The growth curve

The latest forecast of the Central Bureau of Statistics that the national economy will grow by 6.81 percent this fiscal is encouraging. The above-six percent growth, for the third year in a row, has never been attained in over two decades. This kind of sustainable (and increasing) growth is partly the outcome of political stability. The ending of load-shedding has also boosted our industries and businesses. As tourism picks up after the low of the 2015 earthquake and the subsequent blockade, hotels and restaurants are doing a roaring business. Good rainfall has ensured plentiful harvests.

 

Thus 6.81 percent growth is something to celebrate, any way you look at it. It has, for instance, contribut­ed to an increase in the annual income of a Nepali by around Rs 14,000 in a year. The proportion of those living under the poverty line is steadily declining. So far so good. But it would be an incomplete assessment of the Nepali economy if we don’t dig deeper into these numbers. A big reason for the high GDP growth is the boom in construction, which is fueled by loans from banks and financial institutions. Such loans also boost vehicle ownership. Economists warn that the econ­omy is overheating because of such unproductive spending, and a crash might be imminent. The good numbers do not reveal the whole picture.

 

The only way to achieve long-term economic pros­perity is to ensure more, and timely, investment in the productive sector: rather than erect credit-supported private apartments, build good roads and airports. Instead of spending most of our foreign reserves on imports, channel more into improving the local busi­ness climate. The state should also invest in quality education and healthcare for all Nepalis. But the oppo­site is happening. Over the past few years, the spending in productive sectors has been half the level of spend­ing in unproductive activities.

 

While the federal government seems committed to handing out various kinds of benefits and subsidies to the old and the needy, it has made little progress in mass-scale job-creation. Most of our youth in rural areas continue to go abroad in search of well-paying jobs. Yet much of the hard-earned money they send to Nepal is quickly repatriated to pay for our burgeon­ing imports. A growth of 6.81 percent means there is enough money sloshing around for all kinds of produc­tive investments. Too bad the communist government is busy gloating about its high numbers than in laying down the right economic fundamentals.