Confronted with the lack of any sign of inclusive development, Nepal’s democracy and economy both continue to face a vital question mark. But the big shifts that Nepal has made in the past few decades warrant a serious study. In the post-monarchy phase, Nepal’s democracy and realpolitik have shown unique characteristics. But there has long been an absence of a broad analysis from a policy perspective, until now.
Madhukar SJB Rana’s posthumously published book, An Alternative Development Paradigm for Nepal, is just that single document that attempts to explain the country’s crucial development profile and fundamentals. In the case of Nepal, it is unlikely that a top-down development paradigm comprising national planning, state enterprises and labour unions will allow inclusion of all. This can only happen when opportunities are created for all by supporting markets garnished by agrarian, economic, financial, administrative and labour reforms – and not through just offering “Seven Provincial Governments” under the newly introduced federalism. Not least, maximising a bottom-up development paradigm with maximum scope for local leadership development and culture-specific innovations to achieve Sustainable Development Goals (SDGs) depends much on the locals themselves, in tune with their own capacity to deliver.
As early as the 1980s, the idea of “sustainable growth” emerged as a new growth and development paradigm. For the first time, the basic steering principles of economics necessitated harmony with environmental concerns and lasting growth. For good reasons, the old GDP approach to determining growth – and thus success – was seriously questioned. The “inclusion theory” was born and it received traction from the new genre of progressive policy practitioners and economists. In the 1990s, Prime Minister Krishna Prasad Bhattarai, a Gandhian statesman, provided a new term to the development paradigm – “pro-poor growth”. This led to some welcome changes in policies and grassroots implementation.
Nepal’s development plans thus must consider the structural limitations of its economy and geography. Policymakers must show greater empathy towards the precariousness that Nepali citizens face in the absence of constructive national and sectoral dialogues to strengthen the national economy. With the excessive import of goods and the export of human capital, Nepal is in the midst of a crisis. Unfortunately, the political leadership has not been able to pursue an effective economic development plan. There is thus a glaring need to take up a development agenda that aims to reduce imports and create jobs so that human capital is not exported to foreign lands. Such a metamorphosis will require an alternative development paradigm. Nothing less than a revolutionary resolve is needed to orient Nepal’s development planning towards meeting the aspirations of the masses.
Inclusive growth must mean growth with productive employment by creating opportunities for jobs and by investing in the human capital development of oneself and family members for the jobs. Planning must be macro, meso and micro, all harmonised strategically. The macro plan must project the desired structure of the economy for the next 25 years and the five-year plan must focus on human resource development that addresses the long-term requirements of the economy. To make it happen, it is essential to move judiciously and integrate the manpower supply and demand projections with an educational plan that opens up avenues for vocational, apprenticeship, technical and technological options for a variety of occupations in the national economy and in the global markets. Inclusive growth requires that we take in a host of factors and forces like geography, demography, social factors and forces, governance, etc. Hence, it has to be participative to require decisions at all levels and all actors – not just the State guided by Nepal’s National Planning Commission (NPC) – with its basic and applied research capacities coupled with the rapid turnover of planners with the political changes. What is now needed for Nepal is the framework of an Integrated Sector Programming and National Performance Budget governed by a sound Fiscal Responsibility and Budget Management Act (FRBMA) as exists in India, for example, where outcomes are underscored rather than simply inputs and outputs.
Nepal’s development plan has to be framed in the perspective in due cognisance of its economic structure and development constraints. It requires policy planners and businesses from both public and private sectors to be proactively engaged in national and sector dialogues with each other – to set down targets and outcomes for coordinated policy and designing of sector and multi-sector programmes aligned with the annual performance budgets. Also, the feasible economic growth targets have to be assessed for each five-year period first and foremost in consensus with the political parties – and not be driven by external agents and fanciful notions of the political leadership who are very weak in their understanding of economics and finance. The GDP and sector targets should be set in a realistic manner and accordingly, action should take place to secure the best possible outcome. Each target must be supported by a country-wide action plan and programme. This requires developing both import substitution and export promotion strategies in partnership with the private sector to include targeting massive inward FDI to compensate for low gross household savings. This requires a new foreign exchange regime where all commodities are put in a common basket and the foreign exchange rate derived accordingly – and further, the devaluation of the Nepali Rupee (NR) to protect the interests of local agriculture production against the subsidised exports. Subsidies to farmers are a sort of necessity with a national drive on irrigation infrastructure.
Costs have been borne at the household and individual levels, with the pain and suffering of international migration and debts incurred for it. However, one can take advantage from the challenges by planning the remittance economy better so as to empower women as heads of households and the girl child with the skills to fill in job vacancies, as happened during the First and Second World War which liberated women once and for all in the West. Finally, given all the above parameters and their variables for inclusion, there was really no need for an ethnicity-based inclusive State to render justice to all and the next generations. Yes, Nepal needs an inclusive Constitution to not exclude or discriminate against anyone. Primarily, to ensure the supremacy and the rule of law by having independent institutions to check abuse of political authority and guarantee accountability, transparency, competition and merit in the body politic for public good. It would also have to devolve responsibility to the local government units. Sadly, the newly made provinces have thus far failed to achieve their developmental goals and have ended up adding merely another layer of the bureaucratic system at a high cost of public resources.
