Business Environment Analysis

“Assignment on Different Policy of Nepal”

Submitted By-

Santosh K.C

VI Trim, B

Submitted To-

Mr. Indra Dhoj K.C

Faculty Member

Ace Institute of Management

October, 2021
GOALS, OBJECTIVES, VISION AND GOVERNMENT’S THREE ASPECT
HIGHLIGHTS OF POLICIES

MONETARY POLICY 2078/79

The refinancing policies brought to revive the industries/businesses affected by the pandemic have
been retained in the current Fiscal Year 2078/79.

The loan-to-capital deposit ratio has been raised from 85 percent to 90 percent. The existing
provision on credit resource mobilization ratio has been scrapped. The Credit Deposit Ratio should
be maintained no higher than 90% until Ashar, 2079. The provision of the CCD ratio has been
renounced. Meanwhile, the permissible margin lending percentage has been retained from the last
monetary policy with no changes. In order to minimize overexposure to the risks of the capital
market, an entity or individual can only take margin loans of a maximum of Rs. 4 crores from a
financial institution and Rs. 12 crores in total.

In order to further promote merger and acquisition between commercial banks, the following
facilities have been added to the already-existing facilities, effective till Ashad 2079:

1) Added one year of lending facilities to predetermined sectors.

2) 0.5% slicing on the Cash Reserve Ratio (CRR) for a year after commencement of joint
operation.
3) 1% slicing on the statutory liquidity ratio for a year after commencement of joint operation.
4) 5% addition on the limit on the permissible deposit amount for a single financial institution.
5) Board members and higher officials of the bank do not have to complete 6 months of the
dormant period before joining another licensed institution.
6) 1% leniency on the interest rate spread.
7) Misc.

Meanwhile, in order to also promote merger/ acquisition between microfinance institutions, if a

wholesale microfinance institution merges with a retail microfinance institution, the merged
institution can also indulge itself in retail operations. Furthermore, microfinance companies with
cross-holding of commercial banks, development banks, or finance companies are required to go
into merger/ acquisition by Ashar, 2079.
Outlook

The NRB has implemented an expansionary monetary policy to stimulate business activities and
encourage consumer spending. The monetary policy has outlined several reliefs for the revival of
the economy from the impacts of COVID-19. With the deadline for interest and loan repayments
extended, and loan restructuring provisions on the way, the businesses most affected by the
pandemic may slowly be able to return their operations at least to their previous level.

Credit-Deposit ratio requirement has been increased to encourage BFIs to grant more loans to
increase the money supply. The increase in credits and deposits of BFIs in the past fiscal year
shows that NRB’s decision to increase the CD ratio has increased lending in the previous financial
year and so it is reasonable to expect that this year’s monetary policy will increase BFI lending as
well. With the increase of the Repo rate, any inflation arising from the growing economic activity
will be minimized.

The NRB has been introducing incentives to BFIs for encouraging mergers and acquisitions for
the past few financial years to strengthen their capital base and increase their risk-bearing capacity.
Mergers and acquisitions of weaker banks by stronger banks are expected to achieve efficiency
through economies of scale.

The monetary policy for FY 2021/22 makes great promises for the economic recovery from the
impacts of COVID-19. Quick implementation of these policies along with frequent monitoring
and assessment is required to achieve the desired outcome.

FISCAL POLICY 2078/79

Budget 2078-79 (2021-22)

The Government’s annual budget functions as a policy leverage to stimulate economic

development by providing necessary guidance and mobilizing resources for effective governance.
Finance Minister Bishnu Prasad Paudel has announced NPR 1.647 trillion budget for the
upcoming fiscal year 2021/22 that starts in mid-July.

Objectives
  Protecting the life of citizens from the COVID 19 Pandemic.
 Optimum utilization of resources, opportunity and capacity for rapid economic
development and upliftment.
 Strengthen public welfare role of Government, provide social security, and achieve
prosperity with social justice.
 Development of production-oriented economy by mobilizing resources and means of
public, private and cooperative Sector.

Priorities
 Health (COVID 19)
Extension of testing, provision for treatment, supply of health equipment and materials,
assurance of free vaccination, development of health infrastructure and effective
mobilization of health workers to prevent, control and cure COVID 19.

 Economic Recovery from COVID 19

Uplifting economic activities through relief packages to families affected from COVID 19
and providing incentives, subsidies, and packages economic revival to the private sector.

