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NATURE OF ECONOMICS
Economics is all around you. It is about how
society deals with the problem of scarcity. We
Basic
cannot have everything we want, whether it refers
Economic
to continuous holiday or perfectly clean air. We
Concepts.
have to make choices. Economics is the study of
how society makes these choices. Economics is
not just about incomes, prices, and money. Sometimes it makes
sense to use markets; sometimes we need other solutions.
Economic analysis helps us to decide when to leave things to the
market and when to override the market"
-David Begg, Stanley Fischer and
Rudiger Dornbusch
1
Origin of Economics
Economics is a branch of social science. It commenced with the
publication of Adam Smith's book "An Inquiry into the Nature and
Causes of Wealth of Nations" in 1776. Before that economics was a
part of politics, ethics and religion. In early and middle part of the
19th century, it was called political economy. Towards the end of
century, it was called "Economics" a change from political economy.
Economics was derived from the Greek word Oikos (house and to
manage). Thus, economics means to manage household affairs with
limited fund available in the most economic manner possible.
2 Definitions of Economics.
Economics has been defined in different ways in different times
such as (1) Wealth (2) Welfare (3) Choice and (4) Growth.
Adam Smith:
Adam Smith, the father and foremost among the classical
economists, defines economics as the science of wealth. His book
"An Inquiry Into The Nature And Causes Of Wealth of Nations" is
itself the definition of economics.
The implications of this definition are
(i)
Human beings have wants to satisfy;
(ii)
The main concern of economics is the satisfaction of
human wants;
and,
Babasab patil notes
(iii)
Dismal Science:
Some eminent literary writers of 18th century like Carlyle
and Ruskin were very critical about Adam Smith's
definition of wealth. According to them, economics is the
"Gospel of Mammon" or the "God of Riches". It teaches
people how to acquire wealth. They criticised economics
as dismal science and as such it disregards the fulfillment
of spiritual life. However, their criticisms were also not
completely right. Even a hermit who has denounced
materialistic world cannot survive without basic minimum
necessities of life. Thus, earning and spending cannot be
regarded as selfish activities
(ii)
Alfred Marshall:
Alfred Marshall was the founder of the welfare school. He was
very much affected by the criticism on Adam Smith's definition. He
Babasab patil notes
(iii)
Material Welfare:
It studies material welfare of human life. Marshall's definition
is classificatory in nature. It has classified human activities in
two categories i.e. material and non-material.
Material
activities are those activities, through which one gets monetary
rewards. Non-material activities are those activities, which do
not bring any monetary rewards. For instance, if a professor
teaches in college he/she gets remuneration and this activity is
called material activity. But if the same professor coaches
his/her own children he/she does not get any remuneration.
Thus, this activity is called non-material activity although
he/she gets immense satisfaction from his/her work.
(i)
Classification in Nature:
Robbins rejected Marshall's definition on the basis that it is
classificatory in nature. According to him, division of human
activities into economic and non-economic is unscientific.
Human activities cannot be divided into two parts. It must be
taken as a whole. The same activities, at times become
material and at other times non-material. For instance, if a
singer sings for his own pleasure it becomes non-material and
if he sings in public places for money, it becomes material
activities.
(ii)
Narrow Scope:
It has narrowed the scope of economics as it confines its study
into material activities only.
(iii)
Social Science:
Robbins does not want to limit the study of economics only to
material welfare. According to him, welfare is too vague to
make it a sound foundation for building up a respectable
science. Further, welfare definition makes economics purely a
social science. Therefore, it cannot be analyzed scientifically.
Lionel Robbins:
Science of Choice.
The most scientific and widely accepted definition of
economics is the definition given by Professor Lionel Robbins.
According to Robbins, "Economics is the science which studies
human behaviour as a relationship between ends and scarce
means which have alternative uses".
The main ideas of
Robbins's definition are as follow:
(i)
(ii)
scarce;
(iii)
(iv)
wants.
Scientific in Nature:
It is scientific in nature. It does not classify between material
and non-material.
(ii)
Wider Scope:
It is wider in scope. Because it covers all types of human wants
whether material or non-material. It has not restricted the
study of economics to wealth and activities relating to material
welfare of human beings.
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(iii)
Scientific:
All classical and neo-classical economists regard economics
both as science and art. But according to Robbins's definition
it is mainly science.
(iv)
Criticisms:
Robbinss definition has been criticized in the following grounds:
Although Robbins definition is scientific and has wider scope, it is
also not without criticism. It has been criticized in the following
grounds:
(i)
(ii)
Narrow in Scope:
Critics have pointed out that economics is not only to study
resources allocation. It is more than that. It does not cover
Keynesian economics. So it does not explain how the level of
income and employment are determined in a country.
(iii)
Dynamics in Nature:
Unlike Robbins, Samuelson studies the problems of economy
not at a point of time but over a period of time. Thus he has
made economics dynamic by introducing the element of time
in it.
(ii)
Scope of Economics:
Economics has been divided into different areas for its systematic
study, which are closely related to one another. The broad areas of
the study of economics are as follows:
(i)
Consumption:
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Production:
Production involves the use of limited resources for the
production of goods, which satisfy human wants. In short, it
means creation of utility in the commodity. Utility here refers
to power of satisfaction, which the commodity poses.
(iii)
Exchange:
It deals with exchange of goods for goods or goods for money.
Exchange takes place both within the country and outside the
country. In order to satisfy unlimited wants of the people, it is
necessary to exchange goods and services. Normally people
barter or sell what they have for the goods and services what
they need.
(iv)
Distribution:
Goods and services are produced with joint effort of land,
labour, capital and organization. Thus, the wealth of the
country which people produce with joint endeavour has to be
distributed among the factors of production in the form of rent,
wage, interest and profit.
(v)
Public Finance:
Classical economists have divided economics into four
divisions only. They are consumption, production, exchange
and distribution. But later on, public finance was also added.
Public finance deals with adjustment between the income and
expenditure of the government.
(ii)
Economics as Art:
Arts deal with doing and solving practical problems. For example,
economics does not simply find out the various causes of rapid
population growth but also suggests the measure to control high
population growth rate.
Economics both Art and Science:
In fact, economics is both science and art. Because it tries to find
causes of economic problems and suggests the solutions to
overcome them. For example, it not only finds out the causes of
unemployment but also suggests measures to solve the
unemployment problem.
5
Positive Science and Normative:
A positive science only explains what is it and normative science
tells what it ought to be. Positive science describes while normative
science evaluates. According to classical economists, economics
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should be concerned only with what is and not what ought to be. It
is neutral as regards to ends. Robbins has also supported neutrality
of ends.
According to David Begg, positive economics deals with objective or
scientific explanations of the working of the economy. It explains
how society makes decisions regarding consumption, production
and exchange of goods. Positive economics asks the questions like
what is the economic impact of free trade. It can be compared with
pure science like physics and chemistry.
It establishes causes and effects of an event. A normative science on
the other hand involves ethical judgement. It deals with things, as
they ought to be. It offers recommendations based on personal
value judgements. It includes economic issues like unemployment
benefits, senior citizen allowances, subsidy etc. However, the
prominent economists say that economics can never be
disassociated from ethics.
From this short discussion, it can be concluded that economics is
both a positive and normative science. Thus, economics is not only
concerned in allocation of scarce resources among competitive
wants but also deals with maximization of total satisfaction
according to one's own judgement.
Both positive and normative economics are important. However,
positive economics is more important in formulation of economic
theory. Because positive statements are testable while normative
statements are not.
6
Micro and Macro Economics:
Micro and Macro-economics are the two branches of economics.
They are two important approaches to the economic analysis. Prof.
Ragner Frisch first coined these two terms during the 1920s.
Economists use these two terms widely for economic analysis.
(i)
Micro economics:
Micro-economics deals with the choices and decision-making
behavior of the individual units like individual household,
equilibrium of firm, wages of the workers, profit of the
entrepreneurs etc. In this approach, economists choose small units
and make detailed study of its operation. The main areas of micro
Babasab patil notes
moment our desire to drink water is fulfilled. But after some time,
we feel thirsty again. Human wants are not only recurring, it
multiplies all the time. For instance, when a rural area is urbanized
the wants of its inhabitants increase. People require to wear nice
clothes and need many other things, which they were not using
before.
(ii) Different Importance of Wants:
All the wants are not of the same importance. Some wants are
urgent and more pressing than the others. For instance, for a
student study is more important than doing any other things during
examinations. Similarly, for a patient, buying medicine is more
important than buying a box of cigarette. Thus, all persons are
required to prioritize their wants in accordance with their
importance. If all human wants are equally important, then there is
no need of making choices and also there would be no economic
problems.
(iii)
Guns
0
Butter
15000
1000
14000
2000
12000
3000
9000
4000
5000
5000
Guns
Butter
Butter
Guns
Butter
In this diagram as compared to PP in P P both butter and guns can
be produced more. Thus PPF explains how the economy grows.
PART A:3
3
NATIONAL INCOME
1
MEANING OF NATIONAL INCOME:
The term National Income is used to denote money value of the
aggregate production of goods and services of a country during a
specific period, usually one-year. It is used inter changeably with
National dividend, National output and National expenditure.
National income has been defined in a number of ways. According
to Marshall " the labour and capital of a country acting in its natural
resources produce annually a certain net aggregate of commodities,
material and immaterial including services of all kinds. This is the
true net annual income or revenue of the country or national
dividend". In this definition, the word "net" means the deduction
from the gross national income in respect of depreciation and
wearing out of machine. Income from abroad is added in the net
income. This definition is very simple and comprehensive. However,
it has certain defects also. Firstly, it is very difficult to estimate
correctly all the goods and services produced. Secondly, there may
be problem of double counting. In the words of A. C. Pigou, the
follower of Marshall" National income is that part of objective
income of the community including of course income derived from
abroad which can be measured in money". A. C. Pigou's definition is
simple and precise. But it has also some defects. The first problem
in Pigou's definition is making distinction between goods, which can
be exchanged for money and which is not exchanged for money.
According to A. C. Pigou, a woman's service as teacher in school is
included in National Income but excluded when she teaches her
children. This creates the problem of estimation of National Income.
Another prominent economist Irving Fisher adopted "Consumption"
as the basis of national income, whereas, Marshall and Pigou have
based their definition in "Production". According to Fisher "The
national dividend or income consists solely of services as received
by ultimate consumer whether from their materials or from their
human involvement". But from the practical point of view, this
definition is less useful as there are difficulties in getting monetary
value of net consumption. Besides, certain consumption goods are
durable and last for many years like furniture, television set etc.
The above definitions are regarded as traditional. From the modern
point of view, Simon Kuzunets has defined national income as "the
Babasab patil notes
difference
income is
of certain
the same
(a)Sustenance:
Sustenance means ability to meet the basic needs such as food,
housing, clothing, primary education, health care etc. Most of the
people in developing countries are not capable of fulfilling their
basic needs due to poverty.
(b)Self-esteem:
It refers to the feeling of self-respect and independence. However,
most of developing countries are dependent economically and
technologically on advanced countries due to the poverty and low
literacy rate.
(c)Freedom from Servitude:
"Freedom here is to be understood in the sense of emancipation
from alienating material conditions of life and from social
servitude to nature, ignorance, other people, misery, institutions
and dogmatic beliefs" M. P. Todaro. Freedom from servitude
refers to ability and freedom of the people to choose greater
leisure, have more goods and services and also lead a religious
life if people want.
Therefore, the three main objectives of development are:
(a)To increase the availability and widen basic needs of the
people like food, shelter, health and protection.
(b)To raise standard of living. This means raising income,
providing more jobs, better education and greater attention to
cultural and humanistic values.
(c) Expand the range of economic and social choices. It means to
free oneself from ignorance, human misery and servitude
3. HUMAN DEVELOPMENT INDEX:
The United Nations Development Programme put forward Human
Development Index in its annual Human Development Report 1990.
Mahbub ul Haq is the pioneer of introducing this concept.
The Human Development Index (HDI) has been made from three
aspects of human development. They are life expectancy at birth,
adult literacy and GDP per head. HDI ranks each country from 0
scale to 1 on the basis criterion of development. The HDI classifies
the countries into three groups by using three criterion of
Babasab patil notes
5. INTRODUCTION
1.Geographical Feature
Geographical Location and Area:
Location:
Nepal is located between 26 22' north and 30 27' north latitude and 80 4'
east to 88 12 east longitude.
Border:
The boundaries of Nepal are Tibetan Territory of China in the North, the Indian
States of Sikkim and West Bengal in the East, Uttar Pradesh and Bihar State in
the South and Uttar Pradesh in the West.
Size:
The total area of the country is 147,181 sq. km. The average length of the
country is 885 km stretched East to West. The width of the country is not
uniform. Mean width is 193 km North to South.
Physical Feature:
Ecologically it can be divided into three major divisions ascending from south to
north. They are the Tarai plains, the Hills and the Mountains.
(a) Tarai Region:
The broad belt of low and flat land stretching East to West (Mechi to Mahakali)
in the southern part of Nepal is called Tarai. It has been formed out of fine and
fertile soil brought down and deposited by the rivers flowing from the north. It
is 25 to 32 km broad. The region comprises 25 per cent of the total land area.
This region is also called greenery of Nepal, because it has 40 per cent of
cultivable land. Wide varieties of crops such as paddy, maize, wheat, sugarcane,
vegetables, tobacco, tropical fruits are grown in the region. Around 46.7 per
cent of the population live in this region. As this region is most suitable for
cultivation and open to Indian border, the population of the region is increasing
at a very fast rate. This region is densely populated.
(b) Hilly Regions:
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region varies from 610 meters to 4877 metres above the sea level. It consists of
Mahabharat Mountain Range, Churia Hills and river basins. The Kathmandu and
Pokhara valleys lie in midland region. The Churia range extends upto Koshi
River. This range is also known as Siwalik range.
The altitude of the Mahabharat range varies from 1500 meter to 3000 meter
high. Most of areas are covered by forest. It is also the biggest physical region.
It covers 42 per cent of land area. About one tenth of land is suitable for
cultivation. In fact, before the construction of concrete houses, there was much
fertile land where cultivation of cereal crops, cash crops and vegetables were
grown particularly in Kathmandu valley. Now most of the fertile land has been
used for construction of office building or residential houses.
(c) Mountain Region:
It occurs in the northern part of Nepal. The altitude ranges between 4,877
meters to 8848 meters above the sea level. It covers 25 per cent of land area.
