Economy, development on slippery slope: SurveyThe country’s overall development suffered a setback this fiscal, as economy reeled under the prolonged Tarai unrest and Indian blockade along with earthquakes and energy crisis, according to the Economic Survey 2015-16 made public on Thursday.
The country’s overall development suffered a setback this fiscal, as economy reeled under the prolonged Tarai unrest and Indian blockade along with earthquakes and energy crisis, according to the Economic Survey 2015-16 made public on Thursday.
The survey presented at Parliament by Finance Minister Bishnu Poudel paints a bleak picture of the economy and development.
Road expansion, power generation, expansion of health institutions, industry registration, foreign direct investment commitment and tourist arrivals dipped, resulting in the lowest economic growth in 14 years.
The country’s economic growth barely managed to avert negative growth with just 0.77 percent.
The survey shows how dismal development spending has been. The country added only 494KM of new roads this fiscal against 1,050 KM last fiscal.
Even though the government talks of developing major infrastructure projects on its own, only 92KM of roads was blacktopped. Power generation remained on the lower side with only 18.49MW of electricity added to the national grid this year.
Inflation continued to remain on the higher side, affecting the overall savings of the people.
According to the survey, salary and wage rise in the current fiscal year stood at 4.6 percent, lowest in the decade, while inflation grew by 9.5 percent, which hit the
savings against the gross domestic product (GDP) which is estimated to remain at just 5.3 percent, the lowest in last one decade.
Former finance minister Ram Sharan Mahat termed the situation unfortunate and blamed the four-and-half-month-long blockade and ineffective government spending for the economic mess. “Despite having abundant resources, the government failed to speed up reconstruction work and spend the capital budget,” said Mahat. The delay in formation of the National Reconstruction Authority and blockade affected reconstruction work badly.
The government spending that has traditionally been low was further affected by poor governance and trade disruptions this fiscal.
As of May 25, only 24 percent of the capital budget has been spent, according to Financial Comptroller General Office.
According to the Economic Survey, capital expenditure remained low compared to past years, as only 10 percent of the capital budget was spent during first eight months of this fiscal year against 24 percent during the same period last fiscal year.
“Due to the low growth, per capital income (in terms of dollar) has decreased,” says the survey. “It may not help the country to achieve the goal of graduating to a developing nation by 2022.”
Not only the government, the private sector also failed to make enough investments in capital formation.
Private sector investments—both domestic and foreign—dipped this year. There has been a huge decline in foreign investment commitment this fiscal with only Rs 6.57 billion FDI pledge made in the first eight months.
According to the survey, private sector investment in total fixed investment against GDP declined to 19.1 percent against 22.5 percent in the last fiscal year.
“There is an abundant liquidity in the banks, but it has not been utilised. So, creating business-friendly environment is a must to revive the economy,” said Mahat.
How badly the private sector was hit can be gauged by the fact that industrial sector suffered negative growth for the first time in last seven years as industry registration, investment as well as foreign direct investment (FDI) all saw a dip.
The industrial sector witnessed negative growth of 6.3 percent. The service sector’s growth was also the lowest in a decade.
Pashupati Murarka, president of the Federation of Nepalese Chambers of Commerce and Industry, said with the political crisis yet to be addressed, the business community has failed to gain confidence.
“As long as the private sector sees the probability of another round of agitation in the main industrial belt, it won’t be able to make additional investment,” Murarka added.