BALANCED GROWTH THEORY VS UNBALANCED GROWTH THEORY

- Baikuntha Pandey(Asst. Professor of Economics, TU)

1.Introduction
There is a great debate in developing countries and the least developed countries
on what type of growth theory to be pursued for their socio-economic
transformation. Due to inability of proper diagnosis of basic characteristics of the
economy, exact prescription of the growth model is impossible. And sometimes,
exact prescription of the model becomes imprecise although the basic
characteristics of the economy have been identified. This study tries to explore the
best suited growth model for Nepal between the two growth models- balanced
growth model and unbalanced growth model. In the context of Nepal, average
GDP growth rate has been GDP Annual Growth Rate in Nepal averaged 4.35
percent from 1993 until 2020, reaching an all-time high of 8.60 percent in 1993
and a record low of -2.10 percent in 2019(Central Bureau of statistics, 2021).
During the given period, the three types of political system have been changed
viz. Party less Panchayet System, Multiparty System with Constitutional
Monarch, and Federal Republic. Despondently, Nepal's growth rate could not
gear up. It is still unravelled, and it pushes people into puzzle box whether it is
due to inappropriate economic model or inappropriate political system that
Nepal's development activities could not accelerate. But writer assumes that it is
due to inexact growth model we couldn't achieve high growth rate as envisaged in
the aggregates past 14 plans.
1.1. Balanced Growth Theory
The important proponents of this theory are Rosenstein-Rodan, Ragnar Nurkse and
W.A. Lewis. Rosenstein-Rodan has strongly made out a case for balanced growth in
his famous article of 1943(P.N., 1943). His fundamental argument is that often the
social marginal product of an investment is different from its private marginal product
and if in some country a group of industries are set up together in accordance with
their social marginal products, the economy records a higher rate of growth than that
would be possible otherwise. He underlines the point that the social marginal product
of an investment could be greater than its private marginal product. Rosenstein-Rodan
argues that when a new factory is set up in a new region and employs henceforth
unemployed workers, the problem this factory might face would be that there may not
be enough demand for its product because the workers will not spend all their earning
on it. However, if investment is made in several industries simultaneously, there
would be no shortage of demand. The rising income of the people engaged in these
diverse industries would provide sufficient market for all the goods. Increased supply
of goods would, therefore, generate its own demand. The training of labour for the
new technological processes is often unprofitable from the standpoint of the society.
Rosenstein-Rodan thus argues that the external economies of this sort cannot be
overlooked particularly in countries which are in the process of structural
transformation and where optimisation of social gains from given investment is of
prime importance.
W.A. Lewis has advocated balanced growth for two reasons. The first is that as
the economy expands the relative prices of the products of the different sectors of
the economy should remain unaltered. This is necessary for preventing
discouragement to any one sector that may be caused by the movement of the
terms of trade against it. The other reason why balanced growth strategy is to be
adopted is that in order to avoid any severe bottlenecks in the process of the
economy's expansion, the growth in the different sectors should be in accordance
with the income elasticities of demand for their products. For building up his
argument Lewis considers the case of an economy having three broad sectors,
viz., agriculture production for the home market, industrial production for the
home market and export. In his opinion, if the industrial output for home market
increases, it causes an expansion in the market for agriculture products. This
demand obviously has to be met by the increased output of agriculture products.
In case such a thing does not happen, then the export should increase to enable the
county to meet its increased demand for agriculture goods by increased imports.
Similarly in case of agriculture development led growth, demand for industrial
products will increase, and this will require expansion in the industrial output for
domestic consumption. If the industrial output for domestic market does not
expand, exports of the country should increase sufficiently to enable it to meet its
increased demand for industrial goods by increasing imports. Only in the case of
an increase in exports a balancing increase in the output in both agriculture and
industrial sectors for the market would not be necessary(W.A., 1955). Ragnar
Nurkse further highlights the strategy of balanced growth. According to him
balanced growth does not imply growth of all industries at the same rate as some
industries would always remain ahead of others. What balanced growth does
imply is a 'harmonious growth' of different sectors of the economy so that the
products of different industries(and sectors) are able to find a ready market and
there is neither surplus nor shortage in any industry or sectors. He added balanced
growth theory advocates not only investment over a wide spectrum of the
industrial sector but also ample investments in agriculture so that both the sectors,
industry, and agriculture, can grow in harmony. Thus, Nurkse accordingly
