GDP Battered Growth

Inability to bring in full fledged budget has already cost the economic growth by half a percent, say officials<br>A CORRESPONDENT

Nov. 11, 2012, 5:45 p.m. Published in Magazine Issue: Vol. : 06 No.-10 Nov. 09-2012 (Kartik 24, 2069)

For a second time in less than three years, Nepal is facing similar budget crisis.

As government and the opposition fail to see eye to eye, the term of one-third budget passed back in July is coming to an end soon.

The policy instability, lack of predictability and, overall, lack of government investment has led to an environment of overall gloom in growth estimates.

“We had thought that there would be 5 percent growth this fiscal. But now due to the absence of full fledged budget, we now estimate the growth to be just around 4.5 percent,” said Deependra Bahadur Chhetri, vice chairperson of National Planning Commission (NPC).

The main reason for such stunted growth, he said, was due to the government’s inability to spend on development projects.

The psychological impact of an incomplete budget has been total. And so has been its impact on the propensity of spending by the private sector.

For every 25 rupees of spending by the government, the private sector spends 75 rupees. As such when the government does not spend its quota of 25 percent, the 75 percent spending by private sector is also completely affected.

Agro Agonies

Many economists believe that even the estimate by the government of around 4.5 percent growth is unlikely to be met this year.

They point to the impact of weak/erratic monsoon and scarcity of fertilizer on the agricultural output.

Last year, too, the government had predicted five percent of growth. But it was later revised to be 4.5 percent.

That was when there was a bumper paddy and wheat harvest.

This year the weak agriculture is set to severely impact the growth that is already compounded by political instability.

“There was an acute shortage of chemical fertilizer at the peak season. The monsoon was also erratic. So, farmers may not be able to harvest handsomely. As such, we are assuming the growth to come down to between 3 and 3.5 percent,” said economist Dr. Chiranjibi Nepal.

But such a low growth trajectory could prove to be a major handicap in Nepal’s quest for poverty alleviation and development.

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