According to the Asian Development Outlook (ADO-2006), an annual ADB report, at the close of this year Nepal will register only two per cent GDP growth rate, one of the lowest in the whole of Asia and the Pacific. As it is, the economic indicators here showed no encouraging signs in previous years too, as the growth rate came crumbling down to 2.3 per cent in 2005 from 3.5 per cent in 2004. The slowness in growth rate is attributed to weather related decline of both winter and summer crops, low industrial growth, sluggish public and private sector investment and contraction of tourism sector. As per ADO-2006, agriculture, the ‘backbone’ of Nepali economy, grew merely by three per cent in 2005, contributing 1.2 per cent to the GDP. Paddy production (which accounts for almost 20 per cent of agricultural GDP) fell by 3.7 per cent, thanks to the poor monsoon. Industry grew by only 1.4 per cent in 2005 as a result of disruptions caused by frequent strikes and restrictions on the movement of people and goods.

Given such startling revelations, it can be concluded that Nepal is on a disastrous economic course compounded no less by the political unrest that has affected services output and investment. It is appalling, but not surprising, that Nepal ranks third from the bottom (after Tonga and Micronesia) in the ADO-2006 country-by-country growth and forecasts in the Asia-Pacific. Worse still, even among South Asian countries, Nepal’s growth rate is registered as the lowest (in contrast to, for instance, 7.6 and 7.3 per cent GDP growth rate of India and Afghanistan respectively). Although the report has projected a 3.4 per cent GDP growth for Nepal by 2007, it seems urgent that to sustain growth Nepal has to expedite reforms, maintain macro-economic stability and structural adjustments, as pointed out by some economists at home. But reforms cannot be hastened amidst violence and obstructionist politics because growth is always and necessarily contingent upon a stable political order.