advocates a balance between the domestic and the foreign sectors of the economy
and points out categorically that 'to push exports of primary commodities in the
face of an inelastic and more or less stationary demand would not be promising
line of long-run development(Ragnar, 1973). He stresses on the setting up of
import substituting industries behind a tariff wall and points out that the ultimate
result need not be a reduction in imports. In fact, international trade is likely to
expand in the long-run as the size of the international market and the level of
productivity will increase(Misra & Puri, 1998).
1.1.1 The Rationale of Balanced growth
Rosentein-Rodan has strongly made out a case for balanced growth in his famous
article entitled "Problems of Industrialisation of Eastern and South-Eastern
Europe" which was published in "Economic Journal" in 1943. His fundamental
argument is that often the social marginal product of an investment is different
from its private marginal product and if in country a group of industries are set up
together in accordance with their social marginal products, the economy records a
higher rate of growth than that would be possible otherwise. Individual private
entrepreneur is never interested in knowing the social marginal of an investment
because this does not influence his decision with respect to his investment
activity. His entire concern is with the private marginal product o(Misra & Puri,
1998). If the investment Nurkse was not concerned with the problem that arises
from the social marginal product of an investment exceeding its private marginal
product. According to him, the limited size of the market is the main obstacle to
economic development and in order to overcome this problem there has to be all-
round improvement in the productivity. It is quite logical for him to argue that a
large-scale investment program should be undertaken by the underdeveloped
countries to enlarge the size of their market. The difficulties caused by the small
size of the market relates to individual investment incentives in any single line of
production taken by itself. At least in principle, the difficulty vanishes in the case
of more or less synchronized application of capital to a wide range of different
industries(Ragnar, 1973). W.A. Lewis has advocated balanced growth for two
reasons which are not clearly distinguishable from each other. The first reason
why Lewis wants balanced growth is that as the economy expands the relative
prices of the products of the different sectors of the economy should remain
unaltered. In order to avoid any severe bottlenecks in the process of expansion, the
growth in the different sector should be in accordance with the income elasticities
of demand for their products. Lewis opines that if the industrial output for the
home market increases, it causes expansion in the demand for agriculture
products. This demand obviously has to be met by increased output of the
agriculture products. Similarly in case of agriculture development led growth,
demand for industrial products will increase, and this will require expansion in the
industrial output for domestic consumption.
1.1.2 Conclusion
Balanced growth may be accomplished in two ways. When some country employs
price incentives for achieving the objective of balanced growth, not only growth
remains relatively modest, but the balance among the various sectors of the
economy and also within each sector is brought about rather slowly. Further, it
involves risk of technological problems becoming rather formidable. If all this
happens, the possibility of growth rate turning out to be inadequate for a country
in which pressure of population is considerable cannot be ruled out. Nurkse
asserts that underdeveloped countries have no choice except to follow the
balanced growth path. For accomplishing the task of development, whether a
country should introduce planning, or it can wholly rely on private enterprise is a
subject of great controversy. The amount investment that balanced growth theory
requires is simply beyond the capacity of the private entrepreneurs. Therefore, the
state must undertake the initiative on its own or in cooperation with the private
sector. Even if the private sector is in position to undertake the responsibility of
initiating a balanced growth programme, the socio-economic setting of the
underdeveloped countries requires active participation of the state. In the absence
of such participation, inequalities in income, wealth and economic power are
bound to increase as development proceeds.
1.2. Unbalanced Growth Theory
Hirschman is the main architect of unbalanced growth theory. Scholars such as
Hirschman, Rostow, Fleming and Singer propounded the theory of unbalanced
growth as a strategy of development to be used by the underdeveloped countries.
This theory stresses on the need of investment in strategic sectors of the economy
instead of all the sectors simultaneously. According to this theory the other sectors
would automatically develop themselves through what is known as “linkages
effect”. Hirschman states, " creating imbalances in the system is the best strategy
for growth. Owing to the lack of availability of resources in the less developed
countries, the little that is available must be used efficiently. Accordingly
strategic
sectors in the economy should get priority or precedence over others income
is concerned". He further puts, "If the economy is to be kept moving ahead, the
task of development policy is to maintain tensions, disproportions, and
disequilibria. Therefore, the sequence that leads away from equilibrium is