A large number of peaks and mountains lie in this region including the highest
peak on the Earth "Sagarmatha" (Mt. Everest). The other notable peaks are
Kanchanjungha
(Third
highest),
Makalu,
Ganesh,
Gaurishanker,
Lhotse,
Dhaulagiri, Annapurna, Cho Oyu etc. Similarly, some of the main Himalayan
ranges like Kumbhakarna, Mahalangoor, Rolwaling, Ganesh, Annapurna,
Dhaulagiri etc, are situated in this region. The mountains over 5000 meters is
snow covered. The big glaciers and big rivers originate from this region.
Approximately 2 per cent of land are suitable for cultivation and about 7.3 per
cent of population inhabit in the region.
There are many well-known peaks in the region and people come from
different parts of the world for mountaineering and trekking. The region has
great potential for adventure tourism, particularly mountaineering.
2. Rivers, Lakes and Glaciers:
(a) Rivers
Being mountainous country, there are many rivers and streams originating in
the Himalayan region. Most of them are flowing from North to South.
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The
Koshi River in the East is the longest and biggest, formed out of seven
tributaries namely Arun, Tamor, Sunkosi, Dudhkosi, Tamakosi, Likhukosi and
Indrawati. The Gandaki River in the middle of the country also is with seven
tributaries namely Trisuli, Burigandaki, Marsyangdi, Seti, Daraundi, Kaligandaki
and Modi. The Karnali River in the west formed with five tributaries namely
Mugu Karnali, Humla Karnali, Bheri, Seti and Tila.
3. Climate:
Nepal has monsoon type of climate. But, being a mountainous country, the
climatic condition differs from one part to another, generally on the basis of
altitude - higher the altitude cooler the climate. There are three main seasons
in Nepal.
(a) Summer:
March to July is summer season, which is characterized by high temperature. In
Tarai, temperature exceeds 30
in altitude.
(b) Rainy:
June - September is rainy season. Monsoon blows from southeast direction and
brings rain to the country.
ranges in eastern Nepal receive heavy rainfall of over 200 cm. The Pokhara
valley receives the highest amount of rainfall (over 300 cm) and Himalayan
ranges get less than 50cm, which is mostly in the form of snow.
(c) Winter:
October to February is the winter season. The temperature gets very low and it
becomes cold in most of the areas of the country. The temperature in Tarai
belt is about 15 C and Himalayan region far below 0 C. Morning is foggy or
frosty. The western wind brings some rainfall, which decreases from west
towards east. Heavy snowfall takes place in high mountains.
Types of climate:
There are five types of climates in Nepal.
(a) Sub-tropical Monsoon Climate:
In the Tarai and upto the altitude of 1200m, climate is very hot during summer
and cold in winter. Rainfall varies between 170cm in the east and 100cm in the
west.
(b) Temperate Monsoon Climate:
Between 1200 to 2100 m of altitude, the climate is moderately hot during
summer and cooler during winter. The rain varies from 200cm to 100cm. This
is most pleasant climate.
(c) Cool Temperate Climate:
Warm in summer and cold in winter.
Above 5000m the climate is very cold round the year. The precipitation is low
and is in the form of snow. Snowstorms in the afternoon are very frequent in
many parts of the country having this climate.
Nepal is one of the least developed countries in the world. The main features
of Nepali
development,
Geographical Characteristic.
(a) Unfavourable Physical Feature:
Nepal is a mountainous country.
mountainous terrain. Ecologically, the country is divided into three regions; the
Mountain region, Hill region and Tarai region.
widespread in many parts of the country. Similarly, Nepal is very rich in water
Babasab patil notes
resources but is not being able to harness it for the economic development.
Likewise, mineral resources is also not properly explored and exploited due to
lack of effective policy. As for soil, indiscriminate use of chemical fertilizer has
spoiled its quality much to the distress of farmers in many parts of the country.
Economic Characteristics:
The economic characteristics include poverty, investment, saving, agriculture,
industry, trade and technology etc.
Household Budget Survey in 1984/85, Nepal Rural Credit Survey in 1991, and
Nepal Living Standard Survey in 1995/96 revealed the increase of poverty from
33 per cent in 1977 to 42 per cent in 1995/96.
Development Report 2004 estimated Human Poverty Index (HPI) for Nepal at
required for the improvement of agriculture which is not available to all farmers.
The farmers are facing problems of not only inputs but also market for output.
The competition with imported agricultural products is depriving farmers to get
their due price in the market.
(c) Adverse Balance of Trade:
The trade is important to import necessary material for economic development
and
export
Nepali
products
for
earning
foreign
exchange.
Lack
of
changes in government, Maoist problem and rampant corruption in all fields led
to slower GDP growth of per capita income, government revenue, expenditure,
investment and saving. The average annual national saving was recorded at
16.5 percent at the end of the Ninth Plan, which is more than the target rate of
16.1 percent. The growth in national saving mainly was due to the foreign
employment. The average annual growth rate of investment in the same plan
period was recorded at 3.5 percent as against the 6.1 percent target.
(e) Dualistic Economy:
Nepal's economy is highly dualistic.
non-agricultural
area
sector
while
rural
is
characterized by
backward
per annum during the same plan period. The poor performance of agriculture
further created a wide gap in economic development between rural and urban
areas.
Demographic Characteristics:
(a) High Population Growth:
Another characteristic of Nepali Economy is the high growth of population. The
population of Nepal increased from 15 million in 1981 to 18.5 million in 1991
and increased to 23.1 million in 2001. The annual growth rate is 2.2 per cent
in 1991-2001 decade. According to 2001 census, crude birth rate is 32.5 per
1000 population. The crude death rate is 9.3 per 1000 population. The total
fertility rate is 4.1 per women. The infant mortality rate is 64.1 per 1000 live
birth and life expectancy at birth is 59.7 years.
(b) Population Density:
In 2001 population density was 157 persons per square kilometer.
Among
The children from lower caste are not allowed to sit beside the
The
initiatives
for
community
development.
The
mushrooming
of
The Mid-Western
and Far Western Development Regions are more backward than the rest of
regions. The GDI also follows same pattern with HDI. Where HDI is lower GDI is
also lower.
6 Natural Resources
Planned and careful utilization of natural resources is necessary for lasting and
sustainable economic development of any country. Natural resources are free
gift from the Mother Nature to mankind. The atmosphere, water, soil, forest,
wildlife, land, minerals are all natural resources. There are two types of natural
resources, renewable and non-renewable. The renewable resources are those
resources which with short recycling times that is, the length of time required
to replace a given quantity of a resources that has been used with an equivalent
quantity in a similar form. For example, agricultural crops, pasture grassland,
trees, wild and domestic animals, air, water, solar energy, forest crops etc
Babasab patil notes
1. Water Resources:
Water is a vital resource of Nepal. It is life giving as well as life saving.
1. Potentiality of Water Resources.
The water resource is the most important natural resources of Nepal.
It
possesses about 2.77 percent of the world's water resources. Nepal is said to
be the second richest country in water resources in the World.
The major
conditions. The country not only has perennial rivers but also posses many
water falls. The estimated potentiality of hydro electricity is 83,000,000KW.
However, the total installed capacity of the present hydro electricity projects is
only 397 MW.
This accounts little more than 0.3 per cent of the potential
Babasab patil notes
water. Most of them do not have knowledge of purifying the water to make it
safe for drinking. Piped water is supplied only in Kathmandu valley and certain
towns in Tarai. At present, 46 per cent of water supply in Kathmandu is from
ground water sources. The city's drinking water supply despite coming through
purifying plants is not safe for drinking.
contaminated from sewerage waste.
Nepal.
work of drinking water project is done by the Water Users Committee formed
in many Village Development Committees.
(c) Spring water:
Nepal is well known in the world due to its Himalayan ranges. Himalayan spring
water has its exotic value for its purity as well as its rarity. It can be promoted
commercially as bottled spring water within the country and abroad.
(d) Irrigation:
Water resources are source of irrigation. Nepal being an agricultural country,
irrigation is very important to increase the productivity of land and expansion
of agricultural land. The modernization of agriculture requires dependable
irrigation facilities. Irrigation is essential to cultivate different types of high
yielding crops. Thus, to improve the economic condition of the farmer and
reduce the risk from the vagaries of monsoon rain, irrigation is very important.
So far the irrigation facility is inadequate in Nepal. Out of 2,642,000 hectare
cultivated land only 1,104,000 hectare of land has been irrigated till
1999/2000 (Water Resources Strategy Nepal, 2002). At present, 42 percent of
Babasab patil notes
cultivated land has irrigation facility, but only 17 percent of cultivated land have
irrigation facility throughout the year.
(e) Industrial Development.
Water is equally important for all industries whether cottage or manufacturing
industries like steel, paper, cloth, carpet dying etc. Carpet and hand made
Nepali paper are among the major export items of Nepal. The supply of water is
essential for the development of these industries. Water mills are used in most
of the rural areas both for grinding grains and generating electricity through
micro hydro projects.
(f) Development of Transport.
Water is equally important for navigational activities. River navigation is cheaper
mode of transportation. Therefore, the navigational opportunity in the country
has to be fully explored. It is used for local transportation in some of the rivers
in Tarai.
(g) Protecting Forest Resources.
The forest is the principal source of energy especially in rural areas. Rural
people are forced to use wood for household necessities, industrial use and
other purposes due to lack of electricity facility. If the facility of electricity
available at affordable price, the use of wood will be reduced.
(h) Recreational use.
Water entertainment is not developed in Nepal like in other countries to attract
people. Water parks, water surfing and other amusement park can generate
both income and employment. However, white water rafting is becoming
popular among the vacationers.
(i) Fisheries and Aquaculture:
Fishing is done in some rivers and lakes in Nepal. So far commercial fishery is
limited to pond fisheries in limited areas. It can be extended to rivers as well
with scientific studies. It could generate rural employment and food supply to
domestic and foreign market
(j) Save Foreign Exchange.
Every year Nepal, spends millions of Rupees in the import of diesel, kerosene
and gas for household energy. The expenses can be saved if these energies are
Babasab patil notes
Besides, the
6.1:
The
Ninth
Plan
Progress
(Population in thousand)
Description
Target
Progress
Additional
9700
2904
Population
benefited
by
drinking water
facility
Source: The Tenth Plan, HMG.
Progress
Percentage
29.94
17017 (71.6%)
As shown by the above Table 6.1 the progress of the Ninth Plan is far from its
target.
The Tenth Plan aims to provide drinking water facility to additional population
of 38,52,000 in rural and 7,39,000 in urban areas.
(B) Irrigation.
One of the main objectives of the Ninth Plan was to make available irrigation
facility as per the need of crops and to reduce dependency on rainwater.
Another objective was to raise water utilization efficiency of surface and ground
projects, and to enhance people's participation in the management of irrigation
system through user groups. The target of the plan was to irrigate 142400
hectare of new land. It manages to achieve 65 per cent of the target.
The Tenth Plan (2002-2007) target is to irrigate 177600 hectare of additional
land.
(c) Electricity.
The present hydroelectric project is 253 MW, which is said to be of only 0.3 per
cent of the total capacity of the country. Recently Kali Gandaki A - the largest
hydro project in Nepal came into operation generating 144MW of electricity.
One of the objectives of the Ninth Plan was to supply electricity at affordable
price internally and to export it at competitive price by developing reliable
and quality hydropower. During the three years period of the Ninth Plan,
electricity facility has been provided to 670,000 users achieving 47.85 per
cent progress. The target of the Ninth Plan was to provide electricity to
828000 users or 20 per cent of the total population during the planned
period.
4.
There are many problems for the development of water resources in Nepal.
They are as follows;
(a) Lack of Adequate Capital.
Nepal lacks adequate capital to launch new electricity projects, drinking water
projects and irrigation projects. The only way to get finance for big projects is
through foreign aid and loan, which is conditional and most of time it is not in
accordance with the need of the people.
(b) Lack of Technician.
Nepal still lacks right kind of human resources to plan and implement big
projects. The government has not yet come up with right type of education to
fulfill need of technical human resources. On the other hand, trained people
are also leaving the country due to lack of proper motivation and job
opportunity and exposure.
(c) Lack of Transport Facility.
Lack of transportation facility is a big hurdle for proper utilization of water
resources. The potential areas of water resources are not easily accessible due
Babasab patil notes
to non-existence of roads. On the other hand, the existing roads are often
damaged during rainy season mainly in hilly region. The regular maintenance of
roads during rainy season is difficult and it takes long time.
(e) Limited Market.
The people's economic situation has not improved despite the implementation
of many development plans. It is said that the electricity tariff in Nepal is the
most expensive one in the whole of South Asia.
The poor have to strive for the basic facility such as drinking water, irrigation
and electricity. The internal market is very limited.
(f) Political Instability.
Nepal witnessed political instability especially after the restoration of multiparty
system 1991. The elected leaders and Parliamentarians failed to fulfill the very
basic needs of Nepali people. This has created great frustration and
dissatisfaction among the people. The poor have not experienced any change in
their livelihood.
of
formation
of
development,
various
there
commissions
are
related
shortcomings
in
to
resource
design
and
2. FOREST
All kinds of plants, which grow in natural habitat, are known as natural
vegetation or forest. The land use of Nepal shows that 37 per cent (5.4 million
hectare) of the total land area is covered by natural forest of which 17 per cent
is conifer, 59 per cent hardwood and 24 per cent mixed type forest.
Babasab patil notes
1.Types of Vegetation.
On the basis of climatic zones, natural vegetation of Nepal generally classified
into five main types.
(a) Sub-tropical Evergreen Forest.
The growth of forest is rapid in Tarai, inner Tarai, Churia range upto 1200
metre altitude. The tall and thick trees are evergreen in the area because the
region has warm temperature and gets generous rainfall. The main vegetation
of green forest is Sal, Simal, Sissao, Khair, Cane, Sabai and elephant grass.
(b) Deciduous Monsoon Forest.
It is found in hilly region upto the altitude of 2100 metre. The trees in this
region shed leaves in winter. The main species found in the area are Oak elm,
Beech, Birch, Maple etc.
(c) Evergreen Coniferous Forest.
The forest is found in higher parts of Mahabharat range and lower parts of the
Himalayan region upto 3300 metre altitude. The main species here are Pine, Fir,
Spruce, Larches, Rhododendrons etc.
(d) Alpine Grassland.
The Himalayan region upto 5000 metre altitude has cold climate and low
rainfall. This region is not suitable for growing trees. The main vegetation of
the region is grass, bushes and other flower plants.
(e) Tundra Vegetation:
The climate over 5000 metre altitude is too cold and dry. As a result, no plant
can grow. The region is also called cold desert. However, minute plants like
mosses and lichens are found there.
The Table No.6.2 provides area under forest.
