State Of Nepal’s Economy And Development Prior To The Introduction Of Padma Shamsher's Constitution

An isolated agrarian society, Nepal has always been a home to a diversity of animals, forests, medicinal resources, pastures, and a source of various minerals and precious stones. Several locations in the Himalayas, the hills and the plains have historically had religious significance for Hindus, Buddhists and Kirats, attracting religious tourists from Nepal’s neighboring countries. These resources have had economic implications for the country. According to the 1941 census, the population of Nepal had already reached 6,283,649, although very little had changed in terms of Nepal’s economic state. Economically, Nepal was a feudal country until 1950-51, after which the predominant part of the national economy began moving towards subsistence agriculture. This article is aimed at reviewing the state of Nepal's economy and development prior to the introduction of the Constitution of Prime Minister Padma Shamsher in 1948.

April 20, 2020, 6:05 p.m.

In terms of ancient history, Kautilya, a well-known economist of the region and living between the 2nd and 3rd century BCE, was fascinated by Nepali handicrafts, namely the bhingisi and the apasáraka, high quality rainproof blankets. Furthermore, wool-based Nepali handicrafts were also discussed in the Brihatakalpasutra Vhashya, a Jain epic that contains the biographies of the Jain Tirthankaras, notably Parshvanatha and Mahavira. The text is said to have been written in the 4th century BCE. Additionally, famous Chinese travelers like Wanghunshe and Huan Sang in 648 AD have mentioned the quality of the Nepalese arts and crafts and the skills of Nepali craftsmen and artisans in their travelogues.

Additionally, since an early period in Nepali history, peasants also worked in small-scale handicraft production or home-based manufacturing using local raw materials. Moreover, Nepalese occupational groups, like the Kumhal (potters), Kami (blacksmiths), and Sarki (Leather workers) have always been important producers. Their production techniques, however, were rudimentary in nature, did not require large capital investments, and typically only met local demand. This meant that both domestic and international trade of such products was restrained, also due in part to a lack of infrastructural connectivity and Nepal’s difficult terrain. (Bajracharya et al, 2019)

Before the Nepal proper (Kathmandu Valley) was occupied, Regmi (1952) writes that the Valley was underwater; this fact also accounts for the fertile lands to which geological evidence points. Once Newars settled, an urban culture and a peasant economy grew, and because of its favorable climatic conditions, the Valley enjoyed surplus production and settled agriculture with a culture of aristocracy. When the Newars first arrived, from as early as the sixth century B.C., Regmi hypothesizes, it was in a state of pastoral life; with the arrival of tribes from east came the manufacturing of ports of ornamented design using a wheel and copper bronze, wood carving and metal works, and possibly the development of a high style of pottery. For agriculture, the people in the Valley used large spades and wood earth-breakers and grew wheat, rice, and maize; they also domesticated buffalos for their milk and flesh. Only limited research exists concerning the economic conditions of other areas of Nepal, then a cluster of different principalities ruled by monarchs (Regmi, D. R. (1952).

Under the Mallas, who ruled Nepal from c. 1201–1779 CE, King Jayasthiti Malla brought about many social transformations, including prescribing different roles for people of different castes. While the Brahmins were to act as priests and preceptors, those in the following castes were given posts in administration, trade and commerce, and agriculture, while the so called lowest caste was to do menial work. Similarly, Buddhist society was also divided on the basis of labor, with monks acting as priests and preceptors, Shakyas as makers of gold ornaments, and Banras as carpenters, sculptors, or businessmen. This supposed efficiency also resolved the issue of unemployment, and trade and commerce increasingly developed during the Malla period. (Shrestha and Singh, 1972)

When Prithvi Narayan Shah set out to unite the country, evidence shows varying economic factors at play. In Morang, there were vast areas of cultivable land that remained unused, as many local inhabitants fled to Indian Territory after Prithvi Narayan conquered the region in 1774. Once they returned with amnesty from the reigning government and their lands had been restored, the Morang district began exporting foreign and agricultural products to India, including rice, timber, spices, catechu, honey, and oranges. Additionally, iron and copper were also exported to India, and some items, such as blankets, ivory, and yak tails, were also sent from India to Bhutan. The import from India was somewhat limited and included sugar, tobacco, indigo dye, salt, cotton goods, and metal utensils; Morang enjoyed a favorable balance when it came to trade and was compensated by the East India Company in silver. (Regmi, M. C., 1969)