precisely an ideal pattern of development from our point of view for each move in
the sequence is induced by a previous disequilibrium and in turn creates a new
disequilibrium that requires a further a further move(Albert O., 1969). Therefore,
the sequence that leads away from equilibrium is precisely an ideal pattern for
development. Unequal development of various sectors often generates conditions
for rapid development. More-developed industries provide undeveloped industries
an incentive to grow. Hence, development of underdeveloped countries should be
based on this strategy.
The choice problem is illustrated in the given figure The total cost of DPA output
is measured on the horizontal axis. The curves a, b, c etc. show the cost of
producing a specific full-capacity output of DPA from a fixed amount of
investment in DPA as a function of the availability of SOC. Successive curves a,
b, c, etc. represent different levels of DPA output from higher and higher level of
investment in DPA.
These curves are convex to the origin because as more and more SOC becomes
available, DPA costs will continue to fall. But there is a minimum amount of SOC
necessary for any level of DPA output (e.g., OS1 corresponding to curve a) and as
SOC increases, its impact on the costs of DPA output becomes less and less.
Suppose the objective of the economy is to obtain increasing outputs of DPA with
the minimum use of resources employed in the DPA and SOC sectors. On each
curve, a, b, c the point where the sum of the coordinates is the smallest represents
the most desirable combination of the two. The line OX is the locus of all such
points, and these represent the most efficient expansion path, or ‘balanced’ growth
path, between SOC and DPA. Now, let us consider a specific situation where
‘optimum’ amounts of SOC and DPA cannot be expanded simultaneously to keep
in balance with one another. Now on what criterion is that postponement choice
made. One possibility, according to Hirschman, is the sequence EF 1 FF2 G where
the initial expansionary step is taken by DPA. This sequence is called ‘develop-
ment via shortages. Hirschman has argued that preference should be given to that
sequence of expansion which maximises ‘induced’ decision making.
1.2.1 Phases of the Unbalanced Growth
Complementarity:
Complementarity is a situation where increased production of one good or service
builds up demand for the second good or service. When the second product is
privately produced, this demand will lead to imports or higher domestic
production of the second product, as it will be in the interests of the producers to
do so. Otherwise, the increased demand takes the form of political pressure. This
is the case for such public services such as law and order, education, water and
electricity that cannot reasonably be imported.
Induced investment:
Complementarity allows investment in one industry or sector to encourage
investment in others. This concept of induced investment is like a multiplier,
because each investment triggers a series of subsequent events. Convergence
occurs as the output of external economies diminishes at each step. Growth
sequences tend to move towards convergence or divergence and the policy is
usually concerned with preventing rapid convergence and promoting the
possibility of divergence.
External Economies:
Because of the complementarities, investment in one industry or sector induces
investment in other industries or sectors. Hirschman argues that some projects
create more external economies than they appropriate and, therefore, their private
profitability falls short of their social desirability. The reverse is also possible.
Some ventures can have a larger input of external economies and a much smaller
output.
Backward and forward linkages:
Hirschman introduces the concept of backward and forward linkages. A forward
linkage is created when investment in a particular project encourages investment
in subsequent stages of production. A backward linkage is created when a project
encourages investment in facilities that enable the project to succeed. Normally,
projects create both forward and backward linkages. Investment should be made
in those projects that have the greatest total number of linkages. Hirschman called
the industries with greatest complementarities as the 'leading sectors'. Projects
 with many linkages will vary from country to country; knowledge about project
linkages can be obtained through input and output studies.
1.2.2 Process of Unbalanced Growth
The strategy of unbalanced growth is most suitable in breaking the vicious circle
of poverty in underdeveloped countries. The poor countries are in a state of
equilibrium at a low level of income. Production, consumption, saving, and
investment are so adjusted to each other at an extremely low level that the state of
equilibrium itself becomes an obstacle to growth. The only strategy of economic
development in such a country is to break this low-level equilibrium by
deliberately planned unbalanced growth. Prof. Hirschman is of the opinion that
shortages created by unbalanced growth offer considerable incentives for
inventions and innovations. Imbalances give incentive for intense economic
activity and push economic progress.
Convergent Series of Investment:
It implies the sequence of creation and appropriation of external economies.
Therefore, investment made on the projects which appropriate more economies
than they create is called convergent series of investment.
Divergent Series of Investment:
It refers to the projects which appropriate less economies than they create.

