Last month, I wrote about the three-year investment plan of the Nepalese government and raised some questions. I was unsure about the estimates because I had not read (and still have not) the original document. Dilli Raj Khanal, former member of National Planning Commission, touches this issue. He is skeptical of the estimates. Turns out the elasticities used in projections are outdated.
In the goal, by emphasizing on dignified and gainful employment, reduction of economic disparity and abolition of social deprivation aims at reducing poverty to 21 percent by the end of TYP from present level of 25.4 percent. It adds that by means of improved living conditions through sustainable growth, this will be possible.To begin with, the targets of 21 percent based on new poverty estimates of 25.4 percent are highly questionable, which are simply based on income poverty elasticity that comes out at 0.25 based on a historical data.If this could have been the case, during 1985-90 and 1992-97, poverty would have reduced drastically as the growth rate was above 4.8 percent at that time. But 1996 and 2004 survey data show that poverty remained at 42 percent throughout this period.Despite so much propaganda on dignified or gainful employment in the approach paper, employment calculation is also simply based on historical employment elasticity of 0.60.The method to calculate the investment requirement and techniques used to fix sectoral resource allocation pattern, including bifurcation between the government and private sector, are highly questionable. The fixation of plan outlay technique is the same as the first plan. Given the fixed sectoral target and calculated incremental capital output ratio again based on questionable investment and accumulated capital data, the investment requirement has been derived. It, as obvious, cannot address distributional and sustainable growth issues.