Last year Finance Minister Ram Sharan Mahat based his economic projections on the assumption of peace. Peace has returned to the country by and large, except the disturbances in several districts in the Tarai. But the government’s pre-budget survey of the economy this year does not give reason to share the optimism Dr Mahat had demonstrated. The Economic Survey 2007 puts the current year’s economic growth rate at 2.5 per cent, barely enough to cover the population growth, and about half the rate projected by Dr Mahat. Last year, the economy notched up 2.8 per cent growth. The two years’ low growth figures have been attributed mainly to poor agricultural performance — agriculture has grown at a dismal 0.65 per cent this year, even worse than 1.1 per cent last year. The contribution of the non-agricultural sector has also gone down this year (3.6 pc) as against last year (4.6 pc). Some sectors have registered growth, however small, and others have gone in the negative direction. For instance, the survey has recorded a fall in foreign trade, a rise in foreign debt and an increase in remittances from abroad.

It is a constant sign of underdevelopment that yearly fluctuations in the agricultural harvests have the effect of substantially pulling up or down the country’s gross domestic product. And farm output has always depended on the mercurial monsoons from the start of the country’s planned development more than half a century ago to this day. This excessive reliance on the skies means that development of irrigation has remained dismal despite heavy investments over the years, including infusion of foreign loans. That translates into a bitter truth. In any year, whatever growth the economy achieves is due largely to factors other than the government’s policy. Take, for instance, the huge annual remittances from Nepalis abroad, which have had a vital role in keeping the Nepali economy afloat.

An unusually large proportion of the population still depends for its livelihood on agriculture. As a result, massive farm unemployment and under-employment persist. The challenge of any economic reform, therefore, lies in taking excess manpower away from farm to other sectors such as manufacturing and services. The foreign debt burden on every Nepali’s head has increased, to Rs.14, 000. Questions are often raised how the general people have benefited from these borrowings. Every year, the government, of whatever hue, presents its annual policies and programmes, brings out the Economic Survey, and makes budget estimates for the forthcoming year. These are necessary exercises. But unless the main economic indicators register an encouraging improvement or the direction of the economy as a whole is clearly in the right direction, there is no room even for consolation. Economic development has also to do a lot with good governance, which includes zero-tolerance for corruption. In this connection, a solid start needs to be made.