The long political wrangling and stalemate has affected the forthcoming national budget 2008-09. The new government will have hardly any time left even to make modest changes and fine-tune the budget here and there. The need of introducing transformational approach in budget making by replacing the technocratic status quo appears essential for New Nepal.

The transformational approach demands departure from ongoing developmental practices that aggravate disparity between traditional and modern societies, rich and poor, as well as privileged and deprived. It requires new initiatives or moves to destroy or change feudalistic and other highly non-egalitarian production or social relations that block transforming the economic condition of the majority of the people. However, the ongoing development course is guided by the assumptions that certain market-oriented deregulation-centric reforms or some increment in resources targeting communities or backward areas help not only to expedite growth, reduce poverty and uplift living conditions of the downtrodden but also to bring about structural changes in the society.

The fallacy of such a course is that various sets of existing institutional and/or distributive relations are neutral and hence they should not be considered as impediments to the new socioeconomic transformation we are trying to introduce. The influence of so-called mainstreaming policy regime is so overwhelming in our budgets that except reporting the macroeconomic situation, we hardly explain the degree of progress made on poverty reduction, employment, reductions in gender disparity etc. in budgets. The time has come to change such a budgetary practice.

The transformational approach will require keeping structural and institutional reforms in the centre stage of budget making coupled with equal priority to overhauling policies and programmes. Exploitative feudal, land and other traditional relations have to be abolished for equity-based growth, higher productivity and production diversification. Such a step is justified on both growth and equity grounds, as, in Nepal, small farms are more productive and efficient than large farms. The discriminatory structural and institutional set-ups aggravated by biased policies are augmenting inequalities in access to social services, productive assets, infrastructure facilities, market opportunities, credit and financial services facilities. The State facilities are also biased against small enterprises.

Despite making Nepal a most liberalised country, we continue with monopolistic and oligopolistic practices. Proliferation in financial institutions has led to diverting of resources, including remittances, massively in unproductive areas at a time when we need huge investment in productive areas. Many of us do not readily believe that there is a huge resource surplus in our economy at the aggregate level in comparison to the total investment we make in a year.

This indicates that, if channelised properly, resource is not a major constraint. All these hint at the necessity of structural, institutional and policy-based reforms and changes, different from ongoing policy orientation predominantly governed by unsuitable technocratic outlook and approaches. The lukewarm response of foreign investors may be viewed from the same perspective.

There are more than a million landless households including bondless labourers. Marginal and small farmers face rising debt, especially after the abolition of subsidy. Predominance of informal labour markets has prevented labourers from enjoying minimum wage and other facilities. Elderly, handicapped and helpless people expect to lead dignified lives in New Nepal. The youth, especially educated ones, are neither employable, nor have they been mobilised by the state in nation building. Without direct youth involvement, no societal transformation or nation building has been achieved in any country.

Rising prices are creating panic for the poor and fixed income groups. The reversal of top-down development process is also warranted with massive resource transfers at the grassroots accompanied by targeted social safety programmes. This will be impossible without drastic restructuring of government expenditure. The deliberate cost-escalating practices of projects demand introduction of effective input, output and impact framework in our budgets. At the same time, to enhance quick and better delivery system, accountability at the highest political level is a must, which so far has remained only on paper.

Social transformation cannot be expected from the ongoing budgetary process, with its defective policy and programme orientation. Not to lose one more year, there might be provisions in the budget for revision so as not to create uncertainty for long. This will be the best option for the new government in order to synchronise budgetary process to the needs of New Nepal.

Dr Khanal is an economist