 Employment Creation and Social Security

Assurance of job and employment to entrants into the labour market and labourers who
have lost their jobs. Social security and protection based on life cycle to all citizens.

 Agriculture and Productivity

Agricultural production and productivity enhancement and assurance of food security.

 Infrastructure Development
Investment in infrastructure or skillful and practical education. Construction of
infrastructure having strategic importance which help in rapid industrialization and provide
early returns.

 Sound Governance
Balanced development through coordination and cooperation between Federal, Provincial
and Local level structure. Ending all types of discrimination and inequality, equitable
development, and justified access on the returns of development. Provision of responsible
 governance, assurance of peace and security, corruption control, effectiveness on
governance and services.

Budget Size
The budget plan, for the fiscal year 2021/22 has a total size of Rs 1.647 trillion.

Budget Allocation/ Budget Expenditure

Recurrent Expenditure: 678 billion
Capital Expenditure: 347 billion
Transfer province and local government: 387 billion
Financing Provision: 208 billion

Sources of Financing

Domestic Borrowing
To meet the spending requirements for the fiscal year 2021/22, the government has borrowed
NPR 250 billion from domestic creditors, up by 11.11% from NPR 225 billion in FY 200/21.

Foreign Borrowing
Likewise, the Nepali Government has borrowed NPR 309.29 billion from external lenders,
including foreign commercial banks, international financial institutions, and government of
foreign countries. The foreign debt for FY 2021/22 is 3.27% more than NPR 299.50 billion
in FY 2020/21.

Revenue
The government revenue collection, including government tax, non-tax revenue (property
income, administration fees, fines) and capital revenue (sales of assets or stocks), stood at
NPR 1024.90 for FY 2021/22, an increase by 15.21% from NPR 889.62 in FY 2020/21.

For the FY 2021/22, the Nepali Government has targeted an economic growth rate of 6.5%,
hoping that the vaccination drive could aid economic recovery.

Nepal Budget FY 2078/79: Key Highlights and Takeaways

 NPR 14 billion for the Ministry of Labor, Employment and Social Security
 NPR 45.09 billion for the Ministry of Agriculture
 NPR 122.77 billion for the Ministry of Health and Population
 NPR 180.04 billion for the Ministry of Education
 NPR 1.20 billion for women, children, and senior citizens
 NPR 7.60 billion for concessional loans to farmers
 NPR 12 billion to establish chemical fertilizers
 NPR 4 billion to procure health and medical supplies to combat COVID -19 pandemic
 NPR 400 million for skill development training
 NPR 2.5 million for the security of educational security certificate
 NPR 4,000 for senior citizen allowance per month
 33% rise in all types of social security allowances
 50% subsidies in farm insurance premium
 NPR 12,000 transport allowance to the health volunteers

TRADE POLICY

Vision of Trade policy of Nepal

To achieve economic prosperity by enhancing trade sector’s contribution to the national economy
through export promotion.

Goals of Trade Policy

 Achieving inclusive and sustainable economic growth through export promotion.

Objectives of Trade Policy

Main objective

To support the economic development and poverty alleviation initiatives through the enhanced
contribution of trade sector to the national economy.

Other Objectives
  To create a conducive environment for the promotion of trade and business in order to
make it competitive at international level.
 To minimize trade deficit by increasing exports of value added products through linkages
between imports and exports trade.
 To increase income and employment opportunities by increasing competitiveness of trade
in goods and services and using it as a means of poverty alleviation.
 To clearly establish interrelationship between internal and foreign trade, and develop them
as complimentary and supplementary to each other.

INDUSTRIAL POLICY

Vision of Industrial Policy:

 It is expected to increase the activities relating to industrial development, create extensive

employment opportunities, and increase people's income level such that industrial sector
would contribute to the national economy as a leading sector.

Goal of Industrial policy:

 The long term goal of industrial policy is to provide a major contribution in national
economy by assisting in minimizing poverty through sustainable and broad foundation of
industrial development on the basis of effective coordination and cooperation of public,
private and cooperative sectors.

