PROJECT WORK
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Grade:-11
Section:-A1
Subject:-Economics
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STATEMENT OF THE PROBLEMS:-
State and describe the microeconomics indicators of economic development of Nepal of last
five years .
BACKGROUND OF PROBLEMS:-
The word ‘economics’ comes from two Greek words, ‘eco’ meaning home and ‘nomos’
meaning accounts. The subject has developed from being about how to keep the family
accounts into the wide-ranging subject of today.
Amartya Sen has been called the Mother Teresa of Economics for his work on famine, human
development, welfare economics, the underlying mechanisms of poverty, gender inequality,
and political liberalism
Nepal is among the least developed countries in the world, with about one-quarter of its population
living below the poverty line. Nepal is heavily dependent on remittances, which amount to as much as
30% of GDP. Agriculture is the mainstay of the economy, providing a livelihood for almost two-thirds of
the population but accounting for only one-third of GDP. Industrial activity mainly involves the
processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. Nepal has
considerable scope for exploiting its potential in hydropower, with an estimated...
Nepal has used a series of five-year plans in an attempt to make progress in economic development.
It completed its ninth economic development plan in 2002; its currency has been made convertible, and
17 state enterprises have been privatised. Foreign aid to Nepal accounts for more than half of the
development budget. Government priorities over the years have been the development of
transportation and communication facilities, agriculture, and industry. Since 1975, improved
government administration and rural development efforts have been emphasised.
Agriculture remains Nepal’s principal economic activity, employing about 65% of the population and
providing 31.7% of GDP. Only about 20% of the total area is cultivable; another 40.7% is forested (i.e.,
covered by shrubs, pastureland and forest); most of the rest is mountainous. Fruits and vegetables
(apples, pears, tomatoes, various salads, peach, nectarine, potatoes), as well as rice and wheat are the
main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the
food-deficient hill areas.
GDP is heavily dependent on remittances (9.1%) of foreign workers. Subsequently, economic
development in social services and infrastructure in Nepal has not made dramatic progress. A
countrywide primary education system is under development, and Tribhuvan University has several
campuses. Although eradication efforts continue, malaria had been controlled in the fertile but
previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions
by road and an expanding highway network. The capital was almost out of fuel and supplies, due to a
crippling general strike in southern Nepal on 17 February 2008.[17]
Major towns are connected to the capital by telephone and domestic air services. The export-oriented
carpet and garment industries have grown rapidly in recent years. Together, they account for
approximately 70% of the country’s merchandise exports.
The Cost of Living Index in Nepal is comparatively lower than many countries but not the least. The
quality of life has declined to much less desirous value in recent years.[18] Nepal was ranked 54 th worst
of 81 ranked countries (those with GHI > 5.0) on the Global Hunger Index in 2011, between Cambodia
and Togo. Nepal’s current score of 19.5 is better than in 2010 (20.0) and much improved than its score
of 27.5 in 1990.
PROCEDURES AND EXPLANATION (Current situation):-
The current status of macroeconomics indicators of Nepal:-
1 ). During the first month of 2021/22, merchandise Exports increased 115.9 percent to
Rs.20.76 Billion compared to an increase of 8.9 percent.In the same period of the previous year.
Destination-wise, exports to India, China and Other countries increased 167.0 percent, 47.8 Percent and
17.5 percent respectively. Exports Of soyabean oil, palm oil, polyster yarn & Thread, juice, oil cake,
among others increased Whereas exports of cardamom, medicine (ayurvedic), herbs, wire, readymade
leather Goods, among others decreased in the review Period.
2 ). During the first month of 2021/22, merchandise imports increased 75.7 percent to Rs.150.73 billion
Against a decrease of 19.6 percent a year ago. Destination-wise, imports from India, China and other
Countries increased 58.7 percent, 87.6 percent and 120.8 percent respectively. Imports of petroleum
Products, transport equipment & parts, crude soyabean oil, M.S. billet, gold, among others increased
Whereas imports of chemical fertilizer, cement, tobaco, aircraft spareparts, readymade garments
Among others decreased in the review period.
