GDP growth slashed to half

The government has slashed the growth rate for the fiscal 2008-09 to almost half of the target. According to a source at the Finance Ministry, the gross domestic product (GDP) growth has been slashed to 3.5 per cent.
Dr Baburam Bhattarai, in his budget speech for the fiscal 2008-09, had projected seven per cent growth but his projection failed as a result of regular power cuts, frequent nationwide protest programmes and labour disputes.
Dr Shanker Sharma, former vice-chairman of the National Planning Commission, said peace was the first necessary requirement for growth. Dr Sharma said boosting private sector confidence was a must for the growth. “The private sector must feel that it is safe to invest. There must also be clarity in policies,” he added. If the budget can take the private sector into confidence and encourage investment by providing more incentives, growth could be accelerated. “Otherwise, the growth rate may not pick up in the next fiscal too,” said Dr Sharma.
The Central Bureau of Statistics’ report — based on the first six months’ data — has revised its projection to 3.8 per cent. Similarly, Asian Development Bank (ADB) has also slashed the growth forecast to three per cent for the year 2009 due to poor winter crop, deceleration in remittance inflow and slower growth of the industrial sector.
Finance Minister Surendra Pandey will present the budget for the fiscal year 2009-10 this week. However, it is likely to be a Herculean task for him to fuel growth and keep a tight leash on the runaway price hike horse. The price hike still stands at 12.9 per cent. Both NRB and the government have failed to contain it.
Though accelerated growth would have cushioned the impact of price hike, possibility of growth almost remained a chimera. According to the Forbes’ annual list of Doing Business, Nepal further plunged to the 121st position against 96th position last year as a result of unfavourable investment climate. Nepal has never witnessed double-digit growth in the past. The highest growth rate ever was 9.6 per cent in1984.