GDP growth declines, GDP per capita doubles

In the last five years, income of a Nepali citizen has doubled from $350 to $642, if we go by the country’s gross domestic product (GDP) per capita but the GDP growth rate has seen no encouraging growth as it is hovering below four per cent in an average. In a country where more than half of the population lives below the international poverty line of $1.25 a day, the rate of unemployment and underemployment approaches half of the working-age population forcing the citizens to move to Malaysia and Gulf states in search of work, and the general standard of living enjoyed by the average Nepali citizen has been deteriorating over the years, the growth in GDP per capita could be confusing to some extent.
“The GDP per capita is a measure of all sources of income in an economic aggregate of a country including the remittance,” said director of the National Accounts Division at the Central Bureau of Statistics (CBS) Suman Raj Aryal.
“However, the remittance is not the component of the GDP,” he added. “That explains the increasing gap between rising GDP per capita and lower GDP growth.
”The country had received Rs 231.72 billion remittance -- apart from pension and other such income from out of Nepal -- in the fiscal year 2009-10 and Rs 118.44 billion by the first six months of the current fiscal year. The key reason of rising GDP per capita but lower GDP growth is also rising consumerism. “The consumption is increasing,” he said, adding that the widening gap between the rising GDP per capita and lowering GDP growth is remittance is being wasted on consumption rather than on productive sector.
The consumption expenditure to GDP ratio that was 90 per cent in 2006-07 has increased to 93.3 per cent this fiscal year, according to the CBS report, revealing that the consumption is increasing. However, gross national saving as percentage of GDP is shrinking to 30 per cent against almost 35 per cent in the 2008-09.
“The decrease in national savings will also make the country dependent on outer resources for development activities,” he said, suggesting the policy makers to take it seriously and divert remittance to the productive sector that can help capital formation and contribute to the GDP too that is projected to grow by 3.47 per cent in the current fiscal year.
Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Kush Kumar Joshi agreed. “The only remedy is to create conducive environment for investment and encourage production,” Joshi said, adding that agriculture alone cannot save the economy as the economy has diversified in the recent years.
"Other sectors like financial intermediaries emerged in the recent past, however, he opined that giving a boost to the manufacturing sector –that is expected to grow by a mere 1.47 per cent – is the only pills for the current economic ills.

GDP per capita
2006-07 -- $350
2007-08 -- $390
2008-09 -- $465
2009-10 -- $556
2010-11 -- $642

GDP growth
2006-07 -- 2.75 per cent
2007-08 -- 5.80 per cent
2008-09 -- 3.77 per cent
2009-10 -- 3.97 per cent
2010-11 -- 3.47 per cent