3 ).Based on customs points, exports from Kanchanpur, Mechi and Nepalgunj Customs Offices decreased
Whereas exports from all other customs points increased in the review period. On the import side,
Imports from Kailali Customs Office decreased whereas imports from all other customs points Increased
in the review period.
4 ). Total trade deficit increased 70.6 percent to Rs.129.97 billion during the first month of 2021/22.
Such A deficit had decreased 22.2 percent in the same period of the previous year. The export-import
ratio Increased to 13.8 percent in the review period from 11.2 percent in the same period of the
previous Year.
5). During the first month of 2021/22, merchandise imports from India by paying US Dollar amount. Such
amount was Rs. 9.26 billion in the same period of the previous year.
Composition of Foreign Trade
6 ). As per the Broad Economic Categories (BEC), the intermediate and final consumption goods
Accounted for 31.8 percent and 68.2 percent of the total exports respectively, whereas the ratio of
Capital goods in total exports remained negligible at 0.02 percent the review period. In the same Period
of the previous year, the ratio of intermediate, capital and final consumption goods Remained 32.0
percent, 2.8 percent and 65.3 percent of total exports respectively.
7). On the imports side, the share of intermediate goods remained 53.7 percent, capital goods 11.5
Percent and final consumption goods remained 34.8 percent in the review period. Such ratios were 50.6
percent, 13.8 percent and 35.6 percent respectively in the same period of the previous year.
DATA OF THE PREVIOUS FIVE YEARS:
1) Table of Economics growth Rate
YEAR Economics growth rate of
Nepal.(%)
2016 8.26%
2017 6.80%
2018 6.53%
2019 4.04%
2020 -7.96%
Diagram of economic growth rate
2) Table of Gross domestic product:-
YEAR GDP in U.S. billion dollars
2016 24.52
2017 28.97
2018 33.11
2019 34.19
2020 34.47
Diagram of GDP
3) Data and table of Inflation:-
Year Inflation rate in percentage
2017 4.45%
2018 4.15%
2019 4.64%
2020 6.15%
2021 4.20%
Diagram for inflation :-
4) Unemployment:-
Years Unemployment rate
2016 3.05%
2017 2.97%
2018 2.90%
2019 2.85%
2020 4.44%
Diagram of unemployment rate:-
5) Poverty rate :-
Year Poverty Rate
2016 21%
2017 19%
2018 17.40%
2019 14.30%
2020 18.70%
Diagram of poverty rate:-
6) Per capita income ( PCI):-
Years PCI in US Dollar
2016 900$
2017 1048$
2018 1179$
2019 1195$
2020 1155$
Diagram of PCI:-
Analysis of the macroeconomics Indicators of last five year:-
1) Gross Domestic product:-
GDP refers to the total market value of all goods and services that are produced within a
country per year. It is an important indicator of the economic strength of a country. In 2020,
GDP for Nepal was 34.47 billion US dollars. GDP of Nepal increased from 6.73 billion US
dollars in 2001 to 34.47 billion US dollars in 2020 growing at an average annual rate of 9.24%.
GDP at purchaser’s prices is the sum of gross value added by all resident producers in the
economy plus any product taxes and minus any subsidies not included in the value of the
products. It is calculated without making deductions for depreciation of fabricated assets or
for depletion and degradation of natural resources. Data are in current U.S. dollars. Dollar
figures for GDP are converted from domestic currencies using single year official exchange
rates.
We can calculate GDP by using formula.i.e.
GDP = private consumption + gross private investment + government investment +
government spending + (exports – imports).
2) Economics growth rate:-
Economic growth is an increase in the capacity of an economy to produce goods
and services, compared from one period of time to another. Annual Growth
Rate in Nepal averaged 4.35 percent from 1993 until 2020, reaching an all time
high of 8.60 percent in 1993 and a record low of -2.10 percent in 2019. Nepal is
the poorest country in South Asia and the 17 th poorest in the world.
Approximately 25 percent of Nepalis live below the poverty line. There is a
substantial difference in poverty levels among Nepal’s various ethnic and caste
groups, and between different regions of the country. An unemployment rate of
42 percent has created a sense of vulnerability and hopelessness in parts of
rural Nepal. More than half of the country’s population is under the age of 35,
and each year, more than 300,000 of these young people join the ranks of those
looking for work, with many either striving to go abroad as unskilled labor or
languishing as part of the unproductive workforce.