In the early 1800s, the recruitment of Gurkha soldiers became a source of income and remittance for Nepal after the Anglo-Nepalese war fought between Nepal and the British East India Company in 1814-16.The war was a result of border disputes and both countries’ ambitions for expansion. The signing of the Treaty of Sugauli in 1816 marked the end of the war, but Gurkha soldiers were gradually recruited as units in the British Indian Army. Defectors joined them in the beginning. In due course, the Nepal government sponsored process also started. Additionally, due to the efficiency of Gurkhas in both the war and peace efforts, their recruitment in non-formal security business also increased. This helped the cash-starving economy of Nepal, despite its negative effects in the social agricultural sectors due to the departure of human resources.

Economy in the 19th century

In the 19thcentury, agricultural lands, forests, mines were the most important natural resources aiding the state in its production of material commodities. (Regmi, M. C., 1984) Production was not only an economic set-up but also fulfilled a social function, wherein social groups and classes developed patterns of social and economic relations with one another and went on to effect the kinds of policies the state would adopt in mobilizing its resources. Under the traditional system of birta and jagir, the state granted lands and forests to individuals who were a part of the aristocracy or bureaucracy that supported the Rana regime. Under the system of jagir, government employees received the right and revenue from certain pieces of land. However, mineral resources, including deposits discovered in lands granted to such individuals, were exclusively under the ownership of the state. In terms of production, Regmi (1984) writes that “[w]hereas natural resources used as a means of production were owned by the state, the actual function of production was in the hands of individuals who undertook the costs and risks and hence may be described as independent producers.” (Regmi, M. C., 1984)

Primary production in the Terai region in the earlier half of the nineteenth century was mainly rice, although wheat, millets, and oilseeds were also grown. Rice and oilseeds were grown in surpluses for export, while the other two were mainly for local consumption. Tobacco was the most heavily taxed item and a profitable commercial crop, while other non-cereal crops, including cotton, sugarcane, and jute, were also grown in eastern Nepal. While the Inner Terai region was largely uncultivated lands, the Terai region had several varieties of timber in the forests, which were both used in domestic consumption as well as exported to India. Additionally, elephants and singing birds also presented commercial value to the state, although their capture led to a depletion of their population by the mid-nineteenth century. (Regmi, M. C., 1984)

Rice was widespread in the hill region, and wheat and barley were occasionally cultivated. Although the hill forests also contained sal (sorea robusta) as well as timber, logistically, they were difficult to produce on a commercial basis. However, the hill region produced medicinal herbs, wood for the production of charcoal, and a variety of Daphne for paper production for export. (Regmi, M. C., 1984)

Restricted by climatic conditions, the Himalayan region usually saw only one crop per year: potatoes, barley, or wheat. While non-food crop cultivation was limited to hemp, locals bred yaks, sheet, and goats for their meat and milk as well as for raw materials, like wool. The wool was then woven into different types of cloth and blankets and supplied to southern Nepal and also exported to India. Additionally, the timber from the forests in the region were cut down into planks and exported to Tibet and on to China. Musk deer were hunted for their musk for medical and perfume-related uses, to hunt while hawks were captured and trained. Honey and wax were also cultivated, although the honey was deemed unfit for human consumption, and the wax was used for casting cannon and manufacturing candles. (Regmi, M. C., 1984)

