with abroad countries (third countries). Nepal has to depend fully with India for sea route. As a result, entrepreneurs sometimes cannot export and import the goods in time. Nepal is fenced by open border with India to east, west, and south and fenced by China in north. So, Nepal’s foreign trade is highly dependent with India. Various kinds of smuggling are taking place due to the long and open border between Nepal and India, which generates various problems.

(ii) Export of Primary and Low Qualitative Goods: Most of the Nepalese exportable goods are either primary or low qualitative goods. It is very difficult to make profit from the export of primary goods. Generally, Nepal exports raw materials and semi-finished goods and imports finished and capital goods. As a result, volume of unfavorable trade balance is increasing. Further, carpet and readymade garment, main exportable items of Nepal, could not compete in international market due to the lower quality, higher price, and the lack of tax free and quota facilities.

(iii) Underdeveloped Industrial Sector: Nepal’s industrial sector is still in underdeveloped condition. Because of various reasons, existed industries are not operating smoothly.

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Established industries could not produce sufficient amount of commodities. So, Nepal could not export a large amount of goods.

(iv) Lack of Credit/Loan Facility: Due to the lack of adequate and sound financial institutions, entrepreneurs of Nepal could not receive required amount of credit/loan for the promotion and establishment of industries/enterprises. As a result, export of Nepal is lower.

(v) Lack of Exploratory Effort and Research: Most of the Nepalese entrepreneurs/industrialists are poor financially. Therefore, they are unable to explore their products via international media. Because of inadequate exploratory effort, the demand of Nepalese Commodities is low. Research is necessary for the exploration and expansion of market in foreign countries. But, research for market is lacking in Nepal.

(vi) Tough Competition with Foreign Goods: Nepal has adopted free trade policy. The flow of foreign goods has highly dominated Nepalese products in terms of price, quantity, and quality. Consequently, Nepalese products are losing their position not only in international markets, but in domestic market as well.

UNIT: 15 GOVERNMENT/PUBLIC FINANCE

15.1 Classification of Government Expenditure

15.2 Sources of Government Revenue

Government/Public finance deals with the income and expenditure of government. Government has to play an important role in providing social service, such as, education, health, nutrition, sanitation, and economic services, such as, road, electricity, communication, etc. For this, government needs adequate financial resource.

15.1 Classification of Government/Public Expenditure in Nepal

Government/Public Expenditure

A.Recurrent Expenditure

B.Capital Expenditure

Recurrent expenditure includes

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(i) Constitutional Organs: It includes the expenditure made on high/supreme court, election commission, auditor general office, attorney general, etc.

(ii) General Administration: It includes the expenditure made on council of ministry, district administration, police, jail, etc.

(iii) Revenue Administration: It includes the expenditure made in the collection of land revenue, custom, excise duty, etc.

(iv) Economic Administration and Planning: It includes the expenditure made on National Planning Commission (NPC), Central Bureau of Statistics (CBS), Department of Metric Measurement(DMM), etc.

(v) Judicial Administration: It includes the expenditure made on courts and judicial commissions.

(vi) Foreign Service: It includes the expenditure made on embassy, consulates, etc.

(vii) Defense: It includes the expenditure made on defense activities

(viii) Social Service: It includes the expenditures made on health, education, drinking water, local development, etc.

(ix) Economic Service: It includes the expenditure made on agriculture, irrigation, communication, transportation, electricity, industry, land reform, etc.

(x) Loan and Investment: It includes the expenditure made on repayment of loan and investment made by government in business organizations.

(xi) Miscellaneous: It includes traveling expense of dignitaries and government delegation, pension, allowance, hospitality, emergency fund, donation, reward, etc.

Capital expenditure includes

(i) General Administration: It includes the expenditures made on administrative reform of government organizations.

(ii) Economic Administration and Planning: It includes the expenditure made on planning and statistics.

(iii) Social Service: It includes the expenditures made on education, health, drinking water, local development, etc.

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(iv) Economic Service: It includes the expenditures made on agriculture, irrigation, communication, transportation, electricity, land reform, topography, forest, industry, mine, etc.

(v) Miscellaneous: It includes the expenditure made on miscellaneous and contingency expenses.

15.2 Sources of Government Revenue in Nepal

Government Revenue

A.Tax Revenue

B.Non-tax Revenue

Tax revenue includes

(i) Custom Duty: It includes income obtained from import and export duties imposed on goods and services. It depends upon the volume of import and export. Government of Nepal (GoN) collects the custom duty from the custom points to China, India, and Tribhuvan International Airport(TIA)

(ii) Tax on Consumption and Product of Goods and Services: This tax is levied on consumption and product of goods and services, such as, excise duty, sales tax, entertainment tax, hotel tax, etc.

(iii) Land Revenue and Registration: It includes land revenue and registration charge on land and house.

(iv) Tax on Property, Profit, and Income: This source includes income tax form public enterprises and private corporate bodies and individuals, and urban house and land tax, vehicle tax and tax on interest.