Economic growth activities aim to improve the income-generating potential of
the poorest of the poor, expand young people’s access to jobs, increase farmers’
incomes and food security, help the Government of Nepal address
macroeconomic and agricultural sector policies, and improve Nepal’s business
environment for private sector–led growth. Economic growth efforts also
encourage competitiveness and exports; improve trade and fiscal policies and
practices; and strengthen microfinance policies and institutions by working with
the Government of Nepal, the private sector, think tanks, and civil society.
We can use the same formula to calculate both nominal and real GDP growth
rates. The formula is:
(GDP in year 2 / GDP in year 1) – 1
3) Inflation:-
In 2020, inflation rate for Nepal was 6.2 %. Though Nepal inflation rate
fluctuated substantially in recent years, it tended to increase through 2001 –
2020 period ending at 6.2 % in 2020.ending at 6.2 % in 2020.Inflation as
measured by the consumer price index reflects the annual percentage
change in the cost to the average consumer of acquiring a basket of goods
and services that may be fixed or changed at specified intervals, such as
yearly. The Laspeyres formula is generally used. Data for inflation are
averages for the year, not end-of-period data.
Development of inflation rates in Nepal
The inflation rate for consumer prices in Nepal moved over the past 41 years
between 2.3% and 19.0%. For 2020, an inflation rate of 5.1% was calculated.
During the observation period from 1979 to 2020, the average inflation rate was
8.4% per year. Overall, the price increase was 2,516.88 %. An item that cost 100
Rupee in 1979 was so charged 2,616.88 Rupee in the beginning of 2021.
In only a very few countries, the price increase is that high. The Consumer Price
Index (CPI) of 19.0% in 1986 means, that compared to the previous year all
prices have been increased by an average of 19.0%. In comparison to other
countries, the drastic price increases are no longer on average. Usually this is a
sign of political and economic turmoil.
We can calculate inflation by subtracting the past date CPI from the current
date CPI and divide your answer by the past date CPI. Multiply the results by
100. i.e.
(B – A)/A x 100 where A is the starting number and B is the ending number.
4) Unemployment:-
In 2020, the unemployment rate in Nepal was around 4.44 percent.
Unemployment rate of Nepal increased from 1.8 % in 2001 to 4.4 % in 2020
growing at an average annual rate of 5.86%.Unemployment rate can be defined
by either the national definition, the ILO harmonized definition, or the OECD
harmonized definition. The OECD harmonized unemployment rate gives the
number of unemployed persons as a percentage of the labour force (the total
number of people employed plus unemployed). [OECD Main Economic
Indicators, OECD, monthly] As defined by the International Labour Organization,
“unemployed workers” are those who are currently not working but are willing
and able to work for pay, currently available to work, and have actively
searched for work. [ILO].
We can calculate unemployment rate by Divide the number of employed people
by the total labour force. Multiply this number by 100. The result of these
calculations is the employment rate.i.e.
U = Unemployed person/ labour forced × 100
5) Poverty:-
Poverty is an economic state where people are experiencing scarcity or the
lack of certain commodities that are required for the lives of human beings
like money and material things. Therefore, poverty is a multifaceted concept
inclusive of social, economic and political elements.i.e.ording to the Nepali
government, 18.7 percent Nepali population are living under the poverty line
currently. With the potential addition of new poor people, Nepal’s half of the
30 million populations appear vulnerable to falling into extreme
poverty.Poverty in Nepal contributes to high child mortality rates. In 2016,
for every 1,000 children born in Nepal, 35 died before their fifth birthday.
This can be attributed to lack of health care and education access in
impoverished regions, and there are many such regions in Nepal.
The main drivers of Nepal’s poverty decline are remittances from migration,
more diverse labour income and slowed population growth. Migration
remittances increased from less than 1% to 29% of Nepal’s GDP between the
late 1990s and 2014.
Ways to Reduce Poverty by students
Create Awareness. Social media has become an integral part of daily life, and
now is the time to use it as a voice of social good. ...
Take Action on Your Own. ...
Donate. ...