Table No.6.2
Area Covered by Forest
Base Year
Area
Per cent
Source
1954
64,78,000
47.6
FAO, 1954
1964
64,02,000
45.6
HMG/USAID, 1964
1977
52,59,348
35.7
1977/78
56,17,000
38.7
LRMP, 1986
1985/86
55,18,000
37.0
It has following
direct benefits.
Direct Benefits:
(a) Fuel Wood.
The forest supplies about 90 per cent of total fuel consumption. The rural
people depend on forest product for their day to day use due to lack of fossil
fuel.
(b) Fodder for Livestock.
The forest is the principal source of food for domestic animals. It provides more
than 50 per cent of fodder to rural livestock.
(c) Manure.
Grass and the leaves could also be used to make compost needed for farming.
The compost manure has great value to produce healthy agriculture products.
(d) Herbs.
Different types of valuable herbal plants are found in the high Himalayas. The
people in the rural area have been using herbal plants to cure different diseases.
The herbs collected from the region are sold to pharmaceutical industries
mainly in India and some are exported abroad.
There is high potential for earning foreign exchange by exporting the forest
products such as timber, herbs, rubber products etc to third countries.
(h) Employment.
The forest also generate employment opportunity to people in different forest
based industries. Apart from the industries, a large number of people are
employed as Forester, Ranger, Guards etc in the government service.
The forest
The proper
Rapid deforestation is
catching due to cutting out the trees and causing ecological imbalance. The
topsoil is washed away by rain with the loss of trees. Most of the areas are
turning into desert and semi-desert and growing no vegetation. The proper
aforestation and sustainable development programme can prevent the process
of desertification in the region.
(d) Drinking Water.
Ground water is important source of drinking water for majority of people in
many part of Nepal. The majorities of people in Tarai solely depend on ground
water and extensively use hand pumps for water. The case now is not new to
Babasab patil notes
the people of Kathmandu valley because most of the people have to depend on
ground water. The forest also helps to maintain ground water table.
(e) Oxygen Supply.
The forest vegetation provides life saving Oxygen to all living being. This is one
of the reasons that people prefer to live within greenery of nature.
(f) Environmental Balance.
The forest helps to maintain ecological balance. The beauty and benefits of
forest is so immense that any disturbance of over using it or disrespecting its
resources can have disastrous and counter-productive impact in the form of
flood, draught and disease.
3.Causes of Deforestation.
"Hariyo Ban Nepal Ko Dhan" was the popular slogan in the country some forty
years ago which is no more now. This important resource is rapidly declining.
In
"Char Kose Jhari", once a very famous forest belt is getting thinner and
The number of forest based industries are increasing in the country. Obviously,
the demand for raw materials is also increasing.
Apparently, there is no proper mechanism to manage the supply of raw
materials to the industries. This creates the situation of using forest resources
indiscriminately.
(e) Deforestation: Ignorance/Negligence.
Most of the people are ignorant about the consequences of deforestation.
Equally most of the people neglect it even knowing it for personal benefit.
Thus, the pace of cutting down trees continues due to lack of adequate control
of the concerned authority.
(f) Defective Government Policy.
The government forest policy is not effectively implemented. The illegal log
traders are not punished. The logging continues in broad daylight. The policy
relating to community forest is discouraging for the participation of people in
forest management.
The community participation was low in mid seventies and early eighties in
forest conservation activities. However, the participation of community in tree
plantation and conservation of forests increased in the following decades. In
1993/94 out of total plantation of tree 57.4 per cent is through community
participation.
module should be adhered to women and include the concerned and needs of
women.
The women are not only users of fuel, fodder and other forest
products but also are the one who is directly affected by deforestation. Thus
women should be included in all phases of project cycles.
(f) Use of Alternative Source of Energy.
There must be alternative choice of energy like solar, electricity, kerosene and
biogas in order to control deforestation in the country. Simple and affordable
means of energy sources must be available to the people at an affordable price.
4. Community Forest.
The guidelines of the Master Plan for the forest sector of Nepal put all
community forest management under the control of forest user group to ensure
equitable share of costs and benefits among the stakeholders of the community
Babasab patil notes
village leaders
and
million metric tons of iron ore from each of the site can be obtained. Besides,
these major areas, Jirwang and Gothe Danda in Chitwan, Ghatkhola in Bajhang,
Bhootkhola near Bandipur. Bhainse, Kulekhani, Pyuthan, Godavari and Pharping
are said to be other probable areas. However, the commercial production of the
mineral has not taken place in any of these areas.
(b) Copper.
The main areas where Copper is found are Budhakhola near Bandipur, Gyaji in
Gorkha, Arkhauli in Makwanpur, Nangre in Nuwakot, Baitadi, Illam, Wapsa,
Banglung and Barabise.
(c) Mica.
Mica is found in several places of Nepal. The main areas are Bajhang, Chainpur,
Doti, Bhojpur, Lamjung, Gosaithan, Nuwakot, Dhankuta, Sundarijal and Sindhuli.
However, the exact quantity is difficult to estimate due to lack of authentic
information.
(d) Lead.
Lead is found in several places of Nepal. The main places are Ganesh Himal
area, Arkhuli, Rasuwa, Banglung, Phulchoki, Baitadi and Tipling.
(e) Zinc.
It is found in several places of Ganesh Himal, Phulchoki, Rasuwa, Majer Khola
and Tipling in Nuwakot.
(g) Magnesite.
This is important raw material for the production of chemical fertilizer. Its
production started in Dolakha for some time. It is also found in Udaipur at
Kampughat.
(h) Limestone.
It is used to manufacture cement. It is found in several parts of the country.
The main areas are Bhaise, Chobhar, Murkhu, Jogimara, Hetauda, and Godavari.
The quality of limestone in Nepal is of high quality.
(i) Petrol & Gas:
Petrol and natural gas are called fossil fuels.
Commercialization of these
mineral resources is not made so far. The main areas of occurrence are Surkhet,
Dailekh, Muktinath, Pyuthan, Dhangadi, Chisapani and Kathmandu.
(j) Coal:
Coal peat is found in various parts of Kathmandu valley. This is fossil fuel. But
they are not of high quality. The main areas of coal are Dang, Salyan, Chatra,
Thakkhola in Mustang, Chitwan, Kailali and Kanchanpur.
(j) Gold:
Tiny flakes of gold are occasionally found in the sand of various rivers like
Sunkoshi. Kali Gandaki, Marsyangdi & Budhi Gandaki.
However, scientific
development
of
mineral
resources
and
engineering
are
prerequisite.
(e) Fulfillment of Basic Construction Material.
The basic construction material like cement, iron rod, pipe and zinc sheets are
necessary for construction works. The demand for these raw materials is
increasing due to rapid increase of construction works both in the public and
the private sector. Every year huge quantities of cement, rods are imported to
fulfill the need of construction works. The development of mineral industries
helps to fulfill the need of raw materials to these basic construction materials
industries.
(f) Foreign Exchange Earning.
The development of mineral resources also helps to earn foreign exchange by
exporting raw minerals as well as finished mineral products.
The foreign
exchange earned from export can be used for the import of goods from abroad.
3.Work done for the Development of Mining.
The exploration of metal ad non-metal minerals in an area of 6000 sq. km was
targeted during the Eight-Plan period. The progress during the Plan period was
as follows;
- The extensive survey of gas reserve in Kathmandu valley for commercial use
was completed.
-Geo-scientific study for petroleum exploration was completed in an area of
31,000 sq. km.
-Attempts have been made to promote cement industries in Surkhet,
Arghakhanchi and Dhankuta.
-Mineral Act, 1985 has been amended.
-Mineral Regulation 1995 has been drafted.
-The capacity of using remote sensing Geographic Information System (GIS) was
developed to produce qualitative geological mapping.
6. NATURAL RSOURCES
4. ENVIRONMENT AND NATURAL RESOURCE MANAGEMENT
1. The Importance of Environment and the Global Concern.
Environment is our surrounding made up of biotic and abiotic factors.
Environment includes everything that relates to person and nature. It includes all
aspects of surroundings of humanity affecting individuals and social grouping.
Environment includes (i) Built environment means house, roads etc and (ii) Natural
environment means all the natural resources including air, land and water. To protect
environment means to maintain the continuity of species on the Earth. The survival of
species depends on the availability of natural resources from the eco-system. Thus, to
maintain sustainability in the supply of natural resources, prudent utilization of the
resources is essential.
The existing state of equilibrium will not change as long as there is no external
disturbance. Pollution and all other changes made in nature will themselves maintain a
state of equilibrium by a different natural cycle upto the carrying capacity of the Earth.
Any further exploitation of both renewable and non-renewable resources will disturb
the equilibrium of the eco-system and cause environmental degradation and loss of
bio-species.
The reckless exploitation of scarce resources, both in developed and developing
countries, creates deterioration in environment resulting acid rain, depletion of Ozone
layer and high incidence of deadly diseases. Almost all the developing countries are
facing difficulties in providing regular supply of safe drinking water. Similarly, topsoil
of arable land is also washed away due to floods and landslides. All these are highly
expensive and dangerous for peaceful existence of mankind.
The world is facing many critical issues of importance.
conflicts and wars, violation of human rights, issues of peace and preservation of
eco-system as well as issues relating to right to education and health facilities,
reproductive rights and property right of women. All these issues concern billions of
people living on the Earth and also the coming generation.
In the midst of all these problems, the problem of environmental degradation is
growing fast. There can be no two opinions that if there is no place to live on this
Earth then we are sure to be doomed.
the United Nations conference on Environment and Human Development was the birth
of a common understanding named "Agenda 21" which brought out a comprehensive
action plan and a new concept of economic growth. It devised a plan for a long-term
sustainable development requiring the adoption of development policies, which meet
the needs of the present generation without compromising the needs of future
generations.
2.The Concepts of Natural Resources Management and Sustainable Development.
There are two types of natural resources (i) Renewable and (ii) non-renewable.
Renewable resources mean those resources, which can be obtained again after short
recycling time. It means that the length of time required for replacing a given quantity
of resources that have been used with an equivalent quantity in a similar form. For
examples trees, pasture grass, agricultural crops, wild and domestic animals, air, water
and solar are renewable resources. Non-renewable resources mean those resources,
which once consumed cannot be replaced. For example, a barrel of petrol once
consumed is gone forever in that form.
resources.
The concept of natural resources management adopts the theory of carrying
capacity of the natural eco-system.
non-renewable resources in such a way as to sustain the maximum benefit for present
and future generation. It refers to the quality of environment in order to safe guard
human environment and promotion of human welfare in sustainable way. According to
the Ninth Plan document "resource management means not only protection but also
judicious utilization which fulfil the needs of existing generation and guarantees to
fulfil the future needs.
In the context of Nepal, sustainable resources management means ensuring
sustainability of available resources by fulfilling the interest and needs of Nepali
people.
Sustainable development means to meet the needs of the present without
compromising the ability of future generation to meet their own needs. It emphasizes
an integration of environmental, social and economic consideration in decision making.
3. Importance of Natural Resources Management.
Natural resources management is necessary for mankind to lead healthy, happy,
prosperous and peaceful life. In Nepal, according to latest census 2001, 86 percent of
the people resides in rural areas. Landslide, flood, soil erosion, loss of forest and
Babasab patil notes
drying up of springs and water spouts affect the fulfillment of daily needs of wood,
grass and drinking water etc of rural population.
political reasons are other factors, which led to deterioration of forest in Nepal. This
has caused frequent landslide, flood, and change in climate and other natural disasters.
(b) Soil Erosion.
It is estimated that 240 million cubic meter of soil is eroded every year. The
main causes of soil erosion are deforestation, improper cultivation of land, over
grazing of pasture land and development works. As the result, productivity of the soil
is decreasing every year. It has become serious concern for farmers.
(c)Water Pollution and Scarcity of Drinking Water.
Most of river water near to big settlements is polluted. The problem is acute in
Bagmati and Bishnumati rivers in Kathmandu. The result is number of untimely death
due to water borne diseases like typhoid, diarrhea etc.
underground water is also decreasing causing acute shortage of water for domestic
and industrial use.
(d)
Air Pollution.
Air is precious natural resource. The living beings cannot survive without it.
Due to excessive smoke from vehicles and industries, air has been polluted especially
in the cities. The studies have found high pollution level in the air in various places of
cities and industrial areas. The air pollution causes lung disease. The smoke and dust
Babasab patil notes
in the air affect the health of children and aged most. This not only increases cost for
health care, but it may also cause untimely death or become disable.
(e)
Noise Pollution.
Un-maintained machines and vehicles in the cities cause noise pollution.
It
leads to many diseases like blood pressure, heart diseases and mental disorder.
(f)
Global Warming.
Due to global warming atmospheric change is occurring in the world.
The
human lives have been affected tremendously and eco system has deteriorated.
5. Present Situation of Environment.
Thoughtless human activities are deteriorating both nature and man made
environment. The excessive uses of forest, land, water and unplanned growth of cities
are destroying valuable natural resources. The forests have been destroyed leading to
natural disaster.
polluted destroying the lives of aquatic lives like crocodiles, fish, turtles etc. The high
population growth has created unmanageable garbage in cities.
suffering from various health problems leading their lives to further poverty and
misery.
unplanned growth of cities and neglecting the rule of environment. The Ministry of
Population and Environment is responsible for carrying out the Environment Impact
Assessment (EIA) of each and every development projects in the country.
6. Measures to Remedy the Problem:
For the proper management of natural resources following measures should be
undertaken.
(a)
environmental degradation.
(b)
they live. For instance, rural women have knowledge of the places from where they can
Babasab patil notes
(c)
Legal Provision:
Due to increasing number of use of vehicles in city area, pedestrians are
compelled to breathe polluted air. As a result, people have been facing several health
problems and accordingly health related expenses are also increasing.
Thus necessary legal provisions should be enforced to maintain the standard
emission level and decrease air pollution. A system of compensation for the public
should be introduced to maintain social equality.
(d)
In the past generally villagers themselves use to build and protect village taps,
irrigation canal, temples and other community resources. Disappearance and
non-functioning of religious and cultural community group led to destruction of
natural resources for selfish motives. Therefore, it is necessary to revive and make
people based organizations effective.
(f)
developed to use less resource and encourage recycling of the used resources.
(g)
Development:
Sustainable development of economy requires a proper coordination of
economic, social, natural and human resources as they are interrelated in environment
protection. While framing economic development plan, special care should be taken to
the fact that development and environment are inseparable parts.
Thus, it is
(h)
(i)
(j)
Crop Insurance.
Introduction of crop insurance reduces the risk of crop failure and excessive
7. HUMAN RESOURCES
"The real wealth of a nation is its people both women and men. And purpose of
development is to create and enabling environment for people to enjoy long, healthy
and creative lives. This simple but powerful truth is often forgotten in pursuit of
material and financial wealth."