Additionally, throughout the nineteenth century, Nepal produced copper, iron, lead, as well as gold, cinnabar, and sulfur. After agriculture, mining was the second most important economic activity in the hill region. While copper and iron were sufficient enough for export, lead was scarcer, and Nepal supposedly depended on India for its supply. Sulfur and saltpeter were in demand at the gunpowder factories that the state established in various parts of the country. Additionally, the century also saw the birth of handicrafts and manufactures from processing materials in farms, forests, and mines; these included mainly two categories: handicrafts for consumption needs of the household or village and handicrafts for trade outside the village. The latter category included metals and metal goods, cotton and other types of cloths (handloom weaving), paper and pulp, boats and canoes, and saltpeter. The production of these goods was in its primitive stage throughout the century, which resulted in low productivity due to low capital-intensity of production. (Regmi, M. C., 1984)

In terms of trade, India and Tibet were both convenient markets for Nepal’s exports, although both attracted a different bundle of goods; while India was the mainstay of Nepal’s economy (which included timber, woodwork, rice and paddy, grains, cotton, wax, iron, rhinoceros horn and hides, and falcons), Tibet was a good market for primary produce and handicrafts. Export to Tibet also included European broadcloths and cutlery, small mirrors, previous stones, colored glass beads, opium and other drugs, while gold, salt, borax, furs, and China silks were imported in small quantities. (Gimlette, G. H. D., 1927)

The state collected taxes or rent from those who used state-owned resources for producing commodities, and more specifically, taxes on production meant paying taxes on natural resources used as a means of production. (Regmi, M. C. 1984), Commercial taxation was also implemented, wherein the state was allocated a part of the economic surplus generated by producers and traders. In villages, headmen and other functionaries collected agricultural rent and taxes on behalf of landowners and the state, which meant that peasants throughout the nineteenth century shared their produce with the landowners or the state as well as such individuals collecting rent or taxes. The peasant class was given an additional economic burden in the form of institutionalized unpaid labor for those for whom they were to work. Additionally, slaves were bought and sold, and the practice of bonded labor was prevalent; a typical case was when peasants were experiencing agrarian indebtedness from moneylenders due to high interest rates on loans meant to offset crop failure or death or illness in the family. (Regmi, M. C. 1984)

The Rana Regime

From 1846 to 1951, the Ranas ruled Nepal, with Jung Bahadur seizing power first, making himself the permanent prime minister and establishing a hereditary Rana rule. The Ranas enjoyed the support of the British in India, maintained feudal system that they inherited, exploited the economy for their personal and family interests, and contributed to the Nepalese economy maintaining the closed society. For example, the Durbar High School, the first English medium institution in the country, was established in 1853 by Jung Bahadur Rana in the premises of his own palace. The school was affiliated with the Calcutta University, and a Department of Education (DOE) was later established in 1858. However, the department of education did not play a significant role until the reign of Dev Shamsher, the Fourth Rana Prime Minister in 1901. (Bajracharya et al. 2019)

Later, in 1856, Jung Bahadur had the first population census of Nepal conducted; this census recorded the total number of inhabitants (i.e. a little over 600,000), comprising both old and new Newar houses and other people in rural and urban Kathmandu, Patan, and Bhadgaun. (Regmi, M. C. 1970) Property rights also existed then; in the Mahottari District, for example, when a man died without leaving behind his will and had no male relatives within three generations, his property would be accrued by the government, leaving just the sufficient amount for the needs of his mother per the value of his property (dated 1809). By contrast, in the Western Hill region of the country, among Newars, sons and fathers were not entitled to each other’s properties in the event of one’s death; instead, the property of the deceased would be accrued to the state, but appeals (in 1837) were allowed to permit sons and fathers to do so.

On the other hand, the Muluki Ain (Legal Code) outlines the provisions of the Dolaji system common in the Newar community of Kathmandu Valley; under this system, when a man didn’t have a son to designate as an heir, he could declare his daughter to be an heir, the Dolaji. She would go on to perform her parents’ funeral rights and inherit their property. However, her son would not be entitled to the property of his father and would only be able to share his mother’s property, unless his father has no other sons (from another woman). Additionally, a widowed woman, if she remained chaste after the death of her husband, would be entitled to her late husband’s property, and after her death, the remainder would be distributed to her husband’s relatives. (Regmi, M. C. 1970)

