Nepal Economy

Nepal is in the 115th place in economy in the all world. The Nepal GDP consist of: : services account 41 % of GDP, agriculture comprise 40 % of GDP and industry sector takes 22%.

Nepal is one of the poorest and least of developing countries in all the world mainly one - third of all the countries population leave below the poverty line. Three-fourths of the population is working in agriculture sector and it's the mainstay of the economy.

Talking about the GDP, the Nepal's economy has never seen a double-digit GDP growth rate in the latest five decades. The highest GDP growth rate 9.6 percent was in 1984. But this wasn't surprising because it was effected by the fact that it was a recovery from three consequent years of recession. The lowest GDP growth rate was minus 2.98 percent in 1983. I want to sum up, that this lowest and highest GDP have never reached upper und lower in no other years. Nepal's GDP growth rate has never been stable, because every increase in growth is followed by decrease. Nepal's GDP growth rate stop growing in 2001 and it was 5 percent, while in 2000 GDP growth rate was 6.1 percent, the growth rate changes was influenced mainly because of weaker agriculture's performance because in 2000 was a intense deceleration in manufacturing, and sharp weakness in tourism.

The GDP per capita in Nepal is at a stable rate. In 1987 it was 2.6 percent while in 2007 it was 3.1 percent.

Nepal have following taxes:

  • VAT
  • Corporate tax rate
  • Tax on property
  • Income tax

The VAT - value added taxes was introduced in 1997 (November). That reform was designed to regulate (replace) sales taxes and most of all excises. All thevalue added (VAT) taxes are taxable and tax iscollected at the rate 13 %. Companies which are interested in construction, transportation, manufacturing and power generation have to pay 20% corporate income tax, while mainly all financial institutions are tended to pay 30% tax. All other businesses have to pay 25% tax. All employee working in the organized work sector have to pay 10 percent income tax. Also Nepal have three categories on property that depends along with their amortization rates are : 5 percent have to be paid for building and their structure, 25 percent have to be paid for automobiles, office and companies furniture and equipment, computer and all information systems . For all tangible property have to pay 15. And finally, personal taxes depends from individual income: up to 100000R.s.(Rupee)- tax rate is 10 percent, if the individual income is above 100000 R.s.(Rupee) - tax rate is 15 %.

Fiscal Policy

Nepal have discipline (The reform that was designed in mainly tax administration also regulation in customs charge on imports and excise tax, the reform was succeeded and increased fiscal revenue), that reform had to guarantee all stability of macroeconomic sector. And the result are visible because domestic revenue was collected 16 percent just due to new(improved) tax administration system. However the reform effected and expenditure - rise 26 percent mainly on security spending and salary increase.

Nepal's fiscal deficit in 2006/2007 widened 3.6 percent of GDP. Also 2007 revenue to GDP rate have increased till 12 percent, comparing with the latest year (2006) it was 11 percent. From the 2007/2008 budget I can see that government expenditure increased in relation with government revenue. The revenue had growth by 20.8 percent in 2006/2007 while in 2005/2006 revenue growth was 3.1 percent. Finally, to sum up I want to compare the budget deficits, in 2006/2007 the budget deficit was higher ( 3.6% ) than in 2000/2001 (3.3%). Nepal spends most of its budget money to: public services, defense, health and medicine, education care.

Nepal currency is ''Nepal Rupee'':

  • 1 EUR = 111.70 NPR
  • 1 LTL = 32.50 NPR
  • 1 USD = 76.05 NPR

The stock of quasi money in 2001 growth rate was 14.9 %, it goes down from 2000 it was 21.8 %, the key factor was a deep slowdown in the rise of foreign assets. Because of the exchange rate ( the Indian rupee ). In 2008 in Nepal the stock of quasi money was 4.872 billion $ and stock of domestic credit was 6.027 billion $ .The stock of money in 2008 was 2.204 $.The central bank discount rate in 2008 was 6.5 % and it was 0.25 % less than in 2007 ,due to the financial crisis.

The highest percent of employment are in agriculture sector 81%, the service sector provides work for 16 % of the labor force and manufacturing sector takes 3 %. In 2002 the unemployment rate was 47%, while in 2009 the unemployment rate are the mainly same 46 % . As we can see unemployment rate is stable.Also I want to say that in Nepal are very huge children labor force, about 1.660 million are economically active children : (5 and 14 )years old, male (54 per cent) and (46 per cent)female, the largest part (94.7 per cent or 1.576 million) of all economically active children work in agriculture sector. Sum up ,I want to say that the population below poverty line in Nepal 2007 and 2008 was the same 30.9 percent rate.

Inflation remained at 2.4% in 2001 was the lowest in more than 20 years compared with 3.5% in 2000.But due to the economical crisis in November 2008 the ratio of inflation rose to 14.5 % counting from 2007 November it rised6.3 % . For example sugar and sugar products saw the highest price rise of 37.3 per cent, while cooking oil rose by 25.6 per cent and cereals by 25 per cent.

Recommendations :

  • Improve business conditions - increasing investment to business : the tax payment should be reduced of doing business to induce the private sector to engage in economic activity and to create better investment conditions for foreign and local people.
  • In Nepal 81 % work in agriculture sector and only 18 % in services ,this is because of very low education progress and investing to education system progress . Nepal's literacy is 45.2%. Nepal is the world's 15th illiterate country. More than half the total population of Nepal can not read and write. Female literacy is less than the half of the literacy of males (Female - 28%, Male - 65%) ,so I think that government should more invest in education system, when Nepal's people will have more opportunity to work not only in agriculture sector ,increasing the number of educated person will helps to decrease the level people living below poverty.
  • Nepal have very serious problem with child labor force 2.6 million children between 5-14 years are economical active and work 10 hours per day, mainly in agriculture ,stone quarries , construction materials, they work very hard and it's unhealthful for they growing organism .So I thing that government must eliminate child labor, this step will helps to decrease unemployment rate, will saves child health of damage work conditions and increase Nepal's educated people level.

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