Human Development Report, 1995.
1 Role of Human Resources:
The number of people of working age (both male and female) available in a
country at a particular time is called human resources. The population means total
number of people residing in any defined area, Nepal, India, Bangladesh etc. Skilled,
educated, healthy, labourious and committed people are wealth of the country. Human
resources or human capital is necessary for rapid economic development. Many
prominent economists like Schultz, Harbison Dension and Kuzentss studies show that
educated people in America have contributed in development of American economy. It
is well-established fact that one of the prerequisites of economic development is the
development of human resources.
product but also active agent of production. Among the four factors of production
labourer, land, capital, and organization - labourer and organizer are active agents of
production. Human resources help in the development of the economy in the following
ways:
specialist,
chemical
engineer
is
pre-requisite
for
the
development of industry.
(d) To Develop Government Services:
Human capital is necessary for staffing even in government
services. Government becomes effective when needed-trained staffs are
available. Innovative and important changes in government are possible
only if human resources are available.
(e) Save Foreign Exchange:
Underdeveloped countries not only import physical capital but also
import technical know how and skills. With foreign aid, technical
personnel are also imported. Thus development of human resources help
to reduce the expenditure on foreign expert too.
(f) To Remove Economic Backwardness:
Underdeveloped
countries
are
characterized
by
economic
Total population
Growth rate
Doubling time
1911
5,638,749
1920
5,573,788
-0.13
1930
5,532,574
-0.07
1941
6,283,649
1.16
60
1952-54
8,256,625
2.30
31
1961
9,412,996
1.65
42
1971
11,555,983
2.07
34
1981
15,022,839
2.66
26
1991
18,491,097
2.08
33
2001
23,151,423
2.25
31
males
(49.94%)
and
11,587,502
(50.05%)
females.
Female
Male
Female
Total
04
12.29
11.95
12.12
59
14.38
13.87
14.12
10 14
13.50
12.73
13.11
15 19
10.44
10.57
10.51
20 24
8.33
9.40
8.87
25 29
7.23
7.95
7.59
30 34
6.39
6.71
6.55
35 39
5.73
5.79
5.76
40 44
4.75
4.82
4.79
45 49
4.13
3.99
4.06
50 54
3.46
3.28
3.37
55 59
2.80
2.49
2.65
60 64
2.31
2.27
2.29
65 +
4.26
4.16
4.20
Nepal is the only Hindu Kingdom in the world. On the basis of religion,
latest population census reveals that 80.62 per cent of the people follow Hindu
religion, 10.74 per cent Buddhism, 3.60 per cent, Kirat, and the rest are other
religions like Islam, Christian, Jain, Sikh etc.
The official language is Nepali. According to the population census 2001,
the classification of population by mother tongue shows that 48.98 per cent of
people have Nepali mother tongue. And population speaking Maithili, Bhojpuri,
Tharu, Tamang and Newari tongue are about 12.4, 7.6, 5.2 and 3.7 per cent
respectively.
(e) Density of Population:
The density of population means total number of people living in per square
kilometer area. The density of population for the country is 157 persons per square
kilometer while in terms of ecological regions, 33 persons in mountain, 167 persons in
hill and 330 in Tarai. According to latest census, the lowest density (71) is found in
Mid-Western Development Region and the highest (293) in the Central Development
Region.
(f) Rural/Urban Population Distribution:
There are 3914 Village Development Committees (VDCs) and 58
Municipalities in the country. There are certain criterions to be urban areas like
the total number of population must be 20 thousand and there should be road,
electricity, health and education facilities.
report 2001, 85.8 per cent of the people live in rural areas and 14.2 per cent in
urban areas.
(g) Population Distribution by Development Regions and Districts.
Nepal is divided into 5 Development Regions, namely Eastern, Central,
Western,
Mid-Western
and
Far-Western
Development
Regions.
Each
8 AGRICULTURE
Land is main source of agricultural production.
about 2.6 million hectares. A farmer, on average, holds 0.95 hectare (18.6 Ropanies)
of land. However, 70 per cent of farmer holds less than one hectare of land. Among
Babasab patil notes
them 44 percent farmers have less than 0.5 hectare of land. The actual farmers having
cultivation skill have less land. This has been a great problem for the development of
agriculture.
1 Role of Agriculture in Economic Development.
Agriculture is the backbone of Nepali economy. It occupies an important place in our
economy. The role and importance of agriculture are as follows:
(a) Contribution of Agriculture to National Income:
About 41 per cent of GDP comes from agriculture. Agriculture plays a significant role
in the national income, as the non-agricultural sector is very small in the country.
(b) Source of Employment:
According to the latest census, 86 per cent of the people live in rural areas and major
source of employment and livelihood for about 81 percent of people is agriculture.
(c) Source of Food:
Agriculture is the source of food to the growing population and livestock.
Paddy,
Maize, Millets and Wheat are principal food grains of Nepali people. It also provides
fodder for livestock.
(d) Source of Raw Material for Industries:
All agro-based industries like jute, oil, rice, sugar etc depend on agriculture. Besides,
agriculture also provides healthy and strong manpower to the industries.
(e) Development of Cottage Industries:
During the off season, farmers are engaged in village and cottage industries. The raw
materials, manpower, skill and capital required for the village industries are supported
by agriculture.
(f) Basis of Foreign Trade:
Agriculture helps both internal and external trade. Food grain, vegetable, fruits etc are
purchased by all people.
also fulfill family diet. Thus agriculture is particularly important for the development
of the women and makes them economically independent.
(i) Basis of Economic Development:
Agriculture is the basis of economic development in the country as it provides capital
and employment to a large number of people. It earns foreign exchange, and provides
food to the growing population. It is also source of income to the government. Thus
economic prosperity of our country depends on the development of agriculture.
which the sole aim of the production is to produce for self-consumption and thereby
make living from it. Most of production in farming is just enough for farmer's own
consumption and for the consumption of the family members.
(b) Predominance of Food Crops:
In subsistence type of agriculture, the farmer gives priority to the cultivation of food
crops. Since the primary aim of production is to meet the domestic requirement, food
is the most important crop. It is only when the food need of the farmers have been
fulfilled they devote their time and resources for the production of other crops for
marketing.
(c) Regional Variation:
Due to varied topography and climatic conditions, different crops are cultivated in
different regions of the country. The total cultivated area for food crops such as paddy,
maize, wheat, millet and barely occupy 85 per cent and the rest, i.e. 15 per cent of
cultivated land is occupied by cash crops. Paddy occupies 55 per cent of the total
cultivated land. All Tarai districts, Kathmandu valley and Pokhara valley are main areas
of Paddy production. Maize is produced in hilly areas and inner Tarai area. Wheat and
Barley are produced in Kathmandu and Pokhara valleys. Jute, Sugarcane, oil seeds,
Tobacco are cultivated in Tarai.
Cardamom and fruits are also cultivated. Horticulture, floriculture, bee farming, poultry
farming Sericulture and domestic cattle are also raised in different parts of the country.
(d) Scanty Irrigation Facility:
Nepali agriculture is still depending heavily on monsoon rain. Up to the Ninth Plan only
37 per cent of cultivated land got irrigation facility throughout the year.
Scanty
irrigation facilities has hampered the crop diversification and also productivity of land.
Babasab patil notes
percent of agricultural household own more than 33 percent of the total land.
There are 70 per cent farmers who own less than 0.5 hectare of land. Thirteen percent
of large farmers operate with 2 hectare and more land. Smaller farmers predominate in
Hill region and large farms in Tarai region
(i) Household Heads:
The majority of agricultural household heads in the country are men. Women headed
agricultural households constitute less than 15 percent of the total agricultural
Babasab patil notes
households. Women headed agricultural households are most common in hills and less
prevalent in Tarai. In hill region due to out migration of men folk for employment,
agricultural operation has left to the women.
3 Problems of Nepali Agriculture:
Agriculture is the mainstay of Nepali economy. According to Agricultural Prospective
Plan (APP) the annual growth rate of agriculture is 3.3 percent and annual growth rate
of population is 2.25 percent.
agriculture still faces many problems due to lack of clear-cut strategy and ineffective
implementation of agricultural plan. The major problems of agriculture are as follows;
(a) Pressure of Population on Land:
More than 81 percent of working population depends on agriculture.
Due to slow
20 percent of agricultural credit. The Production Credit for Rural Women (PCRW) and
Babasab patil notes
Micro Credit for Women, though highly successful in catering need of women it still
has to be reached to more needy women farmers. Besides, due to extreme poverty,
farmers have no resources to undertake necessary investment in agriculture. They are
even forced to borrow money for consumption and social activities leading to perpetual
indebtedness.
(e) Lack of Marketing Facility:
Lack of marketing facility is still another problem. Due to lack of storage facility and
affordable transportation facility, farmers are unable to bring their products in the
market to get good price for their product. Instead, they are obliged to sell their
product to middlemen at very low price. It is not only the problem for output market
but also a great problem to the farmers to purchase seeds, fertilizers and insecticides.
For women farmers marketing is critical problem as there is no security in long
distance transportation, no allocated place in the market and toilet facility.
Thus,
2021 B. S. (1978 AD) deprives tenancy right to a daughter who is under the age of 35
years.
(g) Lack of Research:
The National Agriculture Research Council (NARC) was established in 1991 AD as an
apex autonomous body for undertaking agricultural research in the country.
It is
growth rate including migration from neighbouring countries. The population control
programme should be implemented through effective family planning programmes,
spread of female education, increase employment to the women, implementation of
income generating programmes for women and improvement of socio-economic
status of women. Besides reducing population growth, non-agricultural sector should
also be developed at a faster rate.
(b) Development of Simple and Affordable Technology:
Improved technology should be within the reach of all farmers. As women are also
involved side by side with men in agriculture activities, such technology should be
women friendly.
(c) Adequate Irrigation Facility:
Adequate knowledge should be provided to farmers for the proper use of water and
maintenance of irrigation system.
irrigation planning.
(d) Organized Marketing Facility:
There should be organized agricultural marketing facility to ensure fair price for
agriculture product and availability of agricultural input in time.
Bazars
Similarly, in Hat
women's needs and concern should be well taken care so that woman's
The
extension officer should provide information about agriculture both to men and
women equally. There should no discrimination between male and female farmers. As
female farmers also play equally important role in agricultural development, women
should have easy access to extension services.
(g) Transfer of Ownership:
Most of the farmers are tenants and do not own their own land. Obviously, landowner
takes away most of the produced. This weakens motivation of farmer for higher
1
production from land. Therefore, in order to motivate farmers to work very hard for
the improvement of land and its productivity, ownership of land should be transferred
to the actual tillers according to the objectives of land reform Act.
5 Agricultural Marketing in Nepal
The development in agriculture increases the output of farm products. There
must be market to sell these products and prices for them must be enough to cover
the cost of production including farmer's effort. There are three essential things for
marketing. They are;
(i)
(ii)
(iii)
Nepal. The people in intermediaries business collect agricultural products from the
doorsteps of farmers and sell it to consumers. These people buy farm products at
cheaper price and sell it to the consumer at higher price. Therefore, the middlemen
make the lion's share of profit.
Agricultural marketing is not organized in Nepal. Farmers either sell agricultural
products directly to the consumer or to traders in small Hat Bazars in Tarai. In local
village market mostly producers sell their products directly to consumers.
The village
markets are linked with the major markets through whole sellers, trading agents,
dealers, retailers, hawkers, consumers and farmers.
Problems of Agriculture Marketing.
The main problems of agricultural marketing in Nepal are as follows:
(a) Buyer's Market:
It is well understood that a systematic organization is necessary for successful
marketing of any product. The farm product traders are well organized in their trading
network than farmers. As a result, farmers are forced to sell their products at the price
fixed by buyers. Once the agricultural product reaches the local markets it is difficult
to take back and it is also not feasible for everybody to store it to sell later. So, they
are forced to sell at a price fixed by those middlemen.
(b) No Grading and Standardization:
In order to get good price of agricultural products, farmers are required to grade their
agricultural products according to product quality. But most of the farmers have not
Babasab patil notes
adopted this practice. Therefore, the farmers are unable to get desired price for their
products.
(c) Transportation Problem:
Nepal still lacks cheap transportation facilities. Therefore, it is very difficult to sell
agricultural products at a deserving price. The problem is more critical with small and
women producers because it is not economical to transport small quantity of their
agricultural products to main markets.
There is also a women specific problem. Women farmers are forced to depend on their
men folk to sell their products due to the lack of security to travel to main markets.
(d) Lack of Cold Storage and Warehouses:
Agricultural products are perishable in nature if they are not stored in proper
temperature. Food grains are usually stored in mud-built containers, which are easily
spoiled by insects and pests. Perishable products like vegetable and fruits cannot be
preserved for long time without cold storage facility.
The government must assure fair and reasonable price for the agricultural products.
This is possible only by efficient management of agricultural marketing system. Fair
price encourages farmers to make hard effort to improve agricultural production.
(c) Effective Implementation of Metric System:
The metric system of measurement and weighing has been introduced in the country
since a long time; but the substandard weighing and measurement systems are still in
use in many parts of the country. The authority concerned must pay special attention
to curb such practices through regular observation and investigation.
(d) Cold Storage and Warehouse Facilities:
Farmers get very low price for their products because most of the farmers are forced to
sell their output immediately after harvesting season when prices are generally very
low. They are compelled to do so because of lack of warehouse facilities. If warehouse
and cold storage facilities are available, products could be brought to the market
according to demand situation and get a good price for their products.
(e) Facilities for Processing Agricultural Products:
To fix and implement minimum support prices for principal cereal crops.
Farmer needs money to buy ox, buffalo, cow, goat, poultry etc. and to carry on
agricultural related activities. Besides, farmers also need both medium and long term
credit for buying heavy agricultural equipment such as water pump sets, tractors,
thrasher etc.
(d) Social and Domestic Expenditures:
Farmers also need credit to meet consumption expenditure during off-season and
social expenditures like marriage, death ritual, social modes etc.
(e) Agricultural Enterprise:
The agricultural credit is needed for secondary occupations such as cottage industry,
livestock farming, fish farming, bee keeping, mushroom farming etc. For these
activities, farmers need long term and medium term credit.
Sources of Agricultural Credit:
Farmers get agricultural credit from the following sources:
(a) Village Moneylenders:
The traditional source of credit includes village moneylenders, friends and relatives. In
rural area, village moneylenders are usually a Jamindar. They are the main sources of
agricultural credit.
The poor farmers get loans from these landlords and village moneylenders whenever
they need it. The village moneylenders not only charged an exorbitant interest rate but
also charged extra amount of money. Thus, once a poor farmer borrows money, they
are forced to give away their property including farmland to the village moneylenders
due to inability to pay back the loan.
