Determinants of Growth Rate of per Capita Income and Manufacturing Output in Process of Economic Development in Nepal

By Adhikari, Chandra Bahadur | Contributions to Nepalese Studies, January 2011 | Go to article overview

Determinants of Growth Rate of per Capita Income and Manufacturing Output in Process of Economic Development in Nepal


Adhikari, Chandra Bahadur, Contributions to Nepalese Studies


Introduction

Industrialisation is crucial for the development of high value-added economic sectors, to alleviate widespread poverty in developing countries. The historical evidence from Western developed countries demonstrates that industrialisation is a prerequisite for development and growth. Agriculture and other service sectors are also promoted by the process of industrialisation. In this context, economic development and industrialisation are viewed synonymously. Motivated by this belief, many countries around the world have pursued an industrialization policy.

Nepal is a landlocked Himalayan country geographically sandwiched between two emerging global economic powers, China in the north and India in the east, west and south. India and Nepal by special economic treaty virtually have an open border policy. With most of the land of Nepal being mountainous, the construction of physical infrastructures including roads, bridges and other structures has been very difficult--financially, environmentally, and spatially. The factor endowment of the country is remarkably poor, with no significant strategic raw material or mineral reserves. Only a small part of total land area is cultivable. The pressures of the population on the limited land have been growing over the years.

At present the biggest challenge faced by the policy makers in Nepal is the alleviation of poverty. Much effort, time and money have been spent on different sectors of the economy to reduce poverty and inequality. During the last decade, aggregate poverty declined, however, the decline was uneven across geographical regions. This resulted in a sharp increase in regional inequality. The level of poverty is high in rural areas, particularly in the agriculture sector. Despite the huge investments that have been made in agriculture in the past, growth in food production has not kept pace with the rate of population growth.

Given the current state of the amount of cultivable land available for further distribution, and the constraints of development in Nepal, all the evidence suggests that land cannot be the only intervention employed to ease the problems of poverty and inequality. To significantly alleviate rural poverty, rural development strategies including the strengthening of linkages between the urban and rural sectors may be crucial. Economic development through the non-agricultural sector, particularly manufacturing, can be an important strategy in this respect. It can be an important instrument in overcoming the problems of low income, unemployment and the deterioration in the terms of trade, and hence foreign exchange shortages for the import of capital goods which are essential for economic growth. Against this background, based on time series data, this paper attempts to empirically explore trade and industrialisation as potential effective strategies for Nepal in their attempts to reduce poverty and inequality by structural transformation of the economy.

The paper is organised as follows. The trade and industrialisation situation is outlined in Section 2 with the theoretical background in Section 3, Indo-Nepal relationship in Section 4 and the empirical analysis in Section 5. Section 6 provides policy implications with some concluding remarks.

The Trade and Industrialisation Situation in Nepal

Nepal's foreign trade deficit is growing significantly due to a higher rate of growth of imports compared to exports. For the last few years, the total volume of trade with India has increased sharply, while it has been declining with other countries. During the first eight months of current FY (2009/10), total exports with India decreased by 2.9%, but total imports rose by 12.1 percent in the same period of the previous year. Consequently, the total trade deficit reached Rs. 111.44 billion with increase of 15.6% (MOF, 2010). Nepal's trade dependency on India is also increasing sharply. In 1991/92, the India's share of Nepal's total foreign trade was 28% with other countries making up 72%, but in 2009/10 the shares of India and other countries were 55. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Determinants of Growth Rate of per Capita Income and Manufacturing Output in Process of Economic Development in Nepal
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.