As of 1877, there were no schools or colleges, apart from the Durbar High School, and while the upper classes had either Europeans or Begali teachers teaching their children English, everyone else taught their own children or relied on a family priest to do so, while the deprived castes were left without any means of education. The Raj Guru, additionally, was a wealthy and influential person in the state and enjoyed large income from government lands and fines inflicted for “offences against the rules of the caste.” (Wright, D. S.ed., 1877)

Other priests also had land assigned to them and charged their clients fees for performing the necessary rituals for births, marriages, and deaths. Other members of the economy included astrologers (who set the time for events like declaration of war or undertaking business), “baidyas” (traditional medical men, as there were no public hospitals or dispensaries), clerks and accountants, and conventional lawpersons as well. Additionally, slavery was institutionalized, with most born as slaves and some sold into slavery as punishment for crimes like incest or offences against caste; slaves were often engaged in domestic work, wood-cutting, grass-cutting, and other labor. Additionally, evidence dating from 1852 to 1891 in Nepali years demonstrates that Kings allocated various amounts of land, often guthi endowments, for the maintenance of structures like Ranipokhari Tank, the Bridge of Bishnumati River, and maintenance of water spouts in Kathmandu. (Wright, D. S.ed., 1877)

The Singha Durbar was built by Chandra Shamsher in 1908 and proved to be an example of one of the finest westernized architectures in Asia. (Bajracharya et al. 2019)By building Singha Durbar, where the Office of the Prime Minister and Council of Ministers as well as the major Ministries and Departments of the Government of Nepal continue to locate, the Ranas contributed to a well-coordinated public administration in due course. The Singha Durbar still remains the administrative center of Nepal, although the prime minister’s residence has been moved to Baluwatar now. (Bajracharya et al. 2019)

Additionally, Bir Hospital was established in 1889 by Bir Shamsher, who also hired a British engineer to install a piped water system in Kathmandu. (Whelpton, 2005)This brought water to the public taps for the larger population as well as to the Rana residence itself. Under Bhim Shamsher, in the late 1800s, material conditions of education, hospitals, sanitary services, and other social services improved, including the supply of drinking water to valley towns. (Northey 1998) After his death, Deva Shamsher’s regime took a step toward the abolishment of slavery as an institution by freeing his own slaves. Although Dev Shamsher also planned to open schools throughout Nepal, within four months of his rule, his brother Chandra Shamsher ousted him and scrapped Dev Shamsher’s plans. Many schools that had opened had to be closed, while others continued to be supported by local businesspeople.(Northey 1998)

Chandra Shamsher also restructured the department of education to monitor new schools’ suspicious activities. (Sharma 1990) While taking such steps to limit the public’s access to education, Chandra Shamsher did invest in human resource development. (Northey 1998) In 1902, he sent eight Nepali students to Japan to be receive education in engineering, although this was later terminated as well. (Parajuly 2012)Then, in 1918, he established the Tri Chandra College in affiliation with Calcutta University, a decision taken in part to impress the British in India. Still, Chandra Shamsher remained distrustful of the College’s activities. Additionally, in terms of public education, Chandra Shamsher’s regime also saw the end of the practices of sati and slavery in 1920 and 1924, respectively.(Northey 1998) Other developments under Chandra Shamsher included suspension bridges for major trails in the hills as well as a ropeway to transmit electricity to Kathmandu from Bhimphedi in the Terai to the Valley in 1926.(Whelpton, 2005

Aside from formal education, Nepalese belonging to occupational castes continued to pass on their skills to the following generations, as had been done historically. In 1930, the government also established the first western-style technical school in Kathmandu that included trade courses and textile manufacturing. A two-year engineering course was added to this school for SLC graduates, which was followed in 1945 by the assimilation of the school to Tri Chandra College. These institutions were meant to produce human resources necessary for Nepal’s new industries. (Bajracharya et al. 2019)

