It is unfortunate that in this information age, the country lacks vital data in practically all sectors, preventing one from taking informed decision
After years of dismal economic growth, the country’s 15th Five Year Plan, to be unveiled in the next fiscal after a gap of 12 years, envisages a growth rate of 9.6 per cent per annum, to be achieved with an investment of a whooping Rs. 9.3 trillion. But will the huge investment alone deliver the desired growth rate? Doubts are being raised as the tool used by the government to calculate the growth rate is obsolete and not sound. The government’s logic is that the huge investments will automatically spur an economic upturn, leading it to predict a growth rate anywhere between 9.4 per cent and 10.1 during the next five years, needed to propel Nepal from a least developed country to a developing one. But a general survey of 138 countries around the world between 1950 and 1992 has shown that only in 11 per cent of them was there significant relationship between growth and investment. And in the case of Guyana, the country’s Gross Domestic Product actually fell sharply from 1980 to 1990 although investment had increased from 30 per cent to 42 per cent of GDP. Hence, Nepal’s growth rate predictions of 9.6 per cent from 2019-20 to 2023-24 could be a little ambitious.
The huge investment need has been calculated based on the Harrod-Domar growth model, which the inventor had disowned six decades ago. The model, which was introduced in the aftermath of the Great Depression in the US, implied that economic growth depended on increasing investment through capital accumulation, or savings, and using that investment more efficiently through technological advances, or machinery. The model assumes that an investment of a certain amount of money will produce a certain volume of goods or services. Based on this assumption, economists came up with the Incremental Capital Output Ratio (ICOR), which is the ratio of investment to growth. It measures the inefficiency with which capital is used, so the higher the ICOR the lower the productivity of capital. Nepal’s ICOR stands at 4.9, which means an investment of every Rs 4.9 will raise the GDP by Re 1. Based on this assumption, the National Planning Commission had deduced that Rs 9.3 trillion would be needed to achieve an annual growth rate of 9.6 per cent.
ICOR, thus, isn’t a reliable predictor of growth rate nor is it in a position to estimate the exact investment needs. For this, a more sophisticated model that is in vogue in the neighbouring countries needs to be adopted, and quickly. It will also need to take into account such factors as availability of workers in the country and labour productivity. But before such a model can be used, we will need data on a score of areas, from productivity and price to linkages between various sectors. It is unfortunate that in this information age, the country lacks vital data in practically all sectors. There is no standardised data, and whatever is available has been gathered through haphazard sampling. Obviously, lack of data limits one’s ability to make reliable projections and informed decisions. Precise data would have made it easier to predict both the investment needs and growth more accurately, and help prevent distortion of priorities and misallocation of resources.
The local governments have been authorised to manage and supervise educational institutes up to grade XII. The overall management of the plus two public schools was handed over to the local levels, hoping that they would regularly monitor the teachers, who either play truant from the schools for long or engage in local politics, leaving educational activities in a mess. It has now been almost two years since the elections of the local levels, but no progress has been made in improving the quality of education in the rural areas, thanks to inaction of the local levels.
A report from Bajura district is a case in point. A lady teacher at Chaityapipal Suryodaya Lower Secondary School of Budhiganga Municipality has been absent for the last three years. But she is drawing her monthly salary without attending the school. It is also learnt that she has hired a proxy teacher to whom she is paying Rs 10,000 per month. The school management had decided to relieve her of the job, but the municipality is learnt to have put a spoke in the school’s wheel. How can we expect quality education when the authorities concerned resort to protecting the truant teacher? Nobody has the right to play with the students’ future.
A version of this article appears in print on April 24, 2019 of The Himalayan Times.