Government revises growth downward

The government has revised its growth target downward to 4.5 per cent from five per cent.
"The economy will grow by 4.5 per cent," said finance minister Barsha Man Pun, during the mid-term evaluation of budget for the current fiscal year 2011-12. "The agriculture sector will grow by 4.75 — thanks to good monsoon — and the non-agriculture will grow by 4.25 per cent," he said, adding that the financial indictaors are improving and encouraging, though he is not satisfied.
The Asian Development Bank and the World Bank has projected the economy to grow by 3.6 per cent — in the current fiscal year — against the government's target of five per cent in the budget for the current fiscal year.
The gross domestic product (GDP) growth has seen continuous fall in the last three consecutive fiscal years and stood at 3.5 per cent in the last fiscal year 2010-11, from 3.97 per cent a fiscal year ago, mainly due to low manufacturing growth that has been hit by the regular hours of power outage, labour management dispute and government's inability to spend on the development works.
"However, this fiscal year — also due to timely budget — the government has been able to spend Rs 111.13 billion that is 28.87 per cent of the total budget outlay of Rs 384.90 billion," he said, adding that the development expenditure, however, stood at Rs 9.56 billion that is 13.17 per cent of the total budget, which could not propel the growth. "I am not satisfied with the development expenses, though it is 140.44 per cent more than last fiscal year's same period's development expenses," Pun said.
The timely budget has also help boost the liquidity in the banking system but the private sector investment has contracted as it has been reluctant in borrowing due to higher interest rates.
The deposit mobilisation of banks and financial institutions increased by nine per cent — Rs 73.77 billion — during the five months of the current fiscal year, against the same period last fiscal year's increase of two per cent — Rs 14.87 billion — but loan and advances of banks and financial institutions increased by only 4.3 per cent — Rs 36.54 billion — compared to the growth rate of 5.8 per cent — Rs 43.24 billion — in the same period of the last fiscal year," according to the central bank.
The low borrowing by the private sector will hit the economic growth hard, though the finance minister painted a rosy picture of the economy.
The growth in agriculture sector will, however, help ease the food price hike that will contribute in bringing the inflation down to the target of — monetary and fiscal policy — seven per cent, said Nepal Rastra Bank governor Dr Yub Raj Khatiwada. The mid-term evaluation has estimated the inflation between seven per cent to eight per cent.
The government has, however, failed to meet the revenue mobilisation target. "By the six months of the current fiscal year, the government has been able to mobilise Rs 111.03 billion revenue that is 98.32 per cent of its target, though the government will meet its annual target of Rs 241.77 billion," said finance secretary Krishnahari Baskota.
The government is bringing its much awaited programmes to fuel development activities and propel economic growth tomorrow, though its relief package and financial discipline already failed to cheer the people.

Plunging economic growth
2007-08 — 5.80 per cent
2008-09 — 3.77 per cent
2009-10 — 3.97 per cent
2010-11 — 3.5 per cent
2011-12 — 4.5 (revised projection)
(Source: Central Bureau of Statistics)