1910 marked the decline in revenue demand in the Chandra Shamsher’s rule, when he fixed rents to cash terms and left them unchanged for many years.(Whelpton, 2005) A uniform system of cash salaries replaced the jagir system, which had virtually disappeared by 1950.About 60 percent of agricultural land was under the raiker tenure, wherein the tenant/owner paid rent to the government while a third was under the birta tenure, wherein the tenant/owner paid rent to a birtawala (or Rana usually), who then either kept the revenue or only paid a minimal amount to the government. In 1906, Chandra Shamsher offered legal protection to tenants’ security by extending raikar tenure to birta when another cultivator would offer higher rent. This did not always prove to be efficient, and like with the freezing of rent levels in 1940, the benefit did not always go to the actual cultivator, as the nominal cultivator could sublet the land and make profits between the rents he paid and received.(Whelpton, 2005)

In terms of trade and manufacturing, most was run either by Newars or by foreigners (Indians and Kashmiris, among others); Kashmiris settling in Kathmandu were often traders of European manufacture, while Newars carried out trade with Lhasa, facilitated by a consul or vakil located in Tibet. Most of the manufacturing consisted of cotton and coarse woolen cloth, bells, brass and iron pots, silver and gold ornaments, and earthenware. Most of the population of the country, on the other hand, continued as before; people were employed in agriculture at the time, with almost each family owning a piece of land and producing corn, rice, wheat, garlic, radish, red pepper, ginger, and potatoes, among others. Additionally, a significant portion of the revenue (estimated at 96 lakhs or 90,000 pounds in 1977) was also spent on manufacturing rifles and cannons for the estimated 16,000 army men. (Wright 1877)

As for trade with Tibet and China, the challenges posed by the rugged terrain remained, worsened by the cruelty of the winters. Most trade routes with that region during the Rana regime were comprised of unpaved, narrow passages fit for travel by foot or animals, and even smaller carts had difficulty passing through. Most of the trade was conducted through the border points of Humla, Mustang, Kerung, Kuti Oallngchungola and Kimathangka, with the main ones being Kathmandu to Kerung and Kathmandu to Kuti. Newar and Thakali ethnic groups were the primary traders with Tibet and China. Indian cities proved to be more populous and bigger markets for Nepali traders when compared to the Tibetan cities of Lhasa, Shigatse, and Gyantse, among others. Thus, trade with India was larger in scale.

However, for the Tibetan people, even the low volume of trade with Nepal was a lifeline. This prompted the wide use of Nepalese currency in Tibet and led to conflicts between the two countries; China was often called upon to assist Tibetan efforts in this regard. In 1856, a treaty was signed between Ranas and Tibet after yet another conflict, and this treaty outlined that Nepal was to support Tibet should it be threatened by foreign invasion. Still, Ranas were loyal to the British, to the extent that Chandra Shamsher was ready to breach the treaty of 1856 later on in favor of supporting the British. The British, after colonizing India, were focused on strategically using Nathu La.

In the Terai, Ranas distributed their lands to their family members and others loyal to the Ranas, and such persons often exploited the forest reserves in the Terai for profit. (Gaige, F. H. 1975) Throughout the earlier half of the 20th century, the Ranas hired contractors from British India to log timber to meet the supply necessary for their railroads and other construction. In an effort to populate the lands, the Ranas allowed landowners from British India to settle in the plains, especially from 1890s to 1930s, although preference was given to the hill people. (Gaige, F. H. 1975)

The systems of guthi (2.3 percent of total land) and kipat (4.6 percent of the same) also survived until the end of the Rana regime.(Whelpton, 2005) usually, guthi lands were gifted by ordinary families to a shrine, and such families became guardians of the shrine. Guthi lands, as religious institutions, were also exempt from duties. Kipat tenure in the eastern territories survived the unification of Nepal; it determined that nobody outside the clan, composed of the collective owners, could be alienated the land. However, this system continued to decline, and by the 1904s, it had vanished from the Rai communities west of the Arun River, while some groups, like the Limbus, managed to preserve it.(Whelpton, 2005)

Legislation in 1886 had determined that the Limbu kipat lands that were leased out to those outside the group would automatically be transformed into the raikar tenure and ultimately sold freely. (Whelpton, 2005) In 1901, however, this legislation was eliminated, and Limbu lands could be loaned to outsiders and regained whenever with the repayment of the loans. As land demands increased, Limbus could pay the original loans by obtaining a higher one from another bidder. Thus, although the Limbu Subbas were no longer tax collectors for the government for non-Limbu residents of their areas, in general, the community enjoyed security to some extent. (Whelpton, 2005)

