Demography

Studying the composition of population and the dynamics associated with

demography is very important for us to understand the economy is general. Even
though the relationship between population and economy is ambiguous, we can
study how the economy of a nation affects the development activities and that, in
turn, is reflected by their population status. Lesser developed countries with smaller
economic status might have higher mortality rate and lesser population growth but
when their economy startsto develop and advance further the population growth
increases tremendously as fertilityrate rises compared to mortality rate. Meanwhile,
when the economy is developed population growth decreases as awareness and
women empowerment increases. Furthermore, the composition of the population
also indicates economic status. A developed country might have a larger population
belonging to the working age group while a lesser developed country might have a
more dependent population.

In the context of Nepal, the population growth seems to be in check and the
indicators, too, look positive. As Nepal is transitioning into a developing country with
an aim to boost its economy significantly, the population dynamics can be a major
influencing factor in the future. The independent population is increasing, the
dependency ratio is decreasing, the distribution of population in different sectors is
gradually starting to even out as the working population is shifting itself from the
agriculture sector to other different sectors, the per capita income is increasing and
all in all Nepal is moving in a right economic direction in terms of population status.

Resources

Nepal finds itself in a rather fortunate state in terms of resources. It is filled with
abundant water, and forest resources combined with other secondary resources like
minerals. The potential that they hold are unfathomable. From hydroelectricity
production that could possibly make Nepal a ‘fully renewable energy run country’ to
creating a tourism-based economy revolving around the wildlife, forests, and Nepal’s
scenic beauty, the prospects are there for us to be met.

Therefore, it is very imperative for an economy like Nepal to capitalize on what we

have and to allocate them appropriately. Proper long-term plans and investments
are required to efficiently utilize them. But our limited extent of the other facets of
our economy might not suffice for us to be able to exploit the resources better than
some of the other countries. Hence, it also breeds the question of, ‘should we open
Nepal even more for foreign investment for them to employ the resources that we
have if we aren’t being able to do it ourselves?’

Asim Kafle
Nepal should either prioritize on efficiently utilizing the resources that we have or
feedon the leftovers that are would remain when foreign investors will ultimately
exploit them. We have to act fast and sensibly. Nepal’s renewable resources are a
very good alternative for the existing fossil fuel energy and the impending energy
crisis that it brings along with it. And if Nepal can be capable enough to avoid the
crisis in the future,why shouldn’t it aim for that?

Sectors

All the sectors of an economy are very much inter-related. Development of one
sector paves way for further growth in the other and so on. Along with it there is also
a trend among different sectors that happens while the economy develops.
Generally, when an economy develops, it shifts from being a primary sector-oriented
economy to a secondary sector-based and then to a tertiary sector-heavy economy.
At its most advanced stage the tertiary sector has the largest contribution to the GDP
and share of employed population.

However, this hasn’t been the case in Nepal. We are gradually transforming away
from an agriculture-based economy as agriculture’s GDP contribution has been
declining (it stands at 24% currently) but still more than 60% of the population are
involved in it. Meanwhile, the service sector has the largest contribution in the GDP
(59%) yet it only employs 20% of the population in Nepal. Also, the fact that we are
shifting into a service-based economy without ever having a boost in the industrial
sector is quite problematic in itself.

Nepal’s inability to develop the primary sector efficiently as Nepal’s potential lies
enormously in it (agriculture, hydropower, forestry) while also not paying attention to
thesecondary sector prose major questions in terms of Nepal’s planning and how it
wishes the economy to advance further. Moreover, as the economy advances, the
quaternary sector starts to strengthen. It facilitates in study, research, analysis, and
planning. So, this sector offers a possibility for providing answers to the questions
that are being asked.

Plans and Policies

Plans and policies are created and implemented in order to bring stability in the
nation’s economy while also envisioning a future for the economy. With the budgets
and periodic plans, the government is able to allocate the available resources
according to the people’s needs or how it suits their ideology. They become very
essential especially in acountry like Nepal where the market isn’t very strong. Hence,
they also provide guidance for the markets as well in the form of price ceilings or
price floors and other measures.

Asim Kafle
The long-term plans for Nepal are relatively straight-forward. As we are still lacking
in meeting even the most basic of needs in many areas, the priorities lie in providing
good education, sanitation, food, transportation, and so on. Then only, the focus
shifts onto the economy and the different sectors. Therein, the major significance
has been givento agriculture and hydropower, the two strong suits our economy.
The plans are commendable and the goals that they are planning to meet are really
exemplary. If Nepal’s economy achieves all the targets in the projected time-frame,
we could well see us transform into a nascent-developed economy in just a few
decades. The challenge that lies ahead is of the implementation and how
sustainable the visions can be.

Along with that, the plans for Nepal’s economy have been more or less the
same despite change in Governments and ideologies. It might also suggest that
there are certain goals that Nepal has identified which needs to be addressed before
it can actually transform into a more advanced stage by embracing a rigid economic
philosophy.

Trade

A 1:1 import to export ratio is considered to be an ideal trading status for any country.
Therefore, on paper, Nepal’s international trading scenario looks rather bleak as it
is largely constituted of imported goods and very few exported products. However,
there are some significant factors that explain its causes. First, the production
capacity of Nepal is still sub-optimum. And even for the goods being produced Nepal
needs to import raw materials. Second, the goods produced in Nepal are relatively
expensive compared to exported goods, which are cheaper due to mass production.
Hence, there is a very firm stronghold of exported goods in Nepalese market.

However, significant developments have been made to strengthen this sector. SEZ
zones have been established to promote foreign investment and trade. SAFTA and
BIMSTEC have contributed immensely to facilitate trade between Nepal and other
regional countries by creating tariff free zones and special trading zones. Nepal
hasalso increased export of energy in the form of hydro-powered electricity, which
has aided in balancing the trade deficits.

Even so, not having a positive trade balance shouldn’t be a major concern for
Nepal’s economy. Nepal is at a comparative disadvantage in terms of production
and exporting goods and, hence, it is potentially more beneficial for Nepal to import
under current circumstances. If Nepal were to revolutionize a certain sector in due
course, there might be a possibility of a trade balance but for now there are very few
alternatives to the current situation.

Asim Kafle
 Challenges and Opportunities

While the possibilities are there, Nepal faces an array of challenges pertaining to
different facets of economic and non-economic subjects. The most troublesome of
which has been lack of proper infrastructures. Infrastructures are pivotal for
economic growth and poor infrastructures halt many development activities. To
develop these infrastructures, Nepal needs suitable investment and adequate man-
power. And, of course, these are, too, the challenges Nepal faces. Nepal hasn’t been
able to invest properly and keep the human resource from leaving the nation due to
lack of proper plans and policies as well as the incompetence of political hierarchy.
The challenge that lies ahead of us is not merely the inefficient allocation of
resources of or lack of investment; it’s actually much broader and complex than this.
It’s an inherently structural dysfunction, and the structure comprises every individual,
every firm, as well as every governing body.

The solution to it would be first to learn how to capitalize on our greatest assets i.e.,
agriculture and hydropower. We must be able to eliminate the need to import food
and electricity in Nepal soon by making Nepal a better investing market and a market
full of opportunities. Nepal could genuinely create a tertiary sector that is based
largely on the primary sector, without focusing the secondary sector. But that
requires a concrete vision and implementation. Decentralization and an even
development throughout the nation are keys to this; only then Nepal could come
even remotely closer to meeting its economic potential.

Asim Kafle