An unimaginable crisis that Nepal is facing as of now at climate and economic fronts, gives all the reasons for reorienting its economic priorities with progressive economic reforms and keeping nature in harmony. I
n the case of Nepal, a top- down development paradigm, comprising national planning, state enterprises, and labour unions, is unlikely to foster complete inclusion or replicate the approach adopted by NITI Aayog (a government think tank evolved from the former Planning Commission) in India. Inclusion can only occur when opportunities are generated for all through market-supporting agrarian, economic, financial, administrative, and labour reforms, rather than merely establishing ‘Seven Provincial Governments’ under federalism. Furthermore, maximising a bottom-up development paradigm, with ample room for local leadership development and culture-specific innovations to achieve the Sustainable Development Goals (SDGs), depends heavily on local communities acting in accordance with their own capacity to deliver.
The unprecedented climate and economic crises currently facing Nepal provide compelling reasons to reorient its economic priorities toward
progressive reforms while keeping nature in harmony. Recent flash floods have exposed the fragility of the Himalayas, signalling an urgent need to re-examine Nepal’s development paradigm and establish effective cross-border mechanisms with its closest neighbours (India and China) to cope with the unpredictability of nature.
Inclusive growth must mean growth accompanied by productive employment, creating job opportunities and investing in human capital development for individuals and their families to fill those positions. Planning must strategically
harmonise macro, meso, and micro levels. The macro plan should project the desired economic structure for the next 25 years, while the five-year plan ought to function as a human resource development strategy. This strategy must address the human capital requirements of the future economy based on manpower supply and demand projections. It should be judiciously integrated with an educational blueprint that opens avenues for vocational, apprenticeship, technical, and technological training tailored to diverse occupations across both the national
economy and global labour markets.
Achieving inclusive growth requires accounting for a host of forces, including geography, demography, social factors, and governance. Consequently, it must be participatory, requiring decisions across all levels and actors, rather than relying solely on a state guided by Nepal’s National Planning Commission (NPC), which faces limitations in its basic and applied research capacities alongside rapid turnover among planners due to political shifts.
What Nepal now requires is a framework of Integrated Sector Programming and National Performance Budgeting, governed by a sound Fiscal Responsibility and Budget Management Act (FRBMA) similar to the one in India, where outcomes are emphasised over mere inputs and outputs.
Nepal’s development plan must be framed with due recognition of its economic structure and developmental constraints. It demands proactive engagement between policy planners and businesses from both the public and private sectors in national and sectoral dialogues to establish targets and outcomes for coordinated policies and to design sector and multi-sector programmes aligned with annual performance budgets. Furthermore, feasible economic growth targets must first and foremost be assessed for each five-year period through consensus among political parties, rather than being driven by external agents or the fanciful notions of political leaders who seldom grasp economics and finance.
The GDP and sector targets should be set realistically, with action taken accordingly to secure the best possible outcome. Each target must be supported by a nationwide action plan and programme. This necessitates developing both import-substitution and export- promotion strategies in partnership with the private sector, aimed at attracting substantial inward Foreign Direct Investment (FDI) to compensate for low gross household savings. Furthermore, this requires a new foreign exchange regime where all commodities are placed in a common basket to derive exchange
Nepal’s development plan must be framed with due recognition of its economic structure and developmental constraints.
rates, alongside a need-based devaluation of the Nepali Rupee to protect local agricultural production against subsidised foreign exports. Providing subsidies to farmers also remains a necessity, paired with a national push toward irrigation infrastructure.
The costs have been borne at the household and individual levels through the pain and suffering of international migration and the debts incurred for it. However, Nepal can leverage these challenges by better planning the remittance economy to empower female heads of households and young women with skills to fill job vacancies, akin to how World War I and World War II permanently empowered women in the West. Ultimately, given these parameters and variables for inclusion, there was no need for an ethnicity-based inclusive state to deliver justice to current and future generations.
Nepal certainly requires an inclusive constitution that prevents exclusion and discrimination. Its primary aim should be to guarantee the rule of law and supremacy of governance through independent institutions that curb the abuse of political authority, ensuring accountability, transparency, competition, and meritocracy for the public good. It would have been far wiser to devolve responsibility directly to local government units. Regrettably, the newly created provinces have thus far failed to achieve their developmental objectives, serving merely as an additional layer of bureaucracy at a high cost to public resources.
There is no magic wand to ensure
economic reforms and avert the crisis. Next door, the world’s largest democracy, India, offers a fine example. It braved a severe Balance of Payments (BoP) crisis in 1991 and transformed its economy through a sustained wave of economic reforms, never letting political preferences override vital economic matters since. This stands as an inspiring model. Conversely, China, also next door, presents an example of the ruthless use of expansionist capital, which is far from altruistic and has already ravaged the economies of Pakistan and Sri Lanka. This underscores the need for Nepal to wake up and drop the romanticised notion of cross-border collaborations without first ascertaining the serious risk factors involved. In an era where isolation cannot drive an economy’s growth impulses, it is crucial for Nepal to address its industrial production deficits and trade imbalance pressures caused by excessive imports, while remaining open to healthy global collaboration.
In the short run, government revenue and expenditure should be evaluated to minimise administrative costs. This is especially vital for provincial governments, where operational expenses must be handled frugally to avoid disproportionately burdening the economy. To prevent disrupting the steady flow of goods and services, the government should lift bans on imported items that lack viable domestic alternatives.
Until Nepal takes decisive steps to boost domestic production for local consumption and break the chronic business cartels by embracing competition and innovation, remaining open will be essential to successfully navigating this mandatory transition. Nepal is entering a challenging phase, and it must successfully navigate these hurdles by maintaining a delicate balance between its domestic priorities and the rest of the world.
(Atul K Thakur is policy professional, columnist and author (most recently co-authored “Kathmandu Chronicle: Reclaiming India-Nepal Relations”; Penguin Random House India). Views expressed in the above piece are personal.)
