High time to focus on economy

April 12, 2017

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KATHMANDU: With the local level election approaching, the big political parties have swung into action with their various election-centered activities. In this connection, 80 or odd parties that have registered with the Election Commission for the purpose of participating in the local level election have started drafting their respective election manifestos. It might be assumed at this point that the economic growth and local development is going to be the main agenda on the manifestos of these political parties, and rightly so.

All those who are familiar with the country's roughshod journey ahead in the last 25 years or so well know that much of the precious time has been consumed by political affairs. A decade was squandered due to the vicious conflict and even the period after that is marked by turbulence and trouble. Political scientists agree that Nepal is still in transition even after the promulgation of the constitution. The local level election date has been fixed for May 14 but there are misgivings about the beleaguered polls due to the Madhesi Front and the Federal Alliance's reluctance to join the election bandwagon. The government has introduced a new constitution amendment proposal by withdrawing the previous one with the singular motive of bringing these opposing parties on board the political mainstream and into the election platform. However, the Madhesi Front does not seem to buy the new constitution amendment proposal either.

The Prime Minister's new proposal has also failed to convince the main opposition party, the CPN(UML). So, what all this political posturing going on in the country points to is political uncertainty and prolonged transition.

The economy has been on the receiving end all the while and in the doldrums. No matter how much the proponents of the political change brag about ushering the country into a new era, this has not been translated into something tangible for the common man. The tall claims of change might go down the drain if not backed up by a strong and resilient economy. This is a simple truth that every politician knows. But what our political leaders have done is focused only on politics at the expense of the economy. Already dissipated due to the prolonged political transition, the economy was further battered by the devastating April 25, 2015 earthquake and the inhumane border blockade that came with the promulgation of the new constitution. Even though the embattled economy has shown slight signs of improvement of late, it is still wobbly.

A couple of weeks back the Asian Development Bank had projected the economic growth rate to reach 6.2 percent in the current fiscal year provided that the constitutionally mandated three tiers of elections are held in time, that the capital expenditure allocated in the budget is fully utilized and that the post-earthquake reconstruction and other physical infrastructure development projects pick up momentum. The same had shrunken to a dismal 0.77 percent in the last fiscal year. The political parties should not be oblivious of this fact as they chalk out their manifestos aiming the elections.

Attaining a modest economic growth rate of 6.2 percent is not a tall order if the political parties muster the political willpower. The current macroeconomic situation report recently unveiled by Nepal Rastra Bank has given a glimmer of hope on the economic front. The report showed that the consumer price index has increased by only 2.9 percent in the past eight months of the current fiscal year, which is the lowest in the last 11 years. Similarly, the inflation rate has gone down to 3.3 percent. It was 11.3 percent in the corresponding period last fiscal year. The average economic growth rate from the fiscal year 1991/92 to fiscal year 2006/07 was four percent. The same in terms of the prevalent production price from fiscal year 2007/08 to 2015/16 remained 4.1 percent and 3.9 percent in terms of basic price. In the intervening years from 1991 till 2016, the economic growth rate reached 6.1 percent in fiscal year 2009/10 and 6.2 percent in fiscal year 2007/08. This shows that although Nepal's economic growth rate crossed the six digit rarely, it could not be sustained. This increase in growth rate is occasional.

Occasional increase in the growth rate occurs when factors other than those adopted by the government have their impact on the production and there is no solid basis and guarantee that these factors would continue. For instance, the economic growth rate increase in the two intervening years was due to favourable monsoon which resulted in good harvest. There is no certainty that the weather and monsoon is going to be favourable in the succeeding years to scale up the economic growth rate. So, to achieve sustained economic growth, the government has to adopt fitting economic policies that prop up the economy and these policies need to be continued.

Another positive aspect of the economy currently is that market inflation has stabilized although the wage rate has increased. The national wage rate index has risen by 14.4 percent. A heartening thing is that inflation has not risen despite the increase in wages. Given certain positive signs in the economy, the economic growth of 6.2 percent can be achieved if the inflation is controlled, employment opportunities are created within the country, the capital expenditure is fully realized, infrastructure development projects expedited and some degree of balance maintained in the export and import regime. Still, the sustained weak economic growth, unemployment, increasing inflation and the weak
development expenditure capacity have been the lingering challenges to lift up the economy.

The number of people compelled to live under the poverty line has not reduced significantly and there is still lack of employment. The contribution of agriculture sector to the GDP has not increased to the expected level. The country's economy is still stymied by dismal economic growth, high trade deficit and unrestrained market price. Given this context, it is encouraging that the political parties are poised to focus on the economy in their manifestos.

The government should concentrate on scaling up the capital expenditure and expediting the reconstruction works. And, there should not be any let up in the subsidies the government has been providing to the farmers. It is essential to increase youth's involvement in agriculture by means of periodic plans. Of late, the energy supply has improved which is expected to increase industrial output. The improvement in energy supply will encourage more industries to open, besides attracting more foreign direct investment. As the country gears up for the elections, economic prosperity and public welfare programmes should be the focus of the political parties. Only the parties championing these agendas will get the public support. So, it is high time the parties start prioritizing the economy than politics. 

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