The National Planning Commission (NPC) has come up with an investment plan to steer the economy at a moderate growth rate (5-6%) in the next three years beginning mid-July 2010.
Here are some of the details:
- Aim to achieve GDP growth rate of 5 to 6 percent
- Lower absolute poverty to below 21 percent
- Generate 200,000 jobs
- Private sector estimated to invest 64 percent of the total estimated investment; the government will invest the rest. The service sector is expected to absorb an estimated Rs 732.17 billion, the industrial sector Rs 153 billion, and the agricultural sector Rs 133.5 billion.
- Expected size of the economy in 2013: Rs 1397.4 billion (around US$ 20 billion) at producer prices. This fiscal year it is expected to reach Rs 1176.56 billion.
- Total consumption in mid-July 2013 is expected to reach Rs 1239.5 billion (88.79 percent of the estimated GDP). Meanwhile, total investment is expected to reach Rs 359.3 billion.
- Estimated total revenue mobilization: Rs 678 billion (17.4 percent of estimated GDP)
- Estimated government capital expenditure: 9.1 percent of estimated GDP
- Estimated internal loan: 2.1 percent of estimated GDP
- Sub-sector wise, transport, storage and communication is getting Rs 223 billion while agricultural and forestry sector is getting Rs 130 billion.
Few preliminary comments by just reading the news (I have not read the official document and looked at the estimates!):
- It is encouraging to see that the infrastructure sector is getting the most priority. It has been identified as the most binding constraint on Nepal’s economic growth. But, where is the investment in generating electricity?
- Generating an estimated 200,000 jobs will be a challenge, unless this one is temporary target.
- How are we going to channel remittances, which amount to approximately 20 percent of GDP, in the domestic (productive) sectors? Most of the remittances are either going to the real estate market or being driven to India (through increasing consumption of Indian goods and services, thus contributing to ballooning trade deficit with India)
- How will this plan help to remedy the most pressing macroeconomic challenges and macroeconomic paradoxes in the Nepali economy?
- Investment alone does not increase employment. There could be job less growth, fuelled by over-investment in few sectors such as real estate. In fact, with substantial leakages and weak institutions, the growth rate might not be as expected even if there is increasing ‘investment’ in the form of money being channeled to the specified purposes.
- What will happen to macroeconomic balance (fiscal and monetary)? How will the central bank react to rise in general price level (demand side effect coming from the injecting of new investment money and supply side effect coming from supply bottlenecks, deficit production and imports from India)?