Effects of the Indian market

As the demand for Indian goods from the upper- and middle-class Nepalis, including demand for cars and watches, grew, the usage of British Indian currency became more apparent in Nepal, as it has already been in the Terai. The dual-currency system presented a barrier to economic development in the 20th century, especially due to the Nepali rupee’s fluctuation in value against the British Indian rupee, because it presented problems of national integration between the hill and Terai regions of the country. (Gaige, F. H. 1975)

With India’s economic development and the extension of the railway system to Nepal’s borders (i.e. Nepalganj, Biratnagar, Janakpur, and Birjganj) between 1885 and 1898, Nepal’s own patterns of migration and trade began to shift. (Whelpton, 2005) Demand for grains and other produce in India rose, as did demand for wooden sleepers for the railway system. To process Nepali timber, Bir Shamsher established a saw mill in the Terai. However, it was easier for Indian imports to also penetrate the hills; for example, Indian salt began replacing Tibetan salt, traditionally exchanged for grains. Kerosene for lamps and cooking also became an important commodity soon after petroleum was produced in India starting in the 1880s. (Whelpton, 2005)

After the British colonized Sikkim in 1860 and began establishing a route to Tibet through the Chumbi Valley, Kathmandu’s role as a gateway for trade across the Himalayas diminished. The Calcutta-Darjeeling railway, established in 1881, halved the time it took to travel to Lhasa from Kathmandu from six to three weeks. Finally, Tibet was forced to permit unrestricted trade with British India after the Young-husband expedition in 1904, thus eliminating Kathmandu’s importance overall. While, trade, especially salt-grain exchange, between Nepal and Tibet remained significant, the two countries were close to conflict when disputes regarding Newars’ extra-territorial privileges arose in the 1890s and later in the 1930s. In the domestic market, imported manufactures (like clothes, for example) were slowly replacing local manufacturers, even among the general population as opposed to just among the political elite. (Whelpton, 2005)

As Nepal’s production of copper and iron mines became unprofitable, even agricultural and household utensils had begun to be increasingly imported in significant numbers from abroad. The question of when this change in imports began is debatable. Likely, around larger urban areas, like one of the Gorkha, Newar merchants had been importing British fabrics on a large scale and expanded to the business of money-lending as well from the middle of the nineteenth century. As early as 1861, a British resident expressed how Nepali artisan products were deteriorating annually, although in 1879, another resident argued that the country remained mostly self-sufficient. Some argue that Nepali artisans were able to compete with British products until after World War I and, indeed, the inflow of duty-free Japanese products under a 1923 treaty transformed the import scenario in Nepal. (Whelpton, 2005)

The replacement of Nepal’s local craftsmen was perceived by the Rana regime to be a serious problem. This was because from the time of Jang Bahadur Rana and onwards, trade was a revenue source of the government, and Ranas would profit from trade by partnering with Newar merchants and grating them monopoly rights for importing certain goods. Thus, the Rana regime sought to promote domestic production, and inspired by Indian nationalists’ take on the “homespun” cloth, Chandra and Juddha Shamsher promoted the cottage industry. They established training programs and assisted the securement of raw materials. Juddha Shamsher also sponsored large-scale enterprise, including a jute mill in Biratnagar in 1936 with the help of local and Indian private investment. This was followed by the establishment of processing plants for matches, cigarettes, rice and vegetable oil. (Whelpton, 2005)

Additionally, Nepal relied heavily on importing raw materials for manufacturing from India, which meant that industrial development policies could not flourish without Indian support. By then, it was becoming difficult to secure these raw materials, as the British government, pressurized by growing Indian nationalism, was working to protect India’s own industry. In 1924, the British government was worrying about how Indian tariffs might be circumvented by Japanese products imported through Nepal. Thus, in 1937, the British India government declined Juddha Shamsher’s request to have imports, for which the custom duty was waived at Calcutta, be sent straight to Terai’s factories, rather than first to Kathmandu for the inspection by the British residency. Another proposal in 1938 asking Indian to impose duties on its own exports to Nepal was also declined.