Reform Act of 1964, such practices have been curbed down to a great extent. But, in
remote areas, farmers are still compelled to borrow money from local moneylenders
due to the absence of institutional credit facility. On the other hand, poor can not get
loan from institutions due to lack of collaterals.
(b) Friends and Relatives:
The farmers also borrow money from their friends and relatives. But as majority of the
people in rural area lives below the poverty line, credit from friends and relatives are
also limited.
(c) Institutional Source:
After the introduction of economic liberalization in Nepal, a number of financial
institutions came into operation.
In 1982, Production Credit for Rural Women was also introduced which added a new
dimension to rural credit.
Production Credit for Rural Women (PCRW) project. Now, it is under the Ministry of
Women, Children and Social Welfare, with loan assistance from Internal Fund for
Agricultural Development. This is the first programme focused on women in Nepal.
The PCRW covers 55 districts. Under this programme, women can borrow money from
designated branches of Nepal Bank and Rastriya Banijya Bank against a group collateral
basis.
With slight modification in implementation modality, Micro Credit Project was started
in 1994 with financial assistance from Asian Development Bank in 12 districts and 5
municipalities. This loan was also based on group approach. This is the first credit
programme in which the government recognized the role of NGOs in micro-finance
activities. The main activities of NGOs are to form women groups, help to mobilize
group saving and link women group members to commercial banks. Thus, selected
NGOs act as a social mobilizer and also as credit agent. In the last stage, selected
NGOs work as Financial Intermediary. The commercial banks provide 2 to 4 percent
interest commissions to credit agents/NGOs as service charge on interest earned which
is determined on the basis of loan recovery rate.
The PCRW and Micro Credit for Women covers 67 out of 75 districts of Nepal. They
provide services in 624 village development committees and 28 municipalities. Loan is
given to women for income generating activities like purchasing livestock, setting up
small enterprises and other agriculture related activities. Loan recovery shows that
women are careful about repaying loans on time.
(e) Small Farmer Development Programme (SFDP)
To provide collateral free loan to the economically deprived people, Rural Development
Banks have been established in all of the five development regions. By mid 1999, rural
development banks have disbursed a total credit of Rs.2090.20 million to its 87,317
members through 19,410 groups.
(g) Intensive Banking Programme (IBP)
Under this programme, 60 percent of priority sector credit should be given to the
families living below the poverty line or people whose annual income is less than
Rs.2,511. This is a poverty focused credit programme of commercial bank.
9: POVERTY
1 Definition of Poverty.
The concept of poverty has been defined in different perspectives. They are as
follows:
a) Income perspective
b) Basic needs perspective
c) Capability perspective.
In general, Human Development approach has taken in all of the above three
perspectives but particular emphasis has been given to capability perspective.
However, development is a process of enlarging peoples' choices and raising the level
of well being. The concept of poverty focuses on choices and opportunities most basic
to human development for long, healthy and creative life, decent standard of living,
freedom, dignity, self respect and respect for others.
Poverty is socio-economic phenomenon, which does not have any precise
definition. According to the World Bank, the people with annual per capita income of
$275 are termed as extremely poor and per capita income of $370 as poor. With per
capita income of $210 Nepal falls under the category of extremely poor.
Poverty is classified into two categories:
(a) Absolute poverty:
According to the World Bank, absolute poverty is "as a condition of life so
degraded by disease, illiteracy, malnutrition and as to deny its victims basic human
necessities." The absolute poverty approach focuses on poverty from minimum level of
income required to sustain life or estimation of minimum dietary needs. Dietary needs
differ from country to country. For Asia the estimated dietary needs is 2250 calories
per day.
(b) Relative Poverty:
The comparison between the rich and the poor or income gap between
developed countries and poor countries is known as relative poverty. Thus, absolute
poor people are the great concern than relatively poor people for any country.
2. Characteristics of Rural and Urban Poor:
The poor include landless, small land holders, agricultural labourers, village
artisans, poor village women, low paid unskilled workers, landslide/flood victims and
unemployed persons. Similarly in urban areas, slump dwellers and poor unemployed
people are the poor.
The main characteristics of the poor are as follows
(a) Rural and Urban Poverty:
The poor mostly found in rural areas where people suffer from unemployment,
malnutrition, ill health, illiteracy and lack of opportunity for gainful employment.
Occasional landslide and deforestation have further complicated the extent of poverty.
Internal insecurity due to Maoist problem and ineffective government has further
deteriorated the situation.
In urban areas, migrated people in search of jobs, slump dwellers, unskilled
construction workers suffer from uncertain jobs.
middlemen and brokers, ill health, lack of basic needs are the major problems of the
poor. There is also danger of sexual exploitation of women and girls who come from
rural areas seeking for jobs in urban areas. Even poor boys are vulnerable to sexual
exploitation.
(b) Larger Family Size:
The size of family is generally large in a poor family. They do not have access to
modern contraceptives. Besides, due to prevalence of a strong son preference and
benefit from child labour, they do not want to use contraceptives.
As it is not
compulsory to send children to school, poor family children help the parents in
economic activities. Thus, they do not mind to have a large family. On the contrary, a
poor family aspires to have more children to get support for household and
agricultural activities. Due to lack of education and income generating activities, the
status of women in rural areas is very low. Although, women work same jobs like men
they are paid less. Equal wage for equal work is not strictly implemented. Low status
women is also one of the reason for large family size.
(c) Land Major Asset:
Land is important asset in agricultural country. The poor don't own productive
land. They have to cultivate in marginal land, which do not have facility of irrigation or
are most prone to landslide in the hilly areas and flood in Tarai. Because of lack of
asset, it is very difficult to borrow credit from banks.
(d) Lack of Education:
Poor also lack education, training and information to improve earning capacity.
As the result, they are forced to remain in the vicious circle of poverty. Poor women
again suffer from the burden of reproductive and productive work. Due to lack of easy
assess of basic needs like water, fuel and fodder most of their time is spent for
meeting needs of familys survival instead of attending school. Even if they attend
school, most of them are dropouts from school due to early marriage and need of
undertaking household responsibilities.
(e) Dependence on Agriculture:
Agriculture is main source of income for poor people in rural areas.
But
subsistence agriculture does not bring much income to the poor farmers. The main
source of supplementary income is labour wage in construction work.
In urban areas poor people are self-employed in micro enterprise like small
shops, teashops, wage labour and other informal sectors.
(f) More Expenditure on Food:
The poor people can spend very little income on education and health.
Whatever they earn, they are required to spend on food. The distribution of food in
the family is again biased to male and earning member of the family. Thus women are
malnourished resulting in poor health.
(g) Status in the Society:
The poor have low status in the society, as they are uneducated, unskilled and
have fewer opportunities. Their representation in the government, political parties and
other sectors is very low. They are marginalized, exploited and manipulated
everywhere. Even they are deprived of basic human rights.
(h) Gender Discrimination:
In rural family, there is discrimination between sons and daughters. Generally,
daughters are treated as liability, because after marriage they have to leave the family
and live with husband's family. Therefore, parents do not want to invest on daughters
education. There is less gender discrimination in urban areas as compared to rural
areas.
3. Poverty Level:
The National Planning Commission estimated that 42 per cent of the population
is living below poverty line. The poverty level was estimated to be Rs.4404 on the basis
of a daily per capita calorie requirement of 2250 and other expenses in non-food
items. Nepal Living Standard Survey, 1996 (NLSS) conducted by the Central Bureau of
Statistics (CBS) provides the most recent estimate of poverty both at national and
regional levels on the basis of household consumption expenditure data. NLSS shows
that 44 percent of the rural households and 23 percent of the urban households were
estimated to live below the poverty line. Nepals, being agricultural country, access to
land is very important about 70 percent of farmer own less than 0.5 hectare of
farmland. Poverty is wide spread in Nepal. However, the incidence of poverty is more
critical in the mid-western and far-western regions of the country. Similarly, the plight
of bonded labour in Banke, Bardiya, Kailali, Dang and Kanchanpur and some
indigenous people and castes as Kami, Damai and Sarki, Kamaiya etc is even
deplorable. The condition of low caste group women is even worse.
4. Poverty Alleviation Programme:
The Ninth Five-Year Plan has placed its sole goal to poverty alleviation. It has
targeted to reduce the poverty level from 42 percent to 32 percent by the end of the
planned period. The long-term goal is to reduce poverty level to 10.0 percent by the
year 2016. By the end of the Ninth Plan the population living under poverty line has
fallen down to 38 percent.
The Tenth Plan (2002-2007) brought out Poverty Reduction Strategy Paper. Like
in the Ninth Plan the sole objective is to reduce poverty level from 38 percent to 30
percent by the end of the Tenth Plan. The poverty reduction strategy is based on four
conditions. They are (a) Broad based economic growth (b) Targeted programmes for
the ultra poor, vulnerable and deprived groups (c) Social sector development including
human development and (d) Good governance.
In order to reduce poverty level following policies and action plan will be adopted.
-
fully unemployed is expected to decrease from 17.4 percent (FY 2059/60) to 13.5
percent
10. INDUSTRY
1. COTTAGE AND SMALL INDUSTRIES (CSIs)
Cottage and Small Scale Industries:
Simple commodities are produced in cottage and village industries usually by a single
family or with a few hired employees.
cottage industries. In villages weaving of baskets and ropes, paper making, utensils,
cloth weaving, shoe making, jewelry, wood craft, stone craft, metal craft etc are carried
out as household industries. The Malla period was regarded as the golden age for the
development of cottage and village industries in Kathmandu valley and adjoining
settlements. The temples, Pagodas, stone waterspouts, carved wooden objects etc are
all living examples of glorious days of handicraft industry in Nepal.
In earlier days, many villages were even specialized in the production of different
commodities like "Karuwa" and Dhaka clothes in Palpa, Bhadgauali Topi in
Bhaktapur, Khukuri in Bhojpur, cooking (mustard) oil in Khokana and so on.
Earlier,
people were self sufficient in most of their requirements. Women used to engage in
production of household requirements like clothes, Sukul (straw floor mat), Dala
(Bamboo basket), Doko etc. The Gharelu Prachar Elam Adda, which was established in
1940 AD, had promoted cottage and small-scale industries in different parts of the
country.
During the Ninth Plan (1997-2002) HMG and UNDP has been implementing Micro
Enterprise Development Programme (MEDP) with the objective of poverty alleviation
and employment generation.
1) Definition of Cottage and Small Scale Industries (CSIs):
The industries, which are labour intensive based on local resources and reflect
country's traditional art and culture, are known as cottage industries. According to
Industrial Policy of 1992 AD, the industries having fixed investment up to Rs.1 Crore
are classified as small-scale industries. In terms of industrial units, still more than 90
percent of the industries fall under small and cottage industry. Such industries have
contributed over 76 percent of employment in the industrial sector, and 50 percent in
Babasab patil notes
value addition. Thus, there is a huge potential for using the development of
small-scale and cottage industries as important means for poverty alleviation.
There are 9,890 units of cottage and village industries with investment of Rs.7,720
million in 2001/02 as reported in the Economic Survey of 2002/03. (HMG/Ministry
of Finance).
2) Importance of Cottage Industries:
Cottage and small-scale industries are important for Nepal due to the following
reasons:
a. Low Investment:
The cottage and small-scale industries do not require large investment. Most of
the works are mainly done by hands or with the use of simple tools and machines.
Cottage and small-scale industries have been provided loan from the
intensive-banking programme of the commercial banks. In Fiscal Year 2001/02, a
total of 1,246 cottage and small-scale industries spread over five development regions
of the country, were provided with the loan amounting to 145.4 million.
b. Based on Local Raw Material:
The cottage and small-scale industries are based on local resources like forest
products, mineral and agricultural products.
is tendency of migration of adult people from villages to towns and from hilly areas to
Tarai region and even outside the country in search of jobs.
disintegration of family and villages. Villages are left with old people and children and
town has been flooded with more people resulting a different socio-economic problem.
Developing cottage and village industries can control this kind of problem.
h) Reduce Import and Increase Export:
The imports of goods are more than export. This causes unfavourable balance
of trade and depletion of scarce foreign exchange.
small-scale industries can help in reducing import of goods and even boost country's
export.
Pashmina, Rhadi, Pakhi, Leather goods, Cheese, Butter etc. These products of cottage
and small-scale industries are gaining popularity in local as well as in international
markets.
i) Promote Tourism Industry:
Tourists usually buy handicraft products as souvenir. Thus cottage and small
industries also help to promote tourism in the country.
j) Protect Culture and Tradition:
The products of cottage and small-scale industries reflect culture and tradition
of different communities living in different parts of the country. Thus these industries
are important to preserve culture and tradition of the country.
k) Help Large Scale Industries:
The small and cottage industries can provide intermediate products which
large-scale industries use in their production processes.
industries help each other.
produce in large-scale industries but are necessary for them. The small and cottage
industries produces such products. For example, containers are required for packing
finished goods produced by large-scale industries. These items can be produced in
cottage and small-scale industries.
(l) Decentralization:
The Cottage and Small Industries can be established with a minimum resources
and simple skill. Thus they can be established in any part of the country to diversify
industrial production and reduce regional disparity in economic development.
3. Problems of Cottage and Small Scale Industries:
Irrespective of crucial role of cottage and small-scale industries, they are not
free from problems. The main problems of these industries are:
Babasab patil notes
a. Problem of Finance:
The cottage and small-scale industries face financial problem. Usually, initial
investment comes from own sources and credit from non-banking sources at very high
rate of interest.
The banks shy away to provide loan to cottage and small scale
industries have not been able to introduce modern technology to meet the demand of
competitive market due to lack of access to suitable technology.
d. Problem of Marketing:
The goods produced by cottage and small-scale industries are generally not of
standard. Usually, they suffer from poor design and quality. The prices are also not
competitive. As a result, it is difficult to market the products. Many products like
bamboo products, pottery, hand knitted straw floor mats are facing marketing problem.
e. Problem of Transportation:
There is difficulty in transporting finished products to the market due to lack of
easy and cheaper means of transportation facilities. The same problem applies for
necessary raw material for the industry.
f. Middle-person Exploitation:
The small producers are not able to sell their product directly into the market.
They are obliged to sell the products at cheaper price to the middle-persons. The
government owned cottage industry shops are also not able to promote cottage and
village industries.
