A Look At The Economic Downturn In Nepal & The Victor Hugo Moments For ‘Reforms’
A sacrosanct consideration is to identify the root causes, whether in India or Nepal, as structural flaws or cyclical declines. As a result of Nepal’s recessionary tendency, the government and industry were also jittery, leading to unimaginable losses with Covid-19. The current downturn will likely pass as the economy is on its way to recovering.
The economy of Nepal has shown signs of improvement after shock absorption, reaching 2.16 per cent growth over the past year. It is crucial, however, that the policy response moves forward, particularly the readiness to take action rather than stop reform.
It has been noticed that Nepal has entered into an economic recession for the first time in 60 years due to a crash in demand, a shortage of liquidity, a balance of payment crisis, high inflation, and policy paralysis. A recent NSO projection keeps GDP growth in 2022-23 at 1.9 per cent. As estimated in the budget, it would be 8 per cent.
In the same way, multilateral institutions also needed to project a figure close. According to the NSO, economic activities should remain average and economic growth will occur during the last quarter of this fiscal year based on the financial fundamentals of the period (July 2022-April 2023).
Despite Nepal’s challenges, NSO’s estimate could only be correct if capital investment and industrial production reach their targets. As Nepal develops, its real developmental dilemma lies in its low propensity to reform while maintaining monopoly structures in key production areas.
Despite the promises made by transitioning from a monarchy to a functional democracy, neither the government nor private enterprises can manage its economy satisfactorily. While Nepal aims to get foreign investment, it has yet to open its economy to fair competition (even if it isn’t perfect) or ushered in market reforms. Nepal’s front-running industries still need to acknowledge the export potential or recalibrate themselves to make it a hub of hope rather than despair.
Policymakers should realise that Nepal needs a command economy to support a few major enterprises. Next, people’s aspirations must act quickly for nature to control everything. Nepal needs to develop a long-term economic vision for the system to be in order.
Nepal can achieve this by providing an alternative development paradigm and recognising the need for a delicate balance in ensuring the government and industry work together even as political orders change frequently. Political scientist Francis Fukuyama recognised the importance of three institutions for explaining the evolution and working of political orders: the state, the rule of law, and accountability mechanisms.
Politicians in Kathmandu and provinces must recognise the benefits of accountability, homework, and the rule of law. They need to work toward a political economy that facilitates inclusive economic growth. We have reached a point where this idea is time-proven.
Nepal’s Economy & Act
A few examples of poor infrastructure include road projects planned in a fancy rather than in response to the needs. The country only needs 8-lane roads and completion phases over a decade. Sustainability is a must for infrastructure projects, so transparency and efficiency must be ensured.
Nepal needs to rebrand its hydropower as green energy, augment production, increase home consumption and maintain its export to India. It will be a game-changer if we make the necessary course correction here.
Creating a fair and secure environment for the competition will be possible with the state’s role as a facilitator in the transformative process of reforms. The Nepalese government is responsible for building safe and improved roads and air connectivity through partnerships with development agencies.
There should be a welcoming preparedness in its infrastructure. Increasing connectivity would boost Nepal’s primary revenue source. Since Nepal is endowed with natural beauty and is a civilisational wonderland, tourism should be treated as a significant industry in Nepal.
As a country with the top peaks of the Himalayas, extensive water storage facilities, and open borders with India, Nepal is uniquely positioned to mitigate climate change. So, its economy will be able to flourish in many ways and be more sustainable. Even though remittances contribute to around 22 per cent of Nepal’s GDP, they come with a high price, namely immense suffering and socio-economic harm.
After the downturn, it can become more potent if it closely links the state to inclusive growth and introduces progressive economic reforms. Various long-pending actions will eventually lead to the change Nepal dreams of, and India, as a friendly neighbour, can certainly assist in this transformation.
Proofread & Published By Naveenika Chauhan