Then, Prime Minister Juddha Shamsher called for the promotion of public education and schools in 1939-1940, seemingly setting the path for educational developments in the country. However, this decree was actually meant as a tool to exert control over existing educational institutions. Later, following a destructive earthquake in 1934, Juddha Shamsher Rana’s government realized the importance of industrializing the country. To study the reasons behind Britain’s rapid development, he sent Bijaya Shamsher and Sardar Gunja Man Singh to Britain in 1934-35. In 1936, he issued a postal guide for the collection and delivery of mail across the country and even planned for the construction of a postal road. (Bajracharya et al. 2019)

Under the guidance of Patna University, the department of education introduced the School Leaving Certificate (SLC) Examination. Then, in 1946, the department began administering the exam independently. The first girl’s school was established in 1947 under the leadership of Padma Shamsher, who also established a Basic Education System, including practical skills, based on the Gandhian approach rather than a Western one. This move was meant to appease the Indian democratic forces, i.e. Gandhi himself and the Indian/National Congress, as well as Nepali dissenters of the Rana regime. Unfortunately, however, Mohan Shamsher soon overtook Padma Shamsher, and his vision could not be implemented. (Bajracharya et al. 2019)

Additionally, Nepal’s first hydro-electricity project and Asia’s second was established in 1911; it was a 500 KW hydropower plant located in Pharping in Kathmandu Valley developed by Chandra Shamsher. (Bajracharya et al. 2019) According to documentation dated in early 1910, quotes Regmi, the production materials for the plant were carried by porters from Bhimphedi to Pharping in the southern hills of the Valley. (Regmi 2002)The manpower to carry the production materials were composed of male members of Kathmandu Valley’s families, who were fined if the decree was disregarded. This was followed by, in 1936, a 600 KW (later 900 KW) hydropower plant established in Sundarijal of Kathmandu Valley and a 1600 KW hydropower plant in Letang village of the Morang district. Regmi (2002Additionally, in the Terai, especially the industrialized areas, there were various private diesel plants.(Regmi 2002)

Large-scale migration continued throughout the late Rana period. Land continued to be cleared for settlement in the Terai.A notice in Gorkhapatra dated December 14, 1931 (as included in Regmi Research Series of December 1, 2074) is illuminating in this regard.

Many Nepalis have left their country and gone abroad. The practices of visiting and staying in another country for employment is prevalent everywhere. It is good to engage oneself in a gainful occupation without renouncing the national religion and the prestige of the nation. Many people from the hill regions have gone abroad in search of employment. They leave the country at the investigation of others, without getting any information about local conditions and employment prospects in the places where they go. They have to, therefore, work as coolies, etc. and suffer much because their daily earnings are not adequate to make ends meet every day. They are unable to return home because they do not have money to pay for the journey. If somehow they are able to arrange for the traveling expenses, they do not have any land or home in Nepal and so are unable to make a living, as they have sold all before leaving the country. Some people who have left the country also avoid the penalties awarded to them by government offices or courts in Nepal. They are unable to come back even if they want to. We have received frequent reports to this affect. Applications in this regard are also being received from time to time.

In order that these people may be able to fulfill their desire to come back to their motherland, as well as that others who intend to go abroad may be able to cultivate their own farm in the country and thus make a satisfactory living, we have set aside for reclamation a tract of forest land containing about 50,000 or 60,000 bighas near Biratnagar in Morang district. This tract is situated east of the Koshi river, west of the Bakraha river, south of the road leading eastward from Ohuni and north of the Nepal-British border. We have also made the following arrangements in this regard.

In case any Nepali riot wants to reclaim lands in this area, he should study the following particulars and send information to the Bada Hakim of the Goswara Office. Lands will then be allotted according to the chronological order of applicants. Alternatively, leaders (of prospective-settlers) may come, finalize the necessary arrangements and fix the date for their arrival. (Settlers) may then come on the scheduled date, set up a farm and homestead, and live happily.

