Major economic problems faced by Nepal

By Arun Dahal Khatri

Geographically, Nepal is a landlocked country situated in the southern part of Asia. It's a buffer state surrounded by two giant neighbors India and China. Being an underdeveloped economy Nepal is struggling to uplift its economic status and periodically using numerous economic plans and strategies to grow the overall size of Gross Domestic Products (GDP). According to the World Bank In 2020, the size of GDP is $33.98 Billion and Nepal is expected to grow its GDP by $52.17 Billion by 2027. Nepal has a greater chance to encourage trade and international business but, because of the various challenges, Nepal has not been able to generate a positive result yet. The unprecedented microeconomics circumstances and various macroeconomics challenges have been creating numerous obstacles on the road to development. 

The major Economics problems faced by Nepal are mentioned below:

Inflation: Nepal has been facing repeatedly inflation. Most of the prices of goods and services are frequently increasing. In 2000 the inflation rate of Nepal increased by 3.03% whereas in 2010 it was raised by 9.33% and in 2020 the inflation rate was5.05%. Nepal government and the Nepal Rastra Bank (Central Bank of Nepal) brought numerous monetary policies but they did not make any changes in the consumer price index because of a lack of proper implementation and supervision of the policies. Because of inflation, the purchasing power of the NPR is continuously decreasing and the people are facing great problems.

Problems created because of inflation :
1- Decrease the purchasing power of the currency
2-Slow down the economy 
3- Decrease the aggregate demand 
4- Might occur the recession

Solutions of inflation:
1-Bring the suitable monetary policy
3-supervise the price of goods and services

Unemployment: Most developing economies are facing such macroeconomic problems. Unemployment is one of the substantial challenges for a nation because it cuts down the overall capacity of skilled, semi-skilled, and unskilled human resources. Because of the lack of job opportunities people face the problem of unemployment. Nepal has been facing huge problems of unemployment because of very low numbers of manufacturing industries and a lack of proper management of jobs and salaries. Data shows that in 2020 the unemployment rate is 4.44% in Nepal. The government of Nepal continuously surveying to eradicate unemployment with the help of issuing suitable fiscal policies but the failure to implementation of fiscal policies regularly deals with unprecedented obstacles. Indeed, people are facing structural unemployment at the highest level because of an imbalance of skilled and demanding jobs.

Problems  created because of Unemployment:
1-Reduced the overall income level 
2-Create financial troubles including crisis
3-Increase the time spent on skilled human resources

Solutions of Unemployment:
1- Bring the suitable fiscal policies
2- Encourage the private and public sectors to operate the industries
3- Lower the employment taxes
4- provide incentives to the workforce

Poverty: Poverty is the greatest challenge for a nation because it can cause the overall economic development of a country. Poverty is defined as the state of not having the capacity to fulfill the basic needs of humans ( Food, Clothing, and Shelter). Poverty can create huge economic problems in the nation because of fabricating income scarcity and decreases the overall growth of the nation. Because of poverty, people might face various medical problems that will cut off huge manpower and the capital of the nation to eradicate such medical haphazard which is the greatest opportunity cost of a nation. Nepal has been facing the greatest problems of poverty yet. According to UNICEF in 2019, 17.4 % of Nepalese people are under the line of poverty and struggling to earn $2 per day. The country faces poverty because of various internal and external causes.

Causes of Poverty in Nepal:
1- Development of inequality 
2- Income inequality
3- lack of implementation of plans
4- Political interference and conflicts
5-lack of jobs in the market

Problems because of poverty:
1- Inadequate income 
2-Medical haphazard 
3-Cut off country capital

Solution of Poverty:
1- Implement the poverty eradication plan
2-Provide education and basic needs 
3-Give the government support 
4-Equal income distribution

Notes:
Inflation: State of continuously increasing the price of goods and services in the market

Fiscal policy: Policy brought by the government to make stable economic development with the help of increasing and decreasing government spending and taxation.

Monetary Policy: Policy brought by the central bank of a nation to eradicate macroeconomic problems like inflation through increasing and decreasing the interest rate and money supply.

Structural unemployment: Unemployment occurs because of the mismatch of job demands and skills.