These two series of investment are greatly influenced by particular motives. For instance,
convergent series of investments are influenced by profit motive which are undertaken by the
private entrepreneurs. The latter is influenced by the objective of social desirability and such
investment are undertaken by the public agencies.

In the words of Prof. Hirschman, “When one disequilibrium calls forth a development move
which in turn leads to a similar disequilibrium and so on and infinitum in the situation private
profitability and social desirability are likely to coincide, not because of external economies,
but because input and output of external economies are same for each successive venture.”
Thus, growth must aim at the promotion of divergent series of investment in which more
economies are created than appropriated. Development policy, therefore, should be so
designed that may enhance the investment in social overhead capital (SOC) is created
external economies and discourage investment in directly productive activities (DPA).

Unbalancing the Economy:

Development, according to Hirschman, can take place only by unbalancing the economy.
This is possible by investing either in social overhead capital (SOC) or indirectly productive
activities (DPA). Social overhead capital creates external economies whereas directly
productive activities appropriate them.

(i) Excess of investment in Social Overhead Capital

Social over-head capital is concerned with those series without which primary,
secondary, and tertiary services cannot function. In SOC we include investment
on education, public health, irrigation, water drainage, electricity etc. Investment
in SOC favourably affect private investment in directly productive activities
(DPA). Investment in SOC is called autonomous investment which is made with
the motive of private profit. Investment in SOC provide, for instance, cheap
electricity, which would develop cottage and small-scale industries. Similarly,
irrigation facilities lead to development of agriculture. As imbalance is created in
SOC, it will lead to investment in DPA.

ii) Excess of Investment in Directly Productive Activities:

Directly productive activities include those investments which lead to direct

increase in the supply of goods and services. Investment in DPA means
investment in private sector which is done with a view to maximize profit. In
those projects, investment is made first where high profits are expected. In this
way, DPA are always induced by profits.

1.2.3 Priorities: Excess SOC or Excess DPA?

(a) Unbalancing the economy with SOC:

Imbalance can be created both by SOC and DPA. But the question before us is that in which
direction the investment should be made first so as to achieve continuous and sustained
economic growth. The answer is quite simple. The government should invest more in order to
reap these economies, the private investors would make investment in order to enjoy profits.
This would raise the production of goods and services. Thus, investment in SOC would
automatically bring investment in DPA.
(b) Unbalancing the economy with DPA:

In case investment is made first in DPA, the private investors would be facing a lot of
problems in the absence of SOC. If a particular industry is setup in a particular region, that
industry will not expand if SOC facilities are not available. In order to have SOC facilities,
the industry has to put political pressure. That is really a tough job. Thus, excess DPA path is
full of strains or pressure- creating whereas excess SOC path is very smooth or pressure
relieving.

1.2.4. Conclusion:

The proponents of unbalanced theory argue that the development is an unbalanced process
and the goal of the complete balance in the system is never realised as the new investment
creates fresh imbalance due to overgrowth of certain sectors. This situation again provides
inducement to complementary investments. This process goes on endlessly in all societies
and keeps pressure for rapid economic growth. The logical conclusion that emerges from the
discussion is that protection or stabilization of import replacing industries should be done at
the right stage of development. Too early encouragement of import replacing industries
would retard the process of industrialization as a country will lose the advantage of backward
linkage effect of enclave import industries. It is only when the market has grown to a
sufficiently large size that country should jump into the producer of import goods. In fact, if it
is desired to prepare the ground for the creation of particular industry, then it might be
advisable to restrict other imports so as to channel import demand artificially toward the
commodity whose domestic production is to be fostered(Singer, 1958).

2.Theory of Dualism

Underdeveloped countries are characterised by a dualistic economic structure. Economists

have paid increasing attention to dualism. The questions that have been examined in
considerable length include questions relating to the nature, features, and implications of
dualism. For example, what is the nature of dualism? What conditions have given rise to a
dual economy? Why does dualism persist? Is dualism an obstacle to economic development?

