Though Nepal’s economic reforms date back to the 80s but go on at an accelerated pace with the adoption of the policy of liberalisation in the 90s following the restoration of multi-party democracy, the momentum of economic growth could not be sustained from the mid-90s onward. A host of unfavourable factors have made the economic growth rather sluggish. Some experts have blamed the country’s weak democratic institutions and lack of sincere participation of all stakeholders in the development process for the current state of the economy.

The process of growth, which could otherwise have proved to be an effective tool for alleviating poverty has been far from satisfactory, thanks to the failure to build the capacity of the institutions supposed to implement development policies and programmes, as well as schemes for improvement in other critical sectors.

Many important decisions, taken in an ad hoc manner, have produced results with negative economic effects. Indeed, most of the reform programmes have suffered much from the lack of a political will on the government’s part to crack down on corruption and to take development to the grassroots level. Furthermore, the linkages between the farm and non-farm sectors, as well as between the government and private sector are rather feeble. Though mainly an agricultural country, Nepal has been able to develop neither the agricultural sector nor other important allied sectors. The displacement of farmers as a result of the Maoist insurgency has compounded the problem. This has resulted in a marked shift away from the farm sector to others like trade, transport and services. But sadly, even these sectors leave a lot to be desired. Economic development depends on many factors, and no less important is the need to build the capacity of the institutions both in terms of efficiency and effectiveness.