Nepal’s agenda of development

The National Planning Commission (NPC) has a new team that has been given three years to revitalise the economy. Poverty, inequality and underdevelopment have made it necessary to change ways in which planners do business. Five-Year Plans have failed to meet targets. Living standards have risen so marginally that in 2004 Nepal’s per capita GDP, estimated at $252, was ranked 37th within the 50 LDCs.

A progressive agenda that averts conflict, lifts the majority out of poverty and generates resources for higher growth is needed. Future policies will have to be based on four pillars to attain inclusive, equitable and sustained growth.

Human security and human development: As Nepal faced autocracy for nearly three-fourths of its existence, human security and development are key to sustained growth. Protection of rights and expansion of capabilities are indispensable for economic growth. Democracy is a must for development; the rule of law for addressing injustice.

Enforceable social contract: The people reflect the state’s raison d’etre. A state that cannot deliver economic and political goods ceases to command legitimacy. Addressing horizontal inequality, exclusion of a large section from development process, political participation and access to education, health, and jobs remain a prime challenge. An enforceable social contract is the realisation of the above entitlements, which addresses equity and creates a productive workforce. Women and ethnic groups should be given priority for fostering equitable and inclusive growth.

Optimal resource allocation: When governments raid the exchequer for wasteful spending, funds for building infrastructure are foregone, national savings are depleted and citizens are made to bear the cost of unproductive outlays. Rulers have displayed ‘free-rider’ behaviour to monopolise resources. Democracies are not immune from rent-seeking. Unless the malaise of unproductive economic leakages is tackled, Nepal’s development efforts — whether in harnessing water resources, promoting tourism and delivering goods — would be second best. Optimal resource allocation is the first condition through which new resources are generated.

Industrial competitiveness: Nepal has failed to catch up with developing economies. International trade poses opportunities and threats but the manner in which an economy adjusts itself implies whether gains or losses occur in the globalisation process. Unless Nepal enhances its industrial competitiveness, rising per capita and higher living standards remain elusive. Industrial share in national income is below 10 per cent of GDP. Why can’t Nepal benefit from its perch between China and India, which are reshaping global order of production, trade and financial flows?

A forward-looking strategy must ensure that India and China are not merely competitors but sources of demand, co-ordination in global production networks and value chains, foreign investment, technology and market niches for Nepal’s economy.

Nepal’s development prospects thus depend on achieving human security and development, social stability, economic prudence and industrial competitiveness. In this regard, the economist’s role would be to act as a beacon of rationality and a trustee for the poor.