Dual Society
When two or more social system appear simultaneously, we have dual society. Societies
showing a distinct cleavage of two synchronic and full-grown social styles which in the
normal, historical evolution of homogeneous societies are separated from each other by
transitional forms, as, for instance, precapitalist and high capitalism by early capitalism, and
which there do not coincide as contemporary dominating features(Boeke, 1953). One of the
two prevailing social systems, as a matter of facts always the most advanced, will have been
imported from abroad and have gained its existence in the new environment without being
able to assimilate the divergent social system that has grown up there, with the result that
neither of them becomes general and characteristics for that society as a whole. Though the
advance system has been imported into the underdeveloped countries, yet the original system
has been able to hold its own. The natural result is a clash of imported and the domestic
social system. As Boeke puts, "Social dualism is the clashing of an imported social system
with an indigenous social system of another style. Most frequently the imported social system
is high capitalism. But it may be socialism or communism just as well or eastern culture".
The dualist economies impart greater importance of social needs as compared to western
economies. Possessions in the share of cattle, land, clothes, houses, the fulfilment of social
duties in all the circumstances of life, must all be regarded as largely the satisfaction of social
needs. This social character of needs is due to the comparatively primitive character of the
eastern society. In fact, lower the development of the individual, the greater his dependence
on social tradition, and the fewer his economic needs the more place is given to the social
needs.

The Technological Dualism

The proponent of technical dualism is Benjamin Higgins. Technological dualism implies the
use of different production functions in the advanced sector and the traditional sector.
Dualism is a situation in which productive employment opportunities are limited, not because
of lack of effective demand, but because of resource and technological restraints in the two
sectors(Gerald, 1989). The traditional rural sector engaged in peasant agriculture and
handicrafts or very small industries; it has variable technical coefficient of production so that
the products can be produced with a wide range of techniques and alternative combinations of
labour and capital; and the factor endowment is such that labour is the relatively abundant
factor of production, so that techniques of productions are labour intensive. In this sector,
there is limited degree of technical substitutability of factors so that production is
characterised by fixed technical coefficient; and the process are relatively capital intensive.
To avoid technological dualism in the two sectors, Higgins assumes two factors of production
and two goods. Higgins notes that the problems of disguised unemployment in the rural
sector tended to become more and more serious during the last two centuries because
technological progress took a form favouring the capital-intensive sector. While no
technological progress took place in the peasant agriculture and handicraft, technological
progress has been rapid in the plantation, mining, and petroleum sector(Higgins, 1966). With
the emergence of national states(particularly after the Second World War), both trade union
activity and direct government intervention in the labour market have tended to increase
leading to artificially high wage rates in a number of countries. However, these policies had
no effect on real wages in the rural sector. As a result, they aggravated the tendency towards
technological dualism. Placing the underdeveloped countries n their world setting, Higgins
finds that the actual pattern of demand has been such as to bring increasing conflict between
the objectives of optimal output and full employment. While demand for exports grew at a
high rate( due to the rapidly expanding European economy), the demand for output of the
rural sector grew only at the rate at which the total population increased, if not more slowly.
Moreover, achieving the optimal allocation of resources from the standpoint of European
entrepreneurs and administrations meant an increasing conflict of that goal with the
maintenance of full employment in the rural sector of underdeveloped countries(Higgins,
1966). However, no such conflict arose in the developed countries and, as a result,
discrepancies between the standard of living of the rapidly industrializing European countries
and those of the underdeveloped countries continuously increased.