In fact, those who "moved into work it were normally from across the Indian border. Many hill-men, especially from the Tibeto-Burman-speaking communities, moved eastwards along the Himalayas, now driven by land hunger rather than the simple wish to escape the government's exactions."

Ranas, of course, wanted to avoid any actions or events that would undermine their authority. Additionally, the agnates succession system proved to be a factor working against large-scale expenditure on public causes. Because the maharaja wanted to provide for his own offerings, he pocketed much of the funds of the palace, leaving little else for the brother or nephew that succeeded him. (Whelpton, 2005) Still, by the end of the Rana regime, the throne called for many public development projects for the benefit of the people. Because budgeting was a big part of this, public budgeting began under Padma Shamsher Rana in 1947; however, it was institutionalized only in 1951.

Although western education was not widely promoted by Ranas, some non-Ranas were able to access education due to the establishment of schools and the Tri Chandra College. Expectedly, these educated folks, coming from elite families, became one of the strong forces that toppled the Rana regime in the mid-1900s.Ranas did, however, supported the traditional Sanskrit schools that were affiliated with the Varanasi Sanskrit Board. Students of one such school, the Teen Dhara Pathasala, organized the first student movement (called Jayatu Sanskritam) in 1947, which demanded the improvement of the curriculum through the addition of modern subjects. Many of these students also supported the political revolution against the Ranas later on.(Bajracharya et al., 2019)

World War II brought only marginal changes to the Nepalese economy, including a high demand for products like jute sacking. The reason could also be a lack of determination and consistency; for example, a small textile operation established by Newar merchants in Bandipur in 1943 had to close because the government terminated the supply of subsided yarn from India, most likely due to pressure from the British India government. Additionally, given the lengthy Nepal-India border, the government found it difficult to control the exchange of commodities via its borders, meaning that Judhha Shamsher’s ban on import of products from India that could be produced in Nepal had little practicality. (Whelpton, 2005)

Then, in 1950, a treaty regulating commerce was signed between Nepal and India, as Mohan Shamsher’s bargaining power was weakened by the anti-Rana movement. This treaty enabled free trade between the countries. However, Nepal was to impose duties on imports from outside of India that amounted to the same imposed by India. This meant that Nepali industrialists could not compete in the Indian market. Still, Nepal was able to enhance its communication with countries other than India due to India’s expansive railway system, resulting in the shortening of the Kathmandu-Morang journey from ten to four days. Air travel became a possibility for Nepal after the British resident, in 1942, led the establishment of an airstrip at Simra, near Birgunj, following the communication disruptions with Calcutta after the Quit India campaign.(Whelpton, 2005)

There were some notable changes occurring towards the end of the Rana regime. The population had started to grow faster. Modern medicines were increasingly available in the towns and administrative centers of the country. Nepal's increasing potato and maize cultivations were helping the food scenario. The scope for agrarian expansion provided by far western Terai was also promising. Much of the territory was being utilized for cultivation, which led to increased exports due to surplus agricultural production.(Whelpton, 2005)

A World Bank report about Nepal’s economic health in 1960-61 provides some idea about the general state of the economy during the era when Nepal was closed off from the world. During that time, the economic conditions remained consistent: Agriculture was the mainstay and the only means of livelihood for a majority of the population, and most relied on agriculture just for subsistence, as there was no incentive for them to cultivate extra due to the feudal system. The staple crops grown in the hills included rice, corn, millets, wheat, and potatoes, as well as oilseeds, jute, sugarcane, and tobacco in the Terai. Occupation in government service, trade, transport, and industry was usually limited to those in the Kathmandu Valley and towns in the Terai. Less than a percent of the population was in school in 1951. (The World Bank, 1964)

[This article is part of the research work the author is conducting on the first Constitution of Nepal, issued in 1948. Detail references will be on the final product.]

Bipin Adhikari.jpg

Dr. Bipin Adhikari

Dr Adhikari is a senior constitutional expert and the founding dean of the Kathmandu University School of Law). He can be reached at []

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