How did the economy perform during different political eras in Nepal? To have a general idea, I took averages of five phases in Nepal’s political economy and compared performance on key macroeconomic indicators. I divided the period between 1970 and 2009 into five phases: pre-reformed panchayat (import substitution era); reformed panchayat (structural adjustment era); constructional monarchy (economic liberalization and opening of economy era); Maoist insurgency (reform+no development reforms era); post revolution (post monarchy era). No surprise that almost all the economic indicators got worse during the Maoist insurgency.
GDP growth rate was higher even during the import substituting era than during the Maoist insurgency, which has cost the nation dearly and pushed development backwards by almost a decade.
Among other notable features: gross domestic savings are decreasing during post monarchy era; consumption expenditure is increasing; trade has slightly decreased during post monarchy era (thanks to loss of exports and high imports); exports have plunged since the Maoist insurgency began; imports is increasing; negative external balance is widening; inflation rate is still high; FDI has decreased; value added of all sectors except services sector is decreasing; similar trend with value added growth of the sectors; revenue is increasing; tax revenue on exports is decreasing; remittances are increasing; and total debt servicing has slightly declined. Overall, it is a rocky ride, irrespective of pre-reformed, reformed, conflict, or post-conflict eras. That said, growth is higher during non-conflict eras.
| Economic performance during different political eras | |||||
| NPL_WDI_ADB_ES_2010-11-18 | Pre- reformed panchayat | Reformed panchayat | Constitutional monarchy | Maoist insurgency | Post revolution |
| 1971-1979 | 1980-1991 | 1992-1996 | 1997-2006 | 2007-2009 | |
| GDP growth (annual %) | 2.60 | 4.33 | 4.99 | 3.91 | 4.45 |
| GDP per capita growth (annual %) | 0.21 | 1.87 | 2.41 | 1.60 | 2.55 |
| GDP per capita, PPP (constant 2005 international $) | -- | 645.35 | 789.84 | 911.43 | 1018.18 |
| Labor force, total | -- | 6708100 | 8465625 | 10649103 | 12727225 |
| Economically active population in agriculture (number) | -- | 6108083 | 7339200 | 9210800 | 11170000 |
| Employment in agriculture (% of total employment) | -- | 81.20 | -- | 70.90 | -- |
| Employment in industry (% of total employment) | -- | 2.70 | -- | 11.60 | -- |
| Employment in services (% of total employment) | -- | 14.70 | -- | 17.05 | -- |
| Unemployment, total (% of total labor force) | -- | 4.50 | 8.80 | -- | |
| Population ages 15-64 (% of total) | 54.81 | 54.34 | 54.65 | 56.12 | 58.83 |
| Population growth (annual %) | 2.35 | 2.39 | 2.49 | 2.25 | 1.84 |
| Poverty gap at $1.25 a day (PPP) (%) | -- | 31.27 | 26.65 | 19.71 | -- |
| Poverty gap at $2 a day (PPP) (%) | -- | 52.42 | 46.78 | 37.82 | -- |
| Gross national expenditure (% of GDP) | 103.81 | 109.35 | 110.98 | 111.67 | 120.18 |
| Gross domestic savings (% of GDP) | 8.72 | 10.44 | 12.63 | 12.19 | 9.69 |
| Gross fixed capital formation (% of GDP) | 14.76 | 18.10 | 21.22 | 20.13 | 20.91 |
| Final consumption expenditure, etc. (% of GDP) | 91.28 | 89.56 | 87.37 | 87.81 | 90.31 |
| Gross savings (% of GDP) | 16.67 | 15.18 | 17.42 | 24.15 | 35.60 |