3.Nepal's Appropriate Development Model

Nepal has endorsed socialism oriented Federal Democratic Republic political system after
experiencing three political models viz Autocratic Rana Regime, party less Panchayet
System, Constitution Monarchical Multiparty System. After the end of Rana regime, Nepal
initiated practice of planned economic system in 1956. Planning is the most cherished system
for quite many and accepted methodology of resource-use for large many. It is an integral
part of economic life of socialist countries. For developing mixed economies, it is regarded as
an essential pre-requisite for rapid development. Indeed, planning is supposed to be the
sovereign remedy of all economic ills. Nepal adopted planned economic system at the time
when political system was multiparty democratic system. At that time Nepal has been freed
from aged long(ie.204 years) Rana regime. From infrastructure to social sector development ,
in every walk of life, Nepal had to start her journey for socio-economic transformation. Nepal
had to do many things to pave the way for economic upheavals. So planned economic system
was inevitable. Planned economy reflects features of socialism because socialism has been
defined in a variety of ways, but the entire approach concentrates on equality of income.
Socialism includes social ownership of the means of production, economic planning, and
equality. A socialist believes that the best utilization of resources can be achieved on the
principle of maximum equality. It creates an economy without exploitation, and an economy
based on economic equality. After having completed the 14th plan, did Nepal achieve all? Of
course, many infrastructures have been made, a historic progress have been done in the social
sector. All these progresses are to be judged in the light of resource mobilization. Nepal's
financial resource was so limited that she couldn't afford to invest in multiple sectors at a
time. So, many friendly countries have supported Nepal to uplift her socio-economic status.
Foreign loan and grant were the option left initially. Later, foreign direct investment policy
was opened. Nepal's over all progress is needed to be analysed in terms of total loan burden
and achievement in the society. Nepal's loan to GDP ratio is around 40 percent. The total loan
recorded has reached Rs 1728.93 billion at the end of Jan 14, 2022. Out of this amount,
external debt is Rs 948.98 billion, and internal debt Rs 779.94 billion. As a result, Nepal has
been provisioning around 11 percent of total annual budget. This is not a joke. What have
been achieved by now is discussed in the following paragraphs:
3.1 Inequality in Nepal
Neoliberalism also prompted the dismantling of the welfare state which in turn has increased
wealth disparity and affected the larger population since they must contend with reductions in
healthcare and unemployment benefits. In this background, we observe its various
dimensions such as inequality, poverty, and employment.
The data shows us that income inequality is significant and growing in Nepal. In 2010/11,
Nepal had one of the highest Gini coefficients in the world, at 49.42. This had increased
considerably since 1996. Analysis of the Palma ratio, which measures the ratio between the
income share of the top 10% and the bottom 40%, tells the same story. It has risen steadily,
from 2.28 in 1995/96, to 2.65 in 2003/04, and then 3.32 in 2010/11.49. This means that
according to the most recent data, the income of the richest 10% is more than three times
higher than that of the poorest 40%. The poorest 40% saw their share of income decline over
that 15-year period; from 15.3% in 1995/96 to 11.9% in 2010/11, while the income shares of
the top 10% rose. Inequality of wealth is also substantial in Nepal: the richest 20% hold
56.2% of all wealth, while the poorest 20% share 4.1% of wealth. Recent reports indicate that
one of the richest Nepalis, listed on the Forbes list of billionaires, added $200m to his fortune
in 2018. This is a 14.5% rise from 2017 and takes his total net worth to $1.5bn. The rise in his
wealth could pay more than half of Nepal’s spending on social protection. It would also take
a poor Nepali more than 100,000 years to earn that amount of money. Wealth inequality is
also substantially higher than income inequality in Nepal. The Gini coefficient is 0.73 for
household wealth distribution, and 0.74 for per capita wealth distribution. The Palma ratio for
wealth also shows that the wealth gap is extremely high. At the national level, the richest
10% have more than 26 times the wealth of the poorest 40%. Both the Gini and Palma
indicators also highlight where wealth inequality is at its highest in Nepal: in urban areas and
in the Hill region . For example, in urban areas, the top 10% has more than 29 times the
wealth of the bottom 40%, and in the Hill region it is even higher (ie.33.64 times), (OXFAM,
2019).
3.2.Poverty in Nepal
17.4 percent of Nepalis are multidimensionally poor – just under five million persons . 28
percent of rural dwellers are MPI poor, compared with 12.3 percent in urban areas and over
half of Nepal’s poor population live in rural areas. Across provinces, 39.5percent of people in
Karnali Province are MPI poor– by far the highest – followed by 25.3 percent in
Sudurpashchim Province and 24.2 percent in Province 2. In contrast, in Gandaki Province 9.6
percent of people are multidimensionally poor, while this falls to 7.0 percent in Bagmati
Province. However, in terms of number of poor, the largest number live in Province 2,
followed by Lumbini Province and Province 1. Children are the poorest – 21.8 percent of
children under 18 years of age are MPI poor compared with 15.1 percent of adults.
Furthermore, 44 percent of poor people are children under the age of 18, making this group
pivotally important for policy. And if the household includes a member with a disability,
overall poverty rises to 18.3 percent, versus 17.4 percent otherwise. Using the new MPI, the
incidence of multidimensional poverty nationally fell from 30.1 percent in 2014 to 17.4
percent, and MPI dropped from 0.133 to 0.074. In human terms, it means that 3.1 million
people left poverty in a mere five years, with only 5 million left to exit. The intensity of
multidimensional poverty also significantly decreased from 44.2 percent to 42.5percent (CBS
& OPHI, 2021) . The given data may soothe us for the time being but if we observed another
aspect, it may keep us into frying pen. It has been nearly 30 years since we endorsed of
neoliberalist policy in Nepal, still 5 million people are the victims of MPI. Nearly 40,25 and
24 percent of people in Karnali province, Sudurpashchim province and province no.2 are
multidimensionally poor. What does it mean? The picture is clear, it is due to fallacy in the
development model that we adopted are still following. If we analyse the total debt of Nepal
during 30 years’ time, it is surprizing. In 1990, our external debt was $1.6 billion which
increased to $ 6 billion in 2019.