Eliminate Gender Inequality. ...
Create Jobs Worldwide. ...
Increase Access to Proper Sanitation and Clean Water. ...
Educate Everyone.
6) Per capita income (PCI):-
In 2020, GDP per capita for Nepal was 1,196 US dollars. GDP per capita of
Nepal increased from 277 US dollars in 2001 to 1,196 US dollars in 2020
growing at an average annual rate of 8.27%.
Nepal gdp per capita for 2020 was $1,155, a 3.33% decline from 2019. Nepal
gdp per capita for 2019 was $1,195, a 1.39% increase from 2018. Nepal gdp
per capita for 2018 was $1,179, a 12.41% increase from 2017. Nepal gdp per
capita for 2017 was $1,048, a 16.56% increase from 2016.
Per capita income or total income measures the average income earned per
person in a given area in a specified year. It is calculated by dividing the
area’s total income by its total population. Per capita income is national
income divided by population size. Causes of low PCI of Nepal are
Low national income. ➡lack of foreign investment.
➡ unemployment. ➡low level of productivity.
Ways to Improve PCI Compliance
Properly allocate resources, such as money, time and people;
Actively maintain compliance year-round;
Bake compliance into the overall security program;
Leverage compliance as an opportunity to realize a return on investment;
and so on.
CONCLUSION:-
Indicators help us to gain knowledge and understanding. They condense and
transform information so that it can be applied to analysis and policy making.
They are used in all sciences for their particular purposes. In the case of social
indicators, which, broadly interpreted, have been our main subject here, their
function has been described as tracing pathways through the maze of society’s
interconnections (Rice, 1967), or as illuminating the topography of the human
landscape (L’Inguiste, 1978). Even monetary or other quantitative indicators
should not stand alone as statistical abstractions but should be viewed within a
human and social setting that can be described by further indication.
The Special Focus section of this report explores options to promote trade,
particularly through exports, as a transformative pathway to support Nepal’s
resilient recovery.
Over the past two decades, Nepal’s export growth has been stagnant. Indeed, with export
growth at 4 percent on average since the turn of the century, Nepal features among the 20
countries in the world with the least dynamic exports. Stronger exports could help increase
Nepal’s economic resilience, and accelerate recovery from the devastating shock that the
COVID-19 pandemic has posed for the private sector. Exports can not only bring foreign
currency into the economy to finance well-needed imports, but also spur the creation of
“good jobs” in higher value-added activities. Indeed, export orientation tends to drive
productivity gains through increased scale and exposure to Sophisticated global clients.
For Nepal to achieve its export potential, six key priorities need to be tackled.
First, Nepal will need to reform the tourism sector to meet the expected changes to demand
and preferences, following the pandemic. A quick and resilient recovery of the sector could
come about through investments to improve planning, conservation, and resilient
infrastructure. It would also entail coordination with the private sector to upgrade skills and
develop nature-based tourism that is environmentally sustainable, with potential to support
jobs creation and inclusive growth. Second, to attract FDI, crucial for integration into regional
and global value chains, it will be important to simplify and streamline processes for
multinationals setting shop in Nepal, as well as actively engage in economic diplomacy to
attract FDI. Third, modernizing export promotion will require links to digitization,
simplification of processes, skills development, and incentives for exporters. Fourth, a
reduction of trade costs will be critical, particularly given the country’s landlocked location
and the mountainous terrain. This would entail reducing border crossing congestion through
upgraded infrastructure and streamlined procedures and processes. Similarly, reducing
import duties – particularly on raw materials and intermediates – is crucial to ensure
exporters have access to the most efficient inputs at world prices. Fifth, investments to
improve phytosanitary infrastructure will be needed for increased standards and safety of
exports. Sixth, measures to boost digital trade, and e-commerce in general – could potentially
be a game changer for Nepal – through adopting a robust policy framework. This would
include, inter alia, efficient domestic and cross-border digital payment systems, and
consumer protection and data privacy regulations aligned with international good practices.
Statistical references :-
Government of Nepal, Economic Survey, various years.
International Monetary Fund, International Financial Statistics, various years.
Nepal Rastra Bank, Quarterly Economic Bulletin, various year Other website of Google.