DAV College

BY
DR. CHANDRA KATUWAL
Unit-3 Nepalese Economy
The state of a country or region in terms of the production and
consumption of goods and services and the supply of money.

An economy is an area of the production, distribution and

trade, as well as consumption of goods and services. In general,
it is defined as a social domain that emphasize the practices,
discourses, and material expressions associated with the
production, use, and management of scarce resources.
Characteristics of Nepalese economy
1. Low Per Capita Income: Nepal has a low per capita income compared to its
neighbouring countries. The Per Capita Income of Nepal in 2019 was US$ 1085 which has
inclined to approximately 1200 US$ in 2021 A.D.
2. Mass Poverty: The estimated poverty headcount ratio is expected to be 16.67 per cent in
2020, down from 18.7 per cent in 2018.
3. Underutilization of Natural Resources: Research shows that different areas of the
country have deposits of minerals but due to lack of modern technology and skilled labour
the country has been unable to produce these minerals at maximum levels.
4. High Trade Deficit: The trade deficit is increasing every year. The trade deficit in 2019
was 1321.4 arba. The trade deficit in 2018 was 1136.7 arba. The increasing trade deficit is
due to the increase in imports relative to exports each year.
5. Dualistic and Mixed Economic System: Nepal has a mixed economic system. The
dualistic feature of Nepal depicts the existence of both the traditional and modern sectors.
The traditional sector relies on agriculture for their livelihood and the modern sector relies
on the manufacturing of goods and services.
6. Rapid Population Growth: The population of Nepal has been steadily rising in recent
decades. The current population is roughly 30 million which contributes to an increase of
about 3 million people every 5 years. Rapid population growth has resulted in
underemployment. The current population growth rate is 1.36.
Remittance Economy: Nepal is highly dependent on
remittance income. The remittance income in 2019 was
879.3 arba. It represented a 16.5 per cent increase from
the previous year. An increase in remittance compared to
GDP shows the increased dependence of Nepal on other
countries.
Planned economy
Capitalist economy
Mixed economy
Planned economy
A planned economy is a type of economic system
where the distribution of goods and services or
the investment, production and the allocation of
capital goods takes place according to economic
plans that are either economy-wide or limited to a
category of goods and services
Advantages of planned economy
1 Equal distribution of income and wealth
2 formulation of objectives and goals
3 Optimum utilization of resources
4 Better social security
5 Rapid long run growth
Disadvantages
1. No role of private sector in economic activities
2. lack of competition in economy
3. Public authority controls
4. No freedom
Capitalist economy ( Market led)

Capitalism is an economic system based on the private ownership

of the means of production and their operation for profit. Central
characteristics of capitalism include capital accumulation,
competitive markets, price systems, private property, property
rights recognition, voluntary exchange, and wage labor
Advantages
There is more efficiency in the capitalist economy as the products
are produced according to the demand of the consumers.
There is less intervention from the government or bureaucratic
interference.
There is better scope for innovation as companies look to obtain a
major part of the market with their offerings.
It discourages any form of discrimination so that the trade can
take place between two parties without any barriers.
Disadvantages
Capitalism leads to inequalities in income.
In capitalism, firms can get monopoly over workers and
consumers.
A high profit-earning motive of a capitalist economy is to
use resources in such a way that it leads to
environmental problems by destroying the natural
balance.
Mixed economy
The term mixed economy gained prominence in the United Kingdom after World War II, even
though many of the policies associated with it at the time were first proposed in the 1930s.
Many of the supporters were associated with the British Labour Party.
A mixed economic system is a system that combines
aspects of both capitalism and socialism. A mixed
economic system protects private property and allows a
level of economic freedom in the use of capital, but also
allows for governments to interfere in economic
activities in order to achieve social aims.
Some features of Mixed economy
Strong Business Regulations
Price Controls / Subsidies
Social Welfare Programs

Nationalization Vs mix
Pros
Increased efficiency and productivity due to market-based
incentives.
Minimal welfare protections for the poorest parts of the
population.
Allows the government to set strategic priorities through
economic policy.
Cons
Does not avoid the market-distorting effects of
government intervention.
May succumb to regulatory capture as business interests
campaign for favorable regulations.
Higher taxes to pay for welfare state policies
HDI- Human development index
What are the consequences and
implications?
The HDI is used to capture the attention of policy-
makers, the media and nongovernmental organizations,
and to change the focus from the usual economic
statistics to human outcomes.
It was created to re-emphasize that people and their
capabilities should be the ultimate criteria for assessing
the development of a country, not economic growth.
The HDI is also used to highlight differences within
countries, between provinces or states, and across
genders, ethnicities and other socioeconomic
groupings.
Highlighting internal disparities along these lines
has raised the national debate in many countries.
Poverty
https://www.youtube.com/watch?v=U5qig9HIJ7k
The term poverty refers to the state or condition in which
people or communities lack the financial resources and
essentials for a minimum standard of living.

As such, their basic human needs cannot be met.

Poverty-stricken people and families may go without
proper housing, clean water, healthy food, and medical
attention
Causes of poverty
There are multiple causes of poverty, however some of
the root causes are:
Limited to no job growth
Poor infrastructure
Conflict and war
High cost of living
Social barriers
Lack of government support
Agriculture in Nepal
Agriculture sector engages around 66% of the
total population in Nepal. It contributes one-third
of the nation's GDP with significant contribution to
national economy. It creates a diverse array of jobs
and employment from farming to small-scale
enterprises.
Features
Subsistence farming.
Nepalese people are engaged in agriculture for their
livelihood.
Monsoon based agriculture.
Traditional farming system.
Fragmentation of land.
Dual ownership of land.
Dominated by food crops.
Low productivity.
Contribution
Main source of GDP- 31.69
Main source of income
Source of food and folder
Base of industries
Source of export
Source of livelihood
Challenges of Agriculture development in
Nepal
Traditional farming:
Lack of proper irrigation system:
Lack of transport and market:
Unscientific and undemocratic distribution of land:
Over pressure of manpower:
Poor economic condition:
Lack of research activities:
Introduction of tourism
Tourism is the largest industry in Nepal and its
largest source of foreign exchange and revenue.
Possessing eight of the ten highest mountains in
the world.
Labor
Labor is the amount of physical, mental, and
social effort used to produce goods and services in
an economy.
Types of employment
Foreign employment
Domestic employment
 Child Labor in Nepal
Child labour refers to the
exploitation of children
through any form of work
that deprives them of their
childhood, interferes with
their ability to attend
regular school, and is
mentally, physically,
socially and morally
harmful
History of Child labour
Child labour refers to any work that deprives children of their
childhood, their right to education, health, safety and mental
development based on the ILO
Child labour first started to occur in England when household
businesses were turned into local
Child labour is a global issue that prevents children from
fulfilling their potential. Child labour is a violation of children's
rights (Protection, survival, development and participation) labour
markets that mass-produced the once homemade goods.