Overcoming development challenges key: US ESCAP

Countries in South Asia, including Nepal will have to overcome a number of development challenges, including large concentration of poverty and hunger, rising inequality, poor levels of human development, wide infrastructure gaps, lack of diversified base for high value added products and exports, widespread food and energy insecurity, and high risk of disaster, in order to realise development potential, according to a new report.
Low growth in Nepal in recent years has largely been due to political instability, frequent strikes, persistent labour problems, and acute electricity shortage, said United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) report 'Forward-looking Macroeconomic Policy: For Inclusive and Sustainable Development,' released globally today.
Though gross domestic product (GDP) growth improved to 4.5 per cent in the last fiscal year from a fiscal year ago's 3.8 per cent, it could not ensure equality due to the failure of the macroeconomic policy, said National Planning Commission (NPC) vice chair Deependra Bahadur Kshetry, launching the report here today in the valley.
Economic growth alone can hardly address poverty, he said, adding that growth should benefit the people. "If the growth is not shared by the society, it will invite conflict as economic insecurity has also risen amid rapid growth in Asia and the Pacific, where more than one billion workers are in vulnerable employment."
Nepal, out from a decade of armed conflict — also due to social disparity — has not been able to post promising growth post-2006, when the armed party came into mainstream politics agreeing to draft a Constitution that would guarantee people their fundamental rights including economic freedom. But the frequent change in government has failed the people in ensuring policy stability that could attract more investment and boost exports.
The country's exports stood at Rs 51.01 billion in the first eight months of the current fiscal year 2012-13, against imports of Rs 360.56 billion, making a trade deficit of Rs 309.55 billion, according to the central bank's data.
"With a large merchandise trade deficit and slowdown in growth of overseas remittance, the current account balance has turned into a deficit in recent years," the report said, adding that the cost of production of agriculture and industrial products has been rising due to acute electricity shortages and rising labour wages due to increasing export of labour.
Supply side constraints and rise in cost of production have pushed inflation to a double digit currently, when inflation in India has come down to a single digit.
"Inflation stood at 10.2 per cent in the eight months of the current fiscal year," according to the central bank. However, UN ESCAP's report noted that inflation in Nepal is closely linked to inflation in India because of fixed exchange rates between the currencies of these countries as well as the close economic ties among them, apart from about two-thirds of Nepal's total trade taking place with India only.
The rising inflation has also pushed people towards poverty.
"Without inclusive growth, poverty cannot be eradicated," Kshetry said.
Not only Nepal, but South Asia's economic, social and environment priorities must be balanced in favour of eradicating extreme poverty and hunger, the report prescribed, adding that the tax-to-GDP ratio has been improving due to growing tax revenue lately. "The budget deficit in recent years has also been about 3.5 per cent of GDP."

Over half of the population living under $2-a-day poverty line
KATHMANDU: Over half of Nepal's population is living under $2-a-day poverty line, according to UN ESCAP that has revealed that the income equality also stood at 32.8. "In early 1996, some 89 per cent of Nepalis used to live under $2-a-day poverty line, but in 2010, it reduced to 57.3 per cent," it said, adding that Nepal had 35.2 Gini coefficient in 1995, whereas in 2010, it stood at 32.8. Gini coefficient measures the inequality among values of a frequency distribution like levels of income. A Gini coefficient of zero expresses perfect equality, where all values are the same or everyone has an exactly equal income. More the Gini coefficient maximum the inequality.