EDITORIAL: Thinking anew
The central bank’s warning is based on a realistic assessment of the economic conditions. This warning becomes the more worrying as Nepal has not faced stagflation before
During the past one year, Nepal has received several big blows, both natural and man-made. The two most important of them are the major earthquake of April and the economic blockade that Nepal has been facing for the past three months, with only an irregular trickle of imports allowed come into Nepal. The later phenomenon has caused an even greater economic loss to Nepal than the earlier disaster. Taken together, they have already pushed Nepal several years behind in economic development. Growth, initially projected at more than 5 percent, has now been revised to 2 or less percent, the lowest since 2001-02, the year when Maoist insurgency was at its height. Inflation has been going up, also not imagined at the time of the presentation of the Budget estimates for the fiscal year 2072-73. This drastic cut in the growth projection means that the Nepalese economy is sick.
Industrial production has sharply fallen, agriculture has suffered much, tourism is down to a fraction of its normal activity, and other important sectors are similarly hit. This has naturally pushed up the number of unemployed people. After the earthquake, various economic organizations had predicted that a million people might fall back below the poverty level. The blockade can be expected to increase the number of people going further below the poverty line. The present features of the Nepalese economy are being felt by all the people, and one does not need to be a professional economist to predict that the economy is going downhill, with their serious negative effects on the life of the nation and its people. They have already been feeling the pinch.
Against this background, the Nepal Rastra Bank has warned of stagflation, an economic situation characterized by increasing prices of goods and services, high unemployment rate, and very low business activity in the economy. The present economic conditions are very closer to that kind of situation – inflation having already gone up from a single digit to double digits (in November it stood at 10.4 percent), economic growth rate revised downwards to something below 2 percent on optimistic projections (But the NRB on November 20 forecast a negative growth rate, which would mark the lowest rate in more than three decades.), and unemployment rate going up from a high to a higher level. If the blockade persists, the economic projections will become even darker. Therefore, the central bank’s warning is based on a realistic assessment of the economic conditions. This warning becomes the more worrying also because Nepal has not faced stagflation before. Such a situation would present greater challenges also because policies aimed at containing one might make the other feature worse. The government’s White Paper, brought out recently, has outlined some of its priorities in the new circumstances. The current Budget estimates will have to be altered to suit the new realities, because the earlier revenue and expenditure estimates will not apply, and the priorities will have to be reordered. More productive investment will be necessary. A new bold effective approach has therefore to be taken to deal with the huge challenges.
Children at risk
Children are used as labourers in brick kiln factories nationwide. It is unlawful to use children as labourers. But the operators of the brick kiln factories do not abide by the law related to the Child Rights Act which prohibits using children as labourers in hazardous conditions. Six persons, most of them children, were killed and 50 others injured when a chimney of a brick kiln factory exploded and collapsed in Sunsari last Tuesday. After the tragic incident, the Sunsari District Administration Office has dispatched an inspection team to monitor if the brick kiln factories are safe and abide by the law.
Reports have revealed that most of the children end up working in hazardous brick kiln factories after their parents fail to provide them shelter, food and education. The Child Rights Act has prohibited using children below 14 years of age as labourers in factories, restaurants, hotels and other areas where their health and mental condition is at risk. Moreover, they are paid less than adults. This situation must end once and for all. Instead of children, parents should be given an opportunity to work. Those who use children in their workplace must be punished.