Objectives of Industrial Policy:

It was formulated with the objective of promoting industrial sector. Some of its objectives are:
 To increase exports of industrial products and ensure rise in national income and
employment through increase in qualitative and competitive industrial production as well
as productivity.
 To increase the contribution of industrial sector on balanced national and regional
development by mobilizing local sources, raw materials, skills and resources.
 To establish industry business as a sustainable and reliable sector by using latest technology
and environment–friendly production technique.
  To establish Nepal as an attractive investment place in South Asia region and world by
strengthening the foundation of investment through development of required productive
manpower and managerial efficiency for industrial development.
 To protect industrial intellectual property right.
 To maintain a sustained growth in productivity
 To enhance gainful employment
 To achieve optimal utilization of human resources
 To attain international competitiveness

TOURISM POLICY

Vision of Tourism Policy:

Tourism is valued as the major contributor to a sustainable Nepal economy having developed as
an attractive, safe, exciting and unique destination through conservation and promotion, leading to
equitable distribution of tourism benefits and greater harmony in society.

Goals of Tourism Policy

 Increase annual international tourist arrivals to Nepal to two million by2020.

 Augment economic opportunities and increase employment in tourism sector to one
million.

Objectives of Tourism Policy:

 To improve livelihoods of the people across the country by developing integrated tourism
infrastructure, increasing tourism activities and products, generating employment in the
rural areas enhancing inclusiveness of women and other deprived communities, and
spreading the benefits of tourism to the grassroots level.
 To develop tourism as a broad-based sector by bringing tourism into the mainstream of
Nepal socio-economic development, supported by a coherent and enabling institutional
environment.
  To expand and extend tourism products and services in new and potential areas of Nepal
by enhancing community capacity to participate in tourism activities.
 To publicize, promote and enhance the image of Nepal in international tourism source
markets.
 To enhance the flight safety and aviation security, extend air connectivity and improve
capacity and facilities of national and international airports.
 To attract new investment in creating new tourism facilities, products and services.

INVESTMENT POLICY

Vision of Investment Policy:

The policy has envisioned the Investment Board, Ministry of Industry, Foreign Investment
Promotion Board, Department of Industry, and One Stop Service Center as the institutions
involved in implementing foreign investment policy in Nepal.

Goals of Investment Policy:

 Achieve sustainable economic growth and generate employment

 enhance investment in the regional and national development
 fill the gap of increasing investment demand
 increase the domestic production and productivity and
 Create an investment friendly environment.

Objectives of Investment Policy:

Primary objectives: safety, liquidity, and yield.

Other Objectives of Investment Policy:

 Making the economy more dynamic and competitive by maintaining trade balance through
export promotion and import management, and by attracting foreign investment,
technology, skills and knowledge in priority sectors.
  Sets forth types and characteristics of eligible instruments, the investment process, and the
management of a portfolio.
 Improves the quality of decisions and demonstrates a commitment to the fiduciary care of
public funds, with emphasis on balancing safety of principal and liquidity with yield.
 Adherence to an investment policy signals that an entity is well managed and is earning
interest income suitable to its situation and economic environment.

EMPLOYMENT POLICY

Vision

The long-term vision of the National Employment Policy is to contribute to poverty alleviation by
making the national economy strong and vibrant by involving the country’s available labor force
in productive, decent and safe employment through means of a capable labor market by making
them competitive.

Goals

 To provide productive, non-discriminatory, exploitation free, decent, safe and healthy work
opportunities for citizens of the working ages by building an environment of friendly
investments
 Building and managing a labor market that contributes to the national economy so that it
can compete at the global level.

Objectives

 To make available productive and output-oriented employment opportunities to all citizens

by promoting the national economy to orient various sectoral policies towards employment
generation by harmonizing them with this policy.
 To improve the quality of employment by gradually transforming informal employment
into formal employment.
 To create suitable opportunities for preparing knowledge- and skill-based labor force as
per the need of the labor market.
  To appropriately manage migrant and immigrant workers.
 To accord priority to the creation of employment opportunities targeted at the youth.
 To strengthen the labor market by using modern research-based information technology.
 To encourage employment-friendly investments by building harmonious industrial labor
relations.

PRIVATIZATION POLICY

Vision

Government has a long-term vision of making the economy more dynamic and efficient
transferring all the government owned corporations to the private sector.

Goals

 Attaining economy and efficiency in the production of goods and services

 Enabling competition for enhancing efficiency and effectiveness

Objectives

 To increase the productivity through the enhancement of the efficiency of the state-owned
enterprises
 To mitigate the financial and administrative burden to the government and
 To achieve the all-round economic development of the country by promoting wider
participation of the private sector in the operation of such enterprises.