3.3.Unemployment in Nepal
Unemployment is vice to humanity. Unemployment causes people to survive in abject
misery. People’s living standard deteriorates and finally it nullifies the economic pace of the
nation. When we talk about unemployment rate in Nepal since 1990,it is increasing in
increasing rate. In 1990 Nepal’s unemployment rate was 1.75 percent and this rate has been
swarming up to 4.44 percent. The rate of change in unemployment is 1.59 per cent. When we
talk about unemployment, we mean group of people seeking job at the current wage rate but
not getting opportunities. Every year, nearly 4,50,000 youth enter the market but do not get
job. So, they are displaced to the foreign jobs. Due to this reason, nearly3200 thousands
youth are migrating in search of job in the foreign land.COVID-19 has made the foreign job
less attractive and those who were getting job opportunity at home, missed the job at home.
The reports show that, at present, over 3,210,848 Nepalese are residing across 125 countries
for various purpose of work. The five major destination countries of Nepali migrant
population include India, Malaysia, Qatar, Saudi Arabia, and UAE, which together comprise
of over 70% of Nepali migrant population working abroad. As of 22nd March 2020, to July
31st, 37,424 Nepalese were repatriated from third countries. It is estimated that about
618,700 migrants out of 3,210,848 (i.e., 19.3% out of total) would likely to return to Nepal
within a year; out of them over 360,000 will be returning sooner (NPC, 2020). This report
shows how blistering situation is caused to Nepalese youth due to indifferent policy regime in
Nepal though we have travelled for three decades of so-called fairy land as envisaged by the
liberal policy. In a nutshell, the neoliberal policy has made the unemployment situation
worse. Huge numbers of youths are displaced to foreign job converting to cheap labour force
lucrative to corporate business houses as safeguarded by the neoliberal policy.

4. Conclusions

We cannot say straight that Nepal did nothing. Nepalese people have been able to observe
the down of new era after the declaration of democratic system. Socialist oriented Federal
Republic democratic system has opened the door for inclusive, federal system. A tremendous
progress has been made in the social and infrastructure. But side by side, Nepalese people
have to shoulder the heavy burden of debt. Nepal's GNI to debt servicing ratio is 0.80. We
observed, there are lots of deviations in the employment, equity, and poverty domain which is
challenging social structure and planned efforts. Now isn't it time to evaluate or revise our
development strategy? It is evident that since the inception of planned economic policy,
Nepal focused on balanced growth policy regional balance, sectoral balance bla. bla. Even the
statesmen and policy makers love talking about balanced development. The word 'balance'
has been the buzz word for Nepal. But in reality-no balance, no equity, no harmony etc. The
balanced growth model is not suitable for underdeveloped country like Nepal whose
economy is characterized by dualism. Both social dualism and technical dualism prevails in
Nepal. In such turmoil, it is imperative to adopt the unbalanced growth approach though it
sounds bitter. As bitter medicines cure the patients, unbalanced growth system cures the
ailing economy by and by. A leading sector, viz agriculture, in Nepalese case will get
significant portion of the annual budget. After its probation period(say five years) its positive
affect starts working. Gradually, it pulls other sectors which will finally cure unemployment
and poverty. Government fiscal policy may reduce inequality adorned with basic education
and health facilities. Now, there will be paradigm shift in our policy regime through planned
economic practices. The social obligation as envisaged by the constitution of Nepal can be
rightly carried out by means of unbalanced growth strategy.
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