2. Medium and Large Scale Industries (MLSI).
1. Beginning of Organized Industries:
The medium and large-scale industries started with the promulgation of
Company Act 1936 AD in the country.
followed the establishment of Jute Mill in Biratnagar. Many consumer goods industries
Babasab patil notes
were established during the post World War II period. The objective of establishment
of such industries was mainly to meet the scarce condition of consumer goods created
by the war. Unfortunately, the end of Second World War brought together the closure
of many industries due to the depression and lack of basic infrastructure like transport,
communication and financial institutions. The first industrial policy was introduced in
1957 and amended many times. Some financial infrastructure namely Nepal Industrial
Development Corporation (NIDC) and industrial estates were established for the
development of medium and large scale industries. After the restoration of multiparty
democratic system, new industrial policy was introduced in 1992. According to the
new industrial policy, the industries having fixed investment of Rs.1 Crore to 5 Crore is
classified as medium scale industries and industries having investment of above Rs.5
Crore is classified as large-scale industries.
industries in Nepal are Biratnagar Jute Mills Ltd., Raghupati Jute Mills Ltd., Morang
Sugar Mill, Mahendra Sugar Company of Bhairahawa, Match Factories in Birgunj, Butwal,
Hetauda. Bhadrapur, Cigarette Factories in Janakpur, Birgunj and Hetauda, Cotton
Textile Industries, Himal Cement Factory, Saw Mills, Brick & Tile Factories, Beer
Factories, Noodle Factories, Carpet Factories, Garment Factories and so on. Most of
the industries are located in eastern Tarai and Kathmandu valley.
2.
Thus,
they can supply superior quality goods at cheaper price to the consumer.
The medium and large-scale industries have following importance:
a.
b.
c.
Raise Income:
Babasab patil notes
f.
g.
Creation of Employment:
Unemployment, underemployment, seasonal
unemployment
and disguise
To Reduce Imports:
Nepal imports both consumer and capital goods.
Establishing import
substitution industries like cement, sugar, and other consumer goods can
reduce the import of goods. Similarly, export promotion industries like carpet
and readymade garment also can be developed to overcome the problem of
adverse balance of trade.
i.
Defense Goods:
For national security and defense purpose, capital goods industries should be
established within the country.
3.
and existing industries are also not healthy. The private sector is hesitant to establish
large-scale industries due to ineffective government policy and uncertain political
environment. Many medium and large-scale industries in the public sector have been
sold out to private sector after the adoption of privatization policy. The problems of
medium and large-scale industries are as follows;
a.
Lack of Capital:
Lack of Power:
Though Nepal is very rich in hydro energy resources, electricity is not cheap and
also supply of electricity is not regular. Many parts of the country are still not
connected by national grid.
e.
f.
Class Struggle:
After the restoration of multiparty system, there were many clashes between the
workers and management due to the absence of clear-cut policy and political
intervention. Workers adopted the methods of strikes, dharnas and gherao etc
and the management had adopted the policy of lockouts.
In this way,
disturbance continued due to the lack of clear-cut policy for dispute settlement
between employer and employee.
h.
Industrial Finance:
The medium and large-scale industries still face problem of necessary capital.
The general people are hesitant to invest in industries due to the poor
performance of industrial groups. The NIDC is also not able to supply necessary
capital to the medium and large-scale industries.
i.
(4,049 mt), GIHB wire (1,107 mt), dry cell batteries (1,156 million pieces) and plastic
goods (32 mt).
b. Classification of Industries:
The current industrial policy of Nepal has classified industries into seven
categories.
oriented industries, (3) agro-based and forest based industries, (4) mineral-based
industries, (5) tourism industries, (6) service industries and (7) construction industries.
c. License and Registration:
There is no
Traditional Cottage Industries are exempted from excise duty, sales tax and
income tax.
(ii)
Manufacturing, energy, agro and forest based, and mining industries are
exempted from income tax for 5 years from date of starting of production.
Industries, which are of national priority, are exempted from income tax for 7
years.
(iii)
(iv)
(v)
Added incentives are given to those industries, which reinvest their earning in
the same or ancillary activities.
(vi)
All needed services for domestic and the foreign investor are given through one
window policy by the government.
(vii)
(viii)
Nepali
(x)
The ownership of cottage and small-scale industries are reserved only to the
citizen. Foreign participation is allowed only in technology transfer.
Sick industries are rehabilitated in accordance with rehabilitation feasibility
study.
4: TOURISM:
1. MEANING OF TOURISM:
Visits by people from one place to another for entertainment, meeting friends
and relatives, enjoying natural beauty, mountaineering, trekking and visiting religious
places are known as tourism. The services provided to visitors are known as tourism
industry. All the organizations like hotels, lodges, restaurants, travel agencies etc
come under Tourism Industry.
means of transportation and communication facilities, few people could travel from
one place to another. The developments of transport and communication have enabled
people to move from one place to another easily. In fact, these days the world has
become Global Village. People can visit different parts of the world due to amazing
growth and development of air transportation. Thus, development of transport and
communication has given a big boost to the tourism sector. Nowadays, people can
safely travel from one place to another in the short time. People can now enjoy and
gain knowledge visiting different places and meeting people from different countries.
2. Tourism Development in Nepal:
Tourism industry in Nepal began from 1950 AD onwards when Nepal opened its door
to foreigners. Nepal got membership of the International Union of Travel Organization
in 1959 AD. The Tourism Board was established in 1957 AD. The UN Conference on
International Travel and Tourism, which was held in Rome in 1963 AD, highlighted the
importance of tourism for developing countries to improve economic condition. In
1972 Tourism Master Plan was introduced in the country. However, only in 1977 the
Ministry of Tourism was established. In Eight Plan (1985-90) emphasis was given to
quality tourism, conservation and maintenance of historical and cultural heritage areas.
Private sector was involved in the development of tourism. The country observed Visit
Nepal Year 1998 with the objective of attracting over 500,000 tourists in that year.
Nepal Tourism Board (NTB) was established in 1999 AD in the form of partnership
between His Majestys Government and the private sector tourism industry of Nepal.
The NTB is responsible for marketing activities aimed at promoting Nepal as a premier
destination.
3. Potentiality:
Nepal is known as the land of Sagarmatha (Mt. Everest), the land of the birthplace of
Siddhartha Gautam and also as Shangri-La in the world. It possesses immense
potentiality to develop tourism industry. It has natural beauty, geographical diversity,
and cultural and artistic heritage.
A brief description of potentiality of tourism industry is given below:
(a) Natural Beauty:
Nepal is very rich in natural beauty. The presence of Mt. Everest, the highest peak in
the world has made Nepal renowned in the world. Out of 14 above 8000m peaks in
the world, eight are in Nepal. Besides, these high mountains, there are 122 Himalayan
peaks above 7000m. These mountains attract people from other countries.
There are many famous and beautiful lakes like Phewa in Pokhara and Rara in
Jumla. The thick jungles of Bhaber region and many kinds of wildlife equally attract
visitors. Different types of climatic conditions are also equally suitable according to the
taste of people. Nepal is considered as one of the best places for bird watching. Exist
bird pops?
(b) Cultural Feature:
Nepal is very rich in cultural heritage. There are numerous artistic temples scattered
all over the country especially in Kathmandu valley. Each place is unique in its cultural
value. Every month there is some sort of celebration in the country like Holi, Dasai,
Tihar, Indra Jatra, Vibaha Panchami, Teej and many more religious festivities. Similarly,
there are many places, which are very popular from religious and historical perspective.
Lumbini, Pashupatinath, Janakpurdham, Gorkha, Muktinath, Swayambhu, Gosaikundan
are some of the examples. Bungamati in Lalitpur is known for its wooden handicraft.
Similarly, Patan, Bhaktapur, Kirtipur, Janakpur, Palpa, Dhankuta and other places are
known for traditional handicrafts and arts.
(C)Friendly People:
Nepali people are friendly and hospitable to the tourists. They can easily mingle with
different communities living in different parts of the World. This is one of the reason,
many tourists return to Nepal..
4. Importance of Tourism Industry.
Babasab patil notes
Rs. (000)
US$(000)
% Change in US$
2018/19 (1961/62)
593
78
2038/39 (1981/82)
493,842
38,149
2048/49 (1991/92)
3,090,700
72,467
27.7
2049/50 (1992/93)
3,082,000
67,721
-6.5
2050/51 (1993/94)
3.397,600
69,309
2.3
2051/52 (1994/95)
5,896,200
118,563
71.1
2052/53 (1995/96)
6,605,800
119,060
0.4
2053/54 (1996/97)
6,158,800
108,527
-8.8
2054/55 (1997/98)
8,084,930
131,042
20.7
2055/56 (1998/99)
11,584,912
171,403
30.8
2056/57 (1999/00)
11,709,098
169,848
-0.9
2057/58 (2000/01)
11,969,174
162,513
-4.3
2058/59 (2001/02)
7,798,535
101,628
-37.5
Year
Tourist Arrival
Foreign
Currency
(in numbers)
Generation
(US $ in million)
Achievement in %
Target
Achiev
Achiev
Compa Compa
ement
red to red to
ement
red to red to
target
1997
1998
1999
2000
2001
Total
Achievement in %
420,00
421,8
57
462,00
463,6
84
508,20
491,5
04
559,02
463,6
46
614,92
361,2
37
2,564,1
2,201,
42
928
previo
target
previo
us
us
year
year
101.4
7.2
.213
115.9
54.4
-0.6
101.4
9.9
255.6
152.5
59.7
31.6
96.7
6.0
306.7
168.1
54.8
10.2
82.9
-5.7
368.1
166.8
45.3
-0.7
140.2
31.74
-15.9
745.3
47.0
441.6
58.74
-22.1
1585
85.9
aggravated this problem. The population is growing at the rate of 2.25 per cent per
annum and 300,000 labourers enter the labour market every year 47 per cent of the
total population remain unemployed. The projected total employment from tourism
industry is 257,000 for FY 1997, and 685013 for FY 2015. In 2002 mountaineers
expedition teams employed 10,599 persons.
(c) Development of Handicraft Industries:
Tourist industry helps to boost up ailing handicraft industries. These industries are
source of income to rural people.
handicraft products.
(d) Source of Government Revenue:
Tourism is also the source of income of the government. The Government receives
income from royalties paid by the mountaineering expeditions, visa fees and taxes
paid by the hospitality sector.
(e) Manpower Development:
The development of tourism requires different types of manpower like tourist guides,
personnel in hotel and travel agencies. To supply necessary manpower for tourism
industry, the Hotel Management and Training Centre provides training on tourism
related subjects. Even in higher education of Tribhuvan University, hotel and tourism
management courses are provided.
students.
(f) Development of Business;
People come to visit not only to spend holidays but also promote business between the
countries. In 1995 some 21829 persons and in year 2002, 16,990 visited Nepal for
business purpose. This helps to develop trade between countries.
(g) Development of far off places:
Most of the tourists come to visit for mountaineering, trekking and pilgrimage. They
travel different parts of the country for days, this helps to generate development
activities in remote parts of the country.
(h) To Promote Friendly Relation:
Babasab patil notes
Tourism helps to promote friendly relation among people of different countries. This
helps to establish peace among the countries and avert conflict. Love, affection and
friendship will be fostered when people meet one another. People can also learn and
exchange ideas.
(i) Improve Balance of Payment:
Nepal being developing country, the value of imported goods and services is many
times more than value of export causing unfavourable balance of payment.
The
foreign exchange earning from tourism industry helps to correct unfavourable balance
of payment.
5. Problems of Tourism Industry in Nepal:
Irrespective of great potentiality of development of tourism industry in Nepal, it is not
progressing satisfactorily. Even Visit Nepal Year could not attract expected number of
tourists.
The main obstacles for the development of the tourism industry are as
follows:
(a) Internal and External Disturbances:
One of the most important factors, which affect the flow of tourists, is internal and
external disturbances.
numerous strikes and protests. Maoist problem has further deteriorated internal
security. The Twin Tower Trade Center attack in the USA in September 11, 2001 has
had negative impact in Nepali tourism as well.
disturbances not only slowed down the growth of tourism it even decreased the
number of tourist arrivals.
(b) Pollution:
The cities in Nepal are labelled as one of the most polluted areas in the world.
Occasional solid-waste dumping problem in Kathmandu city has destroyed the image
of Nepal. Even in trekking routes and along the trail of famous peaks, garbage left by
trekkers and mountaineers is also acute.
(c) Lack of Adequate Transportation and Communication Facility:
Although Nepal has many breathtaking beautiful places like Rara lake, Humla, Jumla,
Muktinath etc they are not easily accessible by road and regular air services. As such
torurists can not visit such places easily. This is one of the reasons for shorter stay of
Babasab patil notes
tourists in Nepal. On average tourists spend only one week in Nepal. Shorter duration
of stay has reduced the possibilities of earning more foreign exchange.
(d) Quality Hotels:
By the end of 1999 there were 785 hotels out of which 95 were star hotels and 690
were non-star hotels. The number of hotel beds were 32,214 upto 1998. Most of star
hotels are located in Kathmandu valley. All the hotels do not have required facilities to
encourage the tourists to lengthen their stay.
(e) Tourist Sites:
The historical, religious and other tourist sites are not well developed. Most of the
beautiful temples are in bad condition. Even in Kathmandu city, historical monuments
like Dharahara, Swayambhu area, Pashupati area etc are not well tended.
Lumbini
which is sacred place for Buddhists all over the world, is not kept clean even after
implementation of master plan for many years.
Tourism industry is most sensitive industry. Any kind of negative information deters
arrival of tourists. Once the potential tourists are lost, it is very difficult to win them
back. Thus, keeping country clean and safe is very important to attract the tourists. If
tourists take back pleasant memories of their visit to Nepal, they tell this to their
friends and relatives back home.
enhance the image of Nepal to the world as a unique visitor's destination. Plan was
made for the effective campaigning to familiarize Nepali art, skills and cultures to the
world, to increase number of tourist arrivals.
xxx
Mountain Tourism:
Policy of opening up more mountains for climbing, the government has already opened
326 peaks for climbing. It has come up with different tourism friendly polices to
facilitate mountain tourism. Some of the proactive steps that the government has taken
towards this end include waiving the royalty on 20 peaks, reducing the royalty by 75%
for 40 peaks and provision of liaison officers for peaks above 6500 meters only.
Mountain tourism generated over Rs.18 million in royalty in 2003.
Thus
goods which are necessary for increasing public welfare may not be produced.
c) Wastage of Resources:
Generally luxury goods bring more profit than essential goods. Thus, private sector
producers produce luxurious goods at the cost of essential goods.
d) Exploitation of Labour:
Under privatization, workers are exploited because they are forced to accept
minimum wage and limited facilities. Security of job is also lacking.
e) Lack of Government Responsibility:
Once industries are privatized, governments responsibility to provide people
welfare is also reduced.
e) Development of Remote Areas Neglected:
Private sector concentrates its business only in urban areas. Thus, remote and
backward areas are neglected.