Nepal’s developmental woes are multidimensional and it has the centrality of political instability as a major factor behind the structural weaknesses at economic and developmental fronts. A decade-long Maoist insurgency, transition from monarchy to finally evolving as a full-fledged democracy and countless rounds of political experiments for power made Nepal too vulnerable to sustain its developmental pursuits. With a population of nearly thirty million (July 2010), Nepal is one of the poorest countries in the world. Over 80% of the population in the country is directly or indirectly involved in agricultural activities. As per the preliminary study of the Central Bureau of Statistics, the per capita Gross National Income (GNI) in Nepal was recorded as low as $568 in 2009–10, while the annual rate of economic growth was 3.5%. Nearly 55% of the people in the country fall below the international poverty measure of $1.25 per day. The country is facing drought, an acute shortage of food and the highest level of hunger in 40 years. According to a report of the Asian Development Bank, Nepal recorded the biggest increase in inequality, together with China and Cambodia. About 46% of the people in Nepal are underemployed and unemployed. Each day, over 1300 Nepalese people flee their country to other countries other than India in search of employment.
Many of the problems in Nepal are the outcome of the armed conflict of ten years beginning in 1996. Over 16,000 people were killed due to the conflict, which directly affected the lives of 4,50,000 of their family members. During the conflict, 5800 people were disabled, 71,200 people were internally displaced, 25,000 children were orphaned and 9000 women were widowed. Besides, 1350 persons disappeared. The property of 11,000 people was damaged. Several government offices, schools, bridges and police posts were damaged.
To know more about the conflict and peace in Nepal, Hari Bansh Jha’s Peacebuilding in Nepal offers some practical insights:
Human Costs of Conflict: 12980 persons including civilians, security forces and insurgents were killed between 1999 and 2009. In 1999, 400 persons were killed. The figure peaked up to 4500 in 2002. Though the number of casualties somewhat declined in subsequent years, the death figures were still very high until 2005. As many as 1800 people were killed in 2003, 2700 people in 2004 and 1848 people in 2005. The number of people killed declined perceptibly to 480 in 2006, 130 in 2007, 81 in 2008 and 49 in 2009.
Economic Cost of Conflict: During the conflict (1996 to 2006), the strength of the Nepalese national army more than doubled from 46000 to 96000. Along with this, the defence budget had to be tripled from Rs 4 billion to Rs 12 billion a year. Estimates are that additional military expenditures blocked the employment prospects for 60000 primary school teachers and another 60000 pre-school monitors and primary health workers. Besides, a huge amount of money is being spent on 19500 Maoist combatants staying in seven major and 21 satellite camps in various parts of the country. Nearly two million rupees was spent in 2009-2010 on their salary, ration and management. The government pays a monthly salary of Rs 5000 to each of the combatants over and above a per diem varying between Rs 72 to Rs 110 based on the place in which they are cantoned. Also, the government had to spend an additional Rs 570 million for upgrading the infrastructure in and around the camps.
Multi-track Approaches to Peacebuilding:
Track-I: During the Maoist insurgency period, efforts were made with different level of tracks to bring peace to the country.
Under Track-I, three rounds of dialogue took place between the government and the Maoists on August 30, September 13 and November 13 in 2001. This was followed by three rounds of dialogue between the government and the Maoists on April 27, May 9 and August 17 in 2003. During those dialogues, the Maoists wanted to have a round-table conference, an interim government, election of the constituent assembly and a republican system.
Track-II: As the negotiation between the government and the Maoists at Track-I level proved futile, various civil society groups including the human rights bodies, NGOs, trade unions, women organisations and professional bodies came forward to facilitate the peace process. Many of them collected information on violations of human rights by the conflicting parties, such as killings, disappearances, abductions, displacements, torture, and recruitment of child soldiers, school closures, conflict transformation and peace rallies. Besides, they also facilitated dialogues and a temporary ceasefire took place due to the appeals made by the civil society organisations, the achievements made under Track-II level were not significant.
Nepal’s economic challenges are real, but suggestions that it is already in deep crisis and may be going the Sri Lanka way are probably premature, unfair and unjustified. The surging trade deficit remains a big concern as it is expected to reach $18 billion this fiscal year. Balance of Payment (BoP) deficit and unsavoury debt liability will pose a very grave risk to the economy already in a tailspin. Nepal Rastra Bank (NRB) statistics showing the country’s inflation averaged at 7.76% in the current fiscal (FY 2022–23), which is the highest of the last sixty-seven months, which does not reflect well on the state of the economy. Such an inflationary tendency can’t be attributed merely to high-rallying global prices of petroleum products, commodities and foods. The Covid-19 pandemic caught the world unaware and disrupted economies unimaginably, thus making economic priorities aligned with domestic compulsions and unprecedented global challenges. It was a moment of reckoning to reshape and reorient Nepal’s economic planning with giving optimum attention to boost the domestic production and consumption of goods and the export ecosystem. Sadly, it also proved an opportunity foregone!
Be that as it may, India will undoubtedly go the extra mile to help Nepal ensure a speedy and comprehensive recovery. India has not hesitated to be generous in coming to Sri Lanka’s aid despite political considerations which might have suggested other approaches. In Nepal’s case, it has to give priority to development over playing to political galleries. There is no doubt that the economic challenges in the post-COVID-19 pandemic situation, and the overall churning of the geopolitical environment, have created an opportunity for both countries to devise innovative approaches to long-standing issues and to aim at new horizons for bilateral cooperation.
Excerpted with permission from Kathmandu Chronicle: Reclaiming India-Nepal Relations, K V Rajan and Atul K Thakur, Penguin India.
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