Non-tax revenue includes

(i) Grants and Gifts: The fund provided for the welfare of people suffering from natural calamities, such as, floods, landslides, earthquake, famine, etc.

(ii) License, Permits, and Fees: Government collects revenue through the distribution of license for gun, pistol, and vehicles. Likewise, government collects revenue by giving permission to mountaineering expedition, national park visit, zoo visit, museum visit, etc. Government can collect revenue through fees for services rendered in the field of education, training, registration, etc.

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(iii) Fines and Penalties: Government charges fines for the violation of law and order as the monetary punishment. For example: The additional amount charged on delay of paying telephone bills, water bills, electricity bills, license renewal fees, etc. Likewise, government penalizes people, who violate bail. In fact, fines and penalties are imposed to prevent the repetition of mistakes.

(iv) Escheats: The claim of government for property on the death of a person who does not have legal inheritance is called escheat. For example: The bank deposits not claim by any one.

(v) Special Assessment or Betterment Levy: The charge levied on the property benefited from some public improvement works is called special assessment or betterment levy.

(vi) Income from Public Property and Enterprises: The government receives income as a landlord by renting land, forest, river, mineral resource, etc. Public enterprises produce goods or services and they sell to people, which generate income to the government.

UNIT: 16 DEVELOPMENT PLANNING

16.1 Concept of Planning

16.2 Objective, Priority, and Policy of Current Plan

16.3 Process of Plan Formulation

16.1 Concept of Planning

A plan is a set of things or activities to operate in a systematic order to achieve definite objectives or targets. Planning is the process of making plan to meet definite objectives.

At fists, famous philosopher Plato in his book ‘Republica’ used the term ‘Economic Planning’. The concept of development planning started from socialistic countries. Later on, it became popular even in capitalistic as well as mixed economy. After great economic depression of 1930 and II world war, development planning remained popular.

In fact, development plan is the program of future functions and activities to develop a nation. A government has to intervene in various functions and activities in order to develop the nation.

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National Development Plan

16.2 Objective, Priority, and Policy of Current Plan(Three Year Plan, 2013/14 – 2015/16)

Objectives

The main objective of the current plan is to make all people feel direct change in their living standard by reducing economic and human poverty existed in the nation.

Priority

(i) Development of hydroelectricity and other energy.

(ii) Increase in productivity, diversification, and professionalization of agricultural sector.

(iii) Development of basic education and health, drinking water, and sanitation.

Agriculture

Industry

Trade and Commerce

Infrastructure

Social Works

to make all people feel direct change in their living standard

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Objectives

Policy

PrioritySectoral Programmes

Reducing economic poverty

Reducing human poverty

(iv) Promotion of good governance.

(v) Development of road and other physical infrastructure.

(vi) Development of tourism, industry and trade sector.

(vii) Preservation of natural resources and environment.

Policy

(i) To make economic growth inclusive, broad based, and sustainable by enhancing contribution of private, public, and co-operative sector in the development process.

(ii) To develop physical infrastructure.

(iii) To enhance access, utilization, and quality in the social service sector.

(iv) To promote good governance in the public and other sectors.

(v) To empower economic and social aspect of targeted class, sector, and group.

(vi) To conduct development programs favoring climatic changes.

16.3 Process of Plan Formulation

(i) Evaluation of Previous Plan and Estimation of New Plan: National Planning Commission (NPC) reviews and evaluates the success and failure of previous plan while preparing new plan. Review and evaluation of previous plan provide valuable feedback for new plan. The planning authority (National Planning Commission) estimates the overall amount of income and expenditure for the new plan.

(ii) Collection and Presentation of New Project Proposals: National Planning Commission presents central level projects to National Development Council (NDC). Other project proposals are collected from District Development Committee (DDC) and district level government offices.

(iii) Discussion: The discussion program on previous and new plans takes place among NPC, NDC, Ministry of Finance (MoF), other ministries, experts of various fields, representatives of donor agencies, etc. It is the most important step in plan formulation. The conclusion derived from the discussion directs the NPC in giving the shape of the plan.

(iv) Determination of Objective, Targets, and Priorities: The major step of plan formulation is to set the objective. It should be done on the basis of priority. Current three years plan has set objective: to make all people feel direct change in their living standard. The

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objectives should be clear and specific so that they can be measured easily. The targets mean objectives expressed in quantity. Appropriate criteria should be adopted in fixing targets. The targets should be achievable. The targets of current three years plan is to improve the living standard of all Nepalese people, reduce poverty to 18 percent, and to achieve Millennium Development Goals(MDGs) by 2015 through sustainable economic growth, generating dignified and gainful employment opportunities, reducing economic inequalities, achieving regional balances, and eliminating social exclusions. Priorities are the pillars of objectives. Planners should set priorities of plan. Setting priorities means determining which sector should be developed first.

(v) Approval, Authorization, Implementation, and Evaluation of Plan: The final documentation of the plan prepared by NPC is presented in NDC for approval and authorization. After the approval and authorization, the plan is implemented. NPC monitors and evaluates the implementation of the plan regularly.

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