4. Needs of Privatization:
Privatization is recommended because of following advantages:
a) Free Competition:
Free competition reduces the cost of production and consumers can get goods at
cheaper price.
b) Optimum Utilization:
Under market economy, resources are utilized in optimum way.
c) Technical Development:
For healthy competition, efficiency is essential.
d) Employment Opportunities: Private producers work hard to expand the business and
make profit. With the increase in profit more investment is made and employment
opportunities increases.
e) Loss Prevention: Losses in business leads to close of business. Private producer
always tries hard to avoid losses.
f) Workers Participation:
In modern organization, workers are also given opportunity to participate in
organization by allowing them to purchase share of the company. In this, way even
workers can own the business.
g) Capital Mobilization:
When the public companies are sold to private sector the unutilized private sector's
capital will be mobilized to prevent losses.
6. Liberalization:
Liberalization
means
non-intervention
of
government
in
economic
activities.
restriction.
g. Financial Sector:
nationalized.
Forest Sector:
Forest sector has also been made liberal. Provision has been made for private and user
group community forests.
Power Sector:
Power sector has opened to the private sector.
The experience of Nepal for more than a decade shows that liberalization has not
benefited the poor people except rich people of urban area. It has been criticized as
anti-rural, anti-poor and anti-agriculture.
hotels,
insurance
companies,
schools,
hospitals,
transports
and
The transportation system helps in the mobility of people. They can move from one
place to another to work. This will help to solve the problem of unemployment and
underemployment. The mobility of laborer helps to get better and remunerative jobs.
Similarly, facility of communication provides information to the people regarding job
opportunities in different places.
f) Development of Natural Resources:
personnel should be able to move easily in different parts of the country. Similarly,
efficient and effective communication system helps the quick action and relay
important messages to appropriate authority.
j) Supply of Food in Deficit Areas:
Hill and mountain areas face food deficit every year due to difficult terrain. But in low
land Terai, food is usually in surplus. The facility of transportation plays important
role to carry food from surplus areas to deficit areas.
worse and had to airlift the basic food grains to deficit areas, which is expensive.
k) Tourism Development:
Tourism is one of the important industries for employment generation in the
country.
It also earns foreign currencies and also develops cottage and village
industries.
tourism development. Tourists come to enjoy natural beauty, visit religious places,
Babasab patil notes
for trekking and experience indigenous culture. Without the efficient facility of
transportation and communication, tourists cannot be attracted and their stay in
Nepal will be short.
2. PRESENT SITUATION OF TRANSPORT AND COMMUNICATION:
a) Road:
Road is major means of transportation in Nepal. Roads can be basically classified into
three types black topped, graveled and earthen.
Km
4,617
3,958
7,330
15,905
Plan Year
Portion in %
29.0
24.9
46.1
100
Total Length/km
376
624
1193
2049
2730
3173
4940
5925
8851
11714
b) RAILWAY:
The first railway line, which is known as Nepal Government Railway (NGR), was
constructed in 1927.
Raxaul in the Indian border. This railway is not in operation now. The other railway
line, which is known as Nepal Jayanager - Janakpur (NJJR), was constructed in 1935. It
is a narrow gauge line. This is the only railway line currently in operation in the country.
It is improved and extended to 51 km. A feasibility study of the East-West railway and
Janakpur- Bardiabas railway is going to be carried out. Raxaul-Birgunj broad-gauge
railway is also under construction. It will connect with dry-port in Birgunj. The main
purpose of this line is to shuttle cargo between Birgunj dry port to Calcutta port.
c) TROLLEY BUS:
Kathmandu-Bhaktapur trolley bus service is the only trolley bus service in Nepal. It is
13km long. There was a plan to extend the service in Kathmandu along ring road
during the Ninth Plan period. There is also plan to undertake a detailed study in other
parts of Nepal.
d) AIRWAYS:
The air transport started in Nepal in 1950 with a weekly Patna-Kathmandu service
operated by Indian Airlines Corporation. The Royal Nepal Airlines Corporation
(RNAC) was established to cater internal air services in Nepal from 1957. Latter, it
started air service to India, Thailand, Hong Kong, Singapore, Shanghai and to
Osaka.
Similarly, for some years RNAC operated its flights to London and
Frankfurt via Dubai. There are 44 airfields in the country. There has been a rapid
expansion of air transportation in Nepal after the adoption of open-air policy in
the country in 1990s under which private sector airlines came forward to operate
in major internal air destinations.
The first rope way was constructed in 1927 A. D. It covered a distance of 14 miles
from Dhursing to Matatirtha. (Ichangu to Lainchaur, Hetauda to Teku) Now it does not
exist.
general post office, 5 regional post offices, 70 district post offices and 827 area post
offices.
provided in 116 post offices. There is also Express mail service to about 22 countries.
b) Telecommunication:
Telephone services started during the Rana regime. After 1956, telephone services
was expanded in Nepal. Telecommunications Corporation is providing both internal
and external telephone links. As of March 2001, a total of 275,558 telephone lines are
in operation and a total of 1726 VDCs are linked with telephone service. There is also
a cellular mobile service in Kathmandu, Biratnagar, Birgunj and Pokhara. Even in
remote areas where electricity has not reached, telephone is operating with the help of
solar energy.
Babasab patil notes
c) Newspaper:
The oldest vernacular daily is Gorkhapatra. After the restoration of multiparty
democratic system in the country, there has been a considerable increase in the
number of daily newspapers, weekly and fortnightly magazines. As of mid April 2001,
the total number of newspapers registered in various districts in the country reached
2870. The government provides a subsidy on newsprint for newspaper publication.
Since 2001, the government has been providing cash subsidy based on advertisement
of public interest.
d) Radio Broadcasting Service:
The Radio Nepal was established in 1950. It is the oldest radio station, which provides
radio broadcasting services all over the country through short and medium waves. It
broadcasts news in different languages in addition to various informative, educational
and agricultural, and entertainment programmes. With the implementation of liberal
radio broadcasting policy number of FM stations came into existance in Kathmndu
Meaning
Trade is one of the age-old occupations of the human civilization. In earlier years
of civilization, traders traveled from one place to another bearing great hardship to
trade merchandise.
Trade is of two-type (a) Domestic Trade and (b) Foreign Trade.
Trade done within the country is known as domestic trade. In villages, people
buy and sell goods at Hat Bazar which take place weekly and on special occasions
whereas in urban areas trading takes place everyday. Due to increased transportation
and communication facilities, domestic trade is also expanding very fast.
The trading with foreign countries is known as foreign trade.
2
association and work for mutual benefits and for common interest. The South Asian
Free Trade Agreement (SAFTA) agreed between the seven regional countries under
South Asian Association of Regional Cooperation (SAARC), ASEAN, European Common
Market (ECM) are the examples of mutual cooperation in economic development of the
member countries. Similarly, Bangladesh, India, Myanmar, Sri Lanka and Thailand
(BIMST) economic cooperation was formed in 1997. Nepal and Bhutan were admitted in
the group in 2004. Nepal has also joined World Trade Organization (WTO) in 2004.
(b) Specialization:
Foreign Trade helps to produce goods at cheaper price. Because, when a country
enters into foreign trade she can produce only those commodities, which have
comparative advantage and import other goods at cheaper price from the foreign
countries. For instance, Nepal being agricultural country it is not economical to
produce machines, equipment, means of transportation, and electronic products
etc. These products can be imported and Nepal can concentrate in the production
of those goods like Carpet, Readymade Garments, Pashmina, handicraft and
agricultural products. Through specialization, Nepal can enjoy the economies of
large-scale production.
(c) Advantageous in Emergency:
The foreign trade is also the source of meeting the urgent need of certain
commodities. The emergency may be caused due to flood, storm, fire, famine,
earthquake, landslide, war etc. Importing goods specially foodstuff may fulfill the
requirement in the emergency situation. In old days whenever famine occurred, people
died due to starvation. Such problems can now be averted through foreign trade.
(d) Supply of Scarce Commodities:
Because of geographical diversity, all the countries are not able to produce all
the goods.
For instance, Middle East countries are rich in oil resources. These
countries export oil and import the necessary goods from other countries. Similarly,
Nepal lacks machinery, equipment and many other commodities, which are imported
from other countries. All these activities come under the foreign trade.
(e) Exchange of Technical Know-how:
Acquiring of modern technological knowledge takes long time.
At the same
time, it is very expensive to develop all the necessary technology for rapid economic
development in the country. Therefore, the developing countries are obliged to import
suitable technology from foreign countries.
(f) International Cooperation:
The trade relationship between the countries brings the countries closer. The
economic cooperation leads to friendly relation among the countries, which help to
foster international peace and solidarity.
(g) Industrial Development:
International trade helps developing industry through the import of raw material
and capital goods.
Assembly industries basically based on electronics and electric goods such
Television, VCR, DVD, Air conditioners, Vehicles, Computers etc, assembled here for
domestic market. There are also some electronic components, which are made here
for export.
Another recent exportable commodity is computer software programmes.
3. Features of Nepali Foreign Trade:
The following are the features of Nepali foreign trade:
(a) Growth and Trend of Foreign Trade:
Trade relation of Nepal with India and Tibet is very old. Nepals major trade
partner is India. Trade with third countries started only after 1956 AD, and trade with
overseas countries started after the implementation of trade diversification policy
during third plan (1965-70 AD).
Volume of Foreign Trade
Value in 000
Rupees
Fiscal
Export
in
Import
in
Total trade
Trade
Year
Total
1998/99
35,269,2
Total
27.7
92,003,39
72
72.3
Deficit
127,272,6
56,734,1
62
18
1999/20
49,561,0
30.4
113,687,1
69.6
163,248,1
64,126,1
00
28
31.7
49
68.3
77
21
2000/20
55,245,9
30.05
118,786,6
69.6
174,032,5
63,540,7
01
00
27.8
09
72.2
09
09
2001/20
47,386,7
108,664,8
156,021,5
61,248,0
02
88
01
89
13
2002/20
50,494,3
131,041,8
181,536,1
80,547,5
03*
22
34
56
12
The total volume of foreign trade in FY 1998/99 was 127,272.7 million and trade defic
56,734.1 million. Similarly, balance of trade is deficit in other years also. The volume of trade
2002/2003 was 181,536.2 million. As compared to FY 2001/2002 export has been decreased by ne
2.3 percent in 2002/2003 amounting to Rs.50,494 million while in the same period import ha
increased by 2.6 percent amounting to Rs.181,536 million.
(b) Composition of Foreign Trade:
The composition of foreign trade refers to export and import according to major
items of export and import. According to the Standard International Trade
Classification (SITC) major items of export and import are shown in the following Table.
(Rupees in million)
1999/2000
SITC Group
Export
Import
Export
Import
3724.5
7619.5
5390.9
10,734.
7
50.0
846.1
110.4
941.2
469.9
6246.7
526.8
7232.0
0.5
8737.5
2.0
9113.9
3597.2
333329.
3605.6
4445.9
0
Chemical & Drugs
2804.0
12476.4
4075.8
15464.6
Classified by Materials
13539.6
25638.0
16013.7
33408.8
18063.7
384.2
20227.4
4302.4
21513.6
5320.2
Machinery
and
Transport 97.8
Equipment
Miscellaneous
Manufactured 11392.8
Articles
Not classified
0.0
266.0
0.0
78.1
Total
35676.3
87525.3
51623.0
106966.
8
Value in 000
Countries
Export
Countries
Import
FY
FY2002/03
FY
FY
2001/02
2001/02
2002/03*
27,956,20
26,913,20
56,622,10
73,737,90
USA
9,377,832
12,686,53
Singapore
7,346,919
9,039,197
Germany
4,043,218
China
4,315,803
4,760,342
India
India
3,555,327
UK
808,751
1,070,737
Malaysia
4,818,356
4,009,640
Italy
566,557
530,869
Indonesia
2,877,654
3,976,734
Japan
492,833
474,247
Korea R
2,500,974
3,380,348
France
473,472
453,961
Thailand
3,278,165
2,988,929
Portugal
NR
414,680
Saudi Arabia
3,654,905
2,363,956
Banglades
NR
411,335
Germany
NR
2,278,356
Canada
305,978
383,651
Hong Kong
2,461,194
2,276,995
Switzerlan
382,823
NR
U.S.A.
2,525,603
NR
Belgium
295,140
NR
U.K
NR
NR
Sub Total
44,702,80
46,984.54
Sub Total
90,401,67
10,881,23
97
2,683,984
3,599,778
Other
18,233,12
22,229,43
Countries
Grand Total
108,634,8
131,041,8
01
34
Other
Countries
Grand
47,386,78
59,494,32
Total
Nepal continues to face trade deficit. The major reasons of trade deficit with
India are as follows;
- Tariff preference to Indian commodities.
- Unlimited exchange facilities of Indian currency.
- The production cost of exportable industrial products in Nepal is high and of low
quality than in India.
- Lack of storage facility for agro products.
- Lack of adequate transit.
- Illegal/unauthorized trades in the border areas.
Similarly growing trade deficit with other countries is due to the following
reasons:
- Increase demand of foreign goods in the market
- Tariff and non-tariff barriers like volume control against Nepali products.
- Failure to find new products and market.
4. Problems of Foreign Trade:
(a) Land Locked:
Being landlocked country, Nepal needs unrestricted and free transit facilities
with India, especially its nearest seaport is in Calcutta.
According to international
conventions, Nepal is entitled to get free transit facility like any other land locked
countries getting in the world.
Many
has reduced export of readymade garments. Similarly, involvement of child labour has
reduced the export of carpet to European market.
The quota imposed on Vegetable Ghee has again limited its export to India.
(e) Illegal Border Trade:
The unauthorized trade takes place through out the borders between India and
Nepal.
involved in the illegal business enjoy high profit. This is a serious problem for both the
countries.
(f) Lack of Market Information:
Businessmen lack adequate information about the requirement of foreign market.
The problem further increased by failure to find out new line of exportable products
and new market.
(g) Lack of marketing images:
Another problem is lack of qualitative products.
13 BANKING
1. Meaning of Bank.
The term "bank" referres to an organization, which exchanges one currency into
another. The modern days banks are those institutions, which receive deposits from
people and give loans and advances to its clients.
Bank can be classified into different kinds on the basis of work they perform.
Mainly, there are three types of banks. They are Central Bank, Commercial Bank and
Development Bank.
Banks are important institutions for the economic development of any country.
The banks help people to earn interest out of their savings and also provide loans and
advances to the people who want to undertake investment and operate their own
business. The history of banking in Nepal commenced only after the establishment of
Nepal Bank Limited in 1937 AD as a commercial bank. The Central Bank of the country
- Nepal Rastra Bank was established in 1956 AD.