| Gross capital formation (% of GDP) | 12.53 | 19.79 | 23.62 | 23.86 | 29.88 |
| Gross capital formation (annual % growth) | -- | -- | -- | 4.76 | 6.28 |
| Gross fixed capital formation (annual % growth) | -- | -- | -- | 3.76 | 4.61 |
| Trade (% of GDP) | 20.91 | 32.09 | 51.45 | 50.82 | 47.40 |
| Merchandise trade (% of GDP) | 17.21 | 22.70 | 36.67 | 38.47 | 36.09 |
| Exports of goods and services (% of GDP) | 8.55 | 11.37 | 20.24 | 19.58 | 13.61 |
| Imports of goods and services (% of GDP) | 12.36 | 20.72 | 31.22 | 31.24 | 33.79 |
| External balance on goods and services (% of GDP) | -3.81 | -9.35 | -10.98 | -11.67 | -20.18 |
| Exports of goods and services (annual % growth) | -- | -- | -- | -4.00 | 11.86 |
| Imports of goods and services (annual % growth) | -- | -- | -- | 1.37 | 9.61 |
| Inflation, consumer prices (annual %) | 6.99 | 11.01 | 9.97 | 5.38 | 8.50 |
| Foreign direct investment, net inflows (% of GDP) | 0.01 | 0.03 | 0.42 | 0.13 | 0.12 |
| Agriculture, value added (% of GDP) | 67.45 | 54.92 | 42.68 | 38.73 | 33.68 |
| Industry, value added (% of GDP) | 9.95 | 14.63 | 21.69 | 20.03 | 16.57 |
| Manufacturing, value added (% of GDP) | 4.16 | 5.44 | 9.27 | 8.87 | 7.37 |
| Services, etc., value added (% of GDP) | 22.60 | 30.45 | 35.63 | 41.25 | 49.75 |
| Agriculture, value added (annual % growth) | 0.81 | 3.65 | 2.00 | 3.37 | 2.62 |
| Industry, value added (annual % growth) | 7.03 | 7.79 | 8.58 | 3.93 | 2.52 |
| Manufacturing, value added (annual % growth) | 2.97 | 8.67 | 12.31 | 2.81 | 0.75 |
| Services, etc., value added (annual % growth) | 4.77 | 4.07 | 6.34 | 4.41 | 5.58 |
| Revenue, excluding grants (% of GDP) | -- | 8.43 | 9.47 | 10.77 | 13.06 |
| Grants and other revenue (% of revenue) | -- | 33.16 | 30.66 | 30.19 | 30.29 |
| Tax revenue (% of GDP) | -- | 6.81 | 7.71 | 8.81 | 11.01 |
| Taxes on exports (% of tax revenue) | -- | 0.70 | 1.50 | 1.32 | 0.71 |
| Taxes on goods and services (% of revenue) | -- | 29.96 | 33.12 | 30.97 | 34.18 |
| Customs and other import duties (% of tax revenue) | -- | 36.58 | 32.73 | 30.40 | 22.20 |
| Other taxes (% of revenue) | -- | 4.45 | 4.00 | 3.81 | 5.87 |
| Total tax rate (% of profit) | -- | -- | -- | 32.50 | 35.23 |
| (1993-1996) | |||||
| Workers' remittances and compensation of employees, received (% of GDP) | 1.25 | 7.43 | 20.77 | ||
| Workers' remittances and compensation of employees, received (current US$) | 51481605 | 539613005 | 2482203667 | ||
| Net ODA received (% of central government expense) | -- | -- | -- | 37.03 | -- |
| Total reserves in months of imports | 8.53 | 4.80 | 5.73 | 6.70 | -- |
| Total reserves minus gold (current US$) | 122250278 | 187018754 | 591802611 | 1045777786 | -- |
| Net capital account (BoP, current US$) | 22949834 | 107120279 | |||
| Present value of external debt (current US$) | -- | -- | -- | 2252000000 | 2119601891 |
| Debt service on external debt, total (TDS, current US$) | 3236556 | 33477917 | 74539200 | 107542200 | 154611000 |
| Total debt service (% of exports of goods, services and income) | 3.31 | 8.77 | 7.82 | 6.36 | 4.02 |
| Total debt service (% of GNI) | 0.21 | 1.07 | 1.86 | 1.75 | 1.34 |
| Interest payments (% of revenue) | -- | -- | 12.50 | 9.63 | 5.42 |
No specific purpose to write this blog post. Sorry for a long post with too many numbers!!Just curious about Nepal’s political economy!