Rastriya Banijya Bank was established in 1956 AD in the public sector. After that many
Babasab patil notes
A Board of Directors
The Government
appoints the Governor and other members of the Board of Directors. The Nepal Rastra
Bank is responsible for implementation of the government policy relating to financial
matter. It was established in 1956 AD. The main functions of Nepal Rastra Bank are as
follows;
(a) Issuing of Nepali Currency Note:
The Nepal Rastra Bank has monopoly of issuing currency notes. It started to issue
notes from 2016 BS. The bank also issues coins, which is minted in the Department of
Mint. It has guaranteed to make payment of amount stipulated in the currency notes.
The Bank has to keep security in the form of gold and foreign currencies against the
issuance of currency note. The Bank has adopted proportionate reserve system for
issuing the currency notes under which 50 percent of the reserve should be kept in
domestic and 50 percent in foreign currencies, securities and gold. The Nepal Rastra
Babasab patil notes
Bank has issued currency notes of different denominations - Rs.1000 being the
highest and Rs.1 is the lowest.
(b) Bankers to the Government:
All the offices of His Majesty's Government make financial transactions through Nepal
Rastra Bank. The Bank keeps the cash balances of the government as it plays the role
of the banker to His Majesty's Government. It gives and receives payments on behalf
of the government. Whenever the government needs large amount of money, it floats
loan to the public. The Treasury Bill and Development Bonds are a few of the examples
of the medium of government loan.
interest on the government securities and returns the amount when the loan gets
mature.
(c) Bankers' Bank:
Nepal Rastra Bank also acts as the banker to all banks in the country.
All the
commercial banks of the country have to keep deposit with Nepal Rastra Bank as
prescribed by it. The Bank fixes the interest rates for deposits with commercial banks
in the country. As a lender of the last resort, it also provides refinance facility to other
banks.
(d) Commercial Bank:
All the commercial banks and finance companies are required to observe rules and
regulations enforced by the Nepal Rastra Bank. It makes supervision of commercial
banks and finance companies and makes necessary recommendations for better
operation of these institutions.
(e) Control of Credit:
Nepal Rastra Bank controls credit by exercising various monetary measures in
order to maintain stability of internal price level and to promote economic growth
in the country. In order to control excess credit supply, Nepal Rastra Bank
exercises Bank rate policy, variable reserve ratio, open market operation and other
indirect methods.
(f) Controller of Foreign Exchange:
The Nepal Rastra Bank keeps reserve of foreign currencies. Transactions of foreign
currency have to be approved by Nepal Rastra Bank. Most of the commercial banks are
Babasab patil notes
authorized by the Central bank to deal with foreign currencies. The Nepal Rastra Bank
fixes day to day exchange rates of foreign currencies in the country.
Accordingly,
commercial banks base their buying and selling rates of foreign currencies.
Development Functions:
In addition to the conventional functions, Nepal Rastra Bank performs following
developmental functions also.
(a) Development of Banks and Financial Institutions:
The Nepal Rastra Bank has established Banking Promotion Committee to develop
banking facilities in the remote areas of the country. It provides compensation and
interest free loan to the branches of commercial banks operating in rural and remote
areas. It also provides training to the banking personnel to develop manpower for
banking development.
established Rastriya Banijya Bank and provided financial assistance to establish Nepal
Industrial Development Corporation, Agricultural Development Bank, Nepal Stock
Exchange and Credit Guarantee Corporation.
(b) Priority Sector Credit:
Nepal Rastra bank has assisted to implement different credit programmes such as
priority sector credit and micro credit programme for women to develop cottage and
small scale industries, to fulfill credit need of the women and poor people in the
country. The programmes are implemented through branches of commercial banks
and other institutions.
(c) Economic Study and Publication:
Nepal Rastra Bank conducts research on various important issues in the country. The
outcomes of such researches help to provide government and other concerned
organizations with the information to formulate economic policies in the country.
Family Budget Survey, Agricultural Credit Survey, Industrial Survey and many other
studies have been conducted by Nepal Rastra Bank. It publishes Economic Reviews,
Economic Reports, Bulletin etc, which provide information on various aspects of Nepali
economy.
(3) Commercial Banks:
Nepal Bank Limited is the first bank in Nepal. It was established in 1937 AD
under Nepal Bank Act. It has authorized capital of Rs.10 million and subscribed capital
of Rs.2.5 million.
Second commercial bank is Rastriya Banijya Bank, which was established in 1965 AD.
The government owns it. Adoption of liberal economic policies allowed the entry of
many new banks in Nepal with foreign collaboration. Nabil Bank (originally Nepal Arab
Bank), Nepal Investment Bank (originally Nepal Indosuez Bank), Standard Chartered
Bank (originally Nepal Grindlays Bank), Nepal Bangladesh Bank, Nepal Bank of Ceylon,
SBI Bank, Himalayan Bank Limited, Bank of Kathmandu are few examples of foreign
collaboration commercial banks.
Functions of Commercial Banks.
Borrowing from people and lending to the people are the primary functions of the
commercial banks.
1. Borrowing/Accepting deposits:
Commercial Banks accept three types of deposits. They are (a) Fixed Deposit (b)
Current Deposit and (c) Saving Deposit.
(a) Fixed/Time Deposit:
Fixed deposits are those deposits, which are kept in bank's account for a specific
period of time. Such deposits can only be withdrawn after a specific time period.
The depositors get higher rate of interest in this kind of deposits. People deposit
money in fixed deposit for interest as well as safety. The fixed deposits in Nepali
commercial banks can be for 3 months, 6 months, 1 year, 2 years and above. The
commercial banks provide 7.25 - 8.50 percent of interest for 1-year time deposit
and 7.50 - 9 percent for two years and above deposit. The rate of interest is not
same in all commercial banks.
(b) Saving Deposits:
Saving deposits are made by the people whose main motive is to save money. Bank
pays interest on deposits to its depositers. They can withdraw money according to
their needs keeping minimum balance with the bank. The minimum balance differs
from bank to bank.
There is also facility of home saving account especially for children and
uneducated people. The operating banks provide a box to the depositor and they
drop money whenever they have money.
The amount
deposited in this account can be withdrawn any time by drawing cheque without
giving any prior notice to the bank. Depositors do not get interest on this account,
instead they require to pay some service charge to the banks. A minimum balance
has to be maintained to operate current account in the banks.
The minimum
balance is different from bank to bank and ranges from Rs.10,000 to 25,000.
Recently, people are not so much interested to save money in the banks due to
the negative interest on their deposits.
As
commercial banks take deposits on one-hand and advances loans from the other, it
would not engage its fund in risky loans. While providing a loan, commercial banks
should adhere to the principles of banking. That is to say, it should keep sufficient
liquid assets to meet the demand of depositors and provide loan to reliable
borrowers to make profit. The banks deal with other people's money that means
depositors' money. Thus, it will survive as long as it can obtain trust and good will
of the depositors. Any small rumour of bank's financial problem spoils the bank's
business and credibility. Thus, banks must be very careful while providing loans to
borrowers.
Types of Loan:
(a) Loan and advances:
The banks give loans and advances to individual, business firms, and
institutions for various purposes.
cards, and travelers' cheques with the approval of Nepal Rastra Bank. They publish
annual bulletins to provide information on the economic situation of the country.
Banks also issue references to person/s or institutions about their economic
conditions, which is required by other institutions to know about the individuals or
company's financial status. Usually, students aspiring to study in a foreign country
get certification of finances verifying their economic condition from the banks.
These banks also do government transactions with the permission of Nepal Rastra
Bank.
According to the directives of Nepal Rastra Bank; Nepal Bank Ltd. and Rastriya
Banijya Bank provide production credit for rural women (PCRW) and Micro Credit for
Women (MCPW). Under this programme designated commercial banks provide loan to
women for income generating activities against group liability. PCRW programme is
operating in 67 out of 75 districts. Similarly, micro-credit project for women is
operating in 12 districts and 5 municipalities. In MCPW; for the first time, 95 NGOs
have been involved in group formation, training and delivery of bank credit as social
intermediation. Both PCRW and MCPW have been successful in meeting the need of
poor women.
intensive
banking
programmes
such
as
Gobar
Gas
Programmes,
Livestock
14 PUBLIC FINANCE
1
Definition:
The word "Public" refers to public authorities, which are both local and central
authorities while the word "Finance" refers to money. Thus, public finance deals with
income, expenditure, public debt and debt management. From the study of public
finance, we understand why government imposes tax and how and where it spends
money. It is a branch of economics dealing with the identification and appraisal of the
effects of the government's financial policies. It analyzes the effects of government
taxation and expenditure on the economic situation of individuals, institutions and
also on the economy as a whole.
Every government is required to maintain internal law and order and protect the
country from foreign aggression. Besides these essential functions, the government
also requires to provide public utilities and social services to the people. Classical
economists believed that the government should not interfere in the economic
activities of the people. But, after the Second World War the importance of government
activities has increased. Especially in developing countries, the government has to play
a crucial role in providing social services such as education, health, sanitation and
economic services like transport, communication, electricity and drinking water. The
enormous financial resources required to perform all these functions are obtained from
tax and other sources.
2
into tax revenue and non tax revenue which are given below:
Tax Revenue:
Tax is the most important source of income for the government. Tax can be
divided into direct tax and indirect tax.
Sources of HMG/Nepal Revenue
Rupees in
million
Heading
1999/2000 %
Tax Revenue
33152.2(100.00)
Customs
10813.3(32.6)
13387.4(40.4)
1015.9(3.1)
7935.6(23.9)
9741.6(100.00)
386.3(4.00)
2428.9(24.9)
Dividend
2507.5(25.7)
563.3(5.8)
3751.0(38.5)
Miscellaneous items
104.6(1.1)
Customs: The main sources of customs income are import tax, export tax and
Indian excise refund and others. During the FY 1999/2000, 32 percent of tax income
was from custom duties.
b.
c.
d.
loan repayment and interest, etc. The amount of regular expenditure made in
different areas is given in the following table.
Regular
Development
expenditure
expenditure
Constitutional Bodies
431.5
26.6
General Administration
4070.4
108.1
Revenue Administration
339.2
---
Economic
Administration
and 130.7
28.6
Planning
Judicial Administration
276.0
---
Foreign Service
672.6
---
Defense
2994.8
---
Social Service
8327.9
12406.2
Economic Service
2224.8
18648.6
39.2
---
10032.8
---
Miscellaneous
4496.1
531.1
Total
34036.0
31749.2
10
11
12
"Strictly speaking all economic life involves planning... to plan is to act with a
purpose to choose and choice is the essence of economic activity"
-Lionel Robbins.
According to Dickinson's definition "Economic planning is making of major
plan were to increase production, employment and living standards of the majority of
the people.
But only
Rs.21,44,00,000 was spent during the plan period. The plan had given top priority to
the development of transportation. Apart from some progress in social services and
rural development, nothing remarkable was achieved during the plan period.
2 Three Years Plan (1962-65 AD).
After the first plan, there was no plan for a period of one year. A plan holiday
was observed. This period was devoted to review the first plan. The objectives of the
second plan were to increase national income, to stabilize the economy, to increase
employment opportunities and to ensure social justice. This plan was also termed as
preparatory plan because this plan was devoted to developing infrastructure needed
for the formulation and implementation of planning in future.
2
Rs.354 Crore of which Rs.225 Crore was allocated for the public sector, Rs.87 Crore for
the private sector and Rs.12 Crore for the Panchayat sector. About 41 per cent of the
total outlay was set aside for transport and communication development, 26 per cent
for agricultural development, 18.4 per cent for industry, commerce, electricity and
mining. The GDP growth during the plan period was 2.65 per cent.
4
The main policies adopted to fulfill the set objectives were reducing excessive
dependency on foreign aid by mobilizing internal resources, investing in less
developed areas and increasing the production of basic goods, using labour intensive
production process in agricultural production, controlling the general price level,
encourage private sector participation in industrial production, increasing foreign trade
and diversify it, provide agricultural credit and inputs through institutional sources.
Out of the total outlay, the outlay for the public sector was Rs.617 Crore, Rs.209 Crore
for the private sector and Rs.93.1 Crore was allocated for the Panchayat sector. Of the
total public sector outlay 29.8 per cent was allocated for agricultural development,
23.2 per cent for transport and communication development and 22.4 per cent was
allocated for industry, commerce, electricity and mining. The growth of GDP was 2.2
per cent during the plan period.
6.
increase employment opportunities and meet the minimum basic needs of the people.
In order to achieve these objectives, the main policies adopted during the plan period
were to give priority in the development of cottage and small-scale industries, to
develop the agricultural sector and to encourage development of export trade and
tourism.
The total outlay of the plan was Rs.3394 Crore. 60 per cent of the
development expenditure was to be met from foreign assistance mainly in the form of
grants. Out of the total development expenditure, 31 per cent of the expenditure was
set aside for agriculture, irrigation and forest. Another 26 per cent went to industry
and mining and 17 per cent expenditure for the development of transport and
communication.
7
and trade. Another important policy was to control population. The estimated total
expenditure was Rs.5041 Crore. Out of the total Rs.2700 Crore was allocated to the
public sector and Rs.2141 Crore to the private sector. Of the total expenditure; 34.3
per cent was set aside for agriculture, irrigation and forest; 14.4 per cent for transport
and communication, 29.8 per cent for social services and 21.5 per cent to industry,
mining and social services.
expenditure were met from external sources and remaining 30 per cent from domestic
sources. This plan had targeted to increase national production by 4.5 per cent per
annum.
8
two years.
The main
programmes during this plan period were intensive development in agricultural sector,
development of rural infrastructure, development of energy, human resource
development, creation of employment opportunities, population control, export
promotion and diversification, industrial development and tourism promotion.
The total fixed capital investment was Rs.17033.2 Crore; out of which
Rs.10919.3 Crore was to be made from the private sector and Rs.6113.9 Crore from
the public sector.
9. Ninth Five Year Plan (1997 2002 AD).
The only objective of the Ninth plan was to alleviate poverty consistent with 20
years long term development prospective plan.
Agriculture and forest have been given first priority followed by water resources,
human resources and human development, industrialization, tourism development,
international trade and physical infrastructure development.
The total development expenditure of the plan was Rs.18,958.0 Crore. Of the
total expenditure; 33.30 per cent has been allocated to social service, 27.0 per cent to
agriculture, irrigation and forest, 18.70 per cent to electricity and 17.54 per cent on
transport and communication. Similarly, 1.54 per cent has been allocated to trade and
tourism, 0.84 per cent to industry and 0.85 per cent to miscellaneous activities.
Babasab patil notes