Economic Growth and Development in Nepal

Kathmandu University School of Management (KUSOM)

Pinchhe Tole, Gwarko, Kathmandu

Submitted by: Anjisha Khadka

Submitted to: Dr. Narhari Dhakal Sir

Economic growth is the change in potential output of the economy shown by the shift to right of
the production possibility frontier. It is usually measured by the change in real national income.
Economic growth is caused by increase in quantity or quality of land, labor and capital and by
technological process. In practice, national income can be measured in many ways, but growth
statistics tend to be presented in terms of either a change in GDP or GNP. So the economic
growth is measured in real terms.
Economic development is usually measured by an increase in the gross domestic product (GDP)
or other measure of aggregate income. Economic development is the process of creating wealth
for the benefit of the community. So the economic development tries to improve the material
standard of living by raising the absolute level of per capita income.
From the given data, Some of the Economic indicators are: GDP, GNI, Population and annual
growth rate.
The economic growth of the country is measured by the GDP which is known as Gross Domestic
Product. GDP is the sum total of money value of all final goods and services produced in
domestic territory of country within a period of one year. In the year 2010/11 the GDP is 0 and
we can see the trend that it is gradually increasing but it decreased in 2015/16, Nepal had 0.43%
growth rate due to difficult situations like devastating earthquake and Indian blockade then
Nepal achieved highest growth rate which was 8.98% in 2016/17. In the year 2019/2020 the
suddenly declined and the rate is -2.09. The reason might me due to the coivd-19 pandemic.
Gross National Income is the entire amount of money earned by a country's population and
businesses (GNI). It is used to track and measure the wealth of a country year after year. The
figure includes both the country's gross domestic product (GDP) and foreign-source income. In
the year 2010/11 the GNI is $820 and it is gradually increasing but in the year 2015/16 we can
see the slight decrease in GNI due to earthquake and blockade by the India then it again
increased till the year 2018/2019. And again decreased in year 2019/2020 due to the covid-19
pandemic.
Similarly, GDP per capita income is increasing. In the year 2010/2011 it was $816 and is in and
increasing term till 2017/2018 which was $1171. This means the income of per person is
increased now in year 2019/2020 it has reached up to $1126 . The reason of decline might be the
ongoing pandemic worldwide as many people are losing their jobs.
Exchange rate is defined as the rate at which one currency will be exchanged for another
currency. The given data is comparing the exchange rate between Nepal and US. In compare
with the US the exchange rate of Nepal in 2010/2011 was 72.3 and it gradually increased in the
year 2019/2020 to about 116.31. So over the decade Nepal currency has become weaker as the
exchange rate of 1$ US was Nepali 72.3 rupees now increase up to 116.31. The money value of
Nepal decreased compared to US.
Primary, Secondary and Territory are the three sector in an economy. Agriculture, fishing, and
mining are examples of primary industries. Manufacturing industries are part of the secondary
sector. Service industries such as banking, education, and logistics are examples of tertiary
industries. From the given data, the composition of primary sector of GDP is in decreasing
trend .In the year 2010/2011 it was 34.0% and it is gradually decreasing and now reaches up to
26.8%. The secondary sector is decreasing but with very low rate. And the tertiary sector is in
increasing trend. In the year 2010/2011 it was 51.9% and in year 2019/2020 it is increased up to
60.4% as the trend of service sector is gradually increasing compared to agricultural in the past
ten years.

The GDP deflector is a price deflector which is a measure of inflation. It is the ratio of value of
goods and services an economy produces in a particular year at current price to that of prices that
prevailed during the base year. We can see the increase in GDP deflator. In the year 2010/11 it
was 100 and it increases gradually and in year 2019/2020 it increased up to 167. As it exceed
over 100 it means the price level has increased. As there is increase in GDP it also means the
output increased.

Social indicators are another important indicators that can be used to assess people's living
standards and the resources they have access to throughout time. The given data provides the
overview of Nepalese Social Status and their way of living. The basic need such as health,
education, food etc. have been improved over the past 10 years but still it has not reach the goal
of the country.
Malaria is one of the common disease that Nepalese people suffer from.
In the year 2010/11 there were 3 people at risk per 1000 population and now the cases of
malaria are continuously declining in Nepal. The reason might be that government might have
implemented some malaria elimination strategy.
Similarly, Tuberculosis is a communicable disease. In our country Nepal, we can see that in the
past ten years the cause of tuberculosis to per 100000 is 302 and is in gradually decreasing rate.
People having better health facilities might be the reason for the better treatment of the disease.

The average time a person is expected to live is measured by life expectancy. From the data we
observe that average lifespan Nepalese population is growing every year, and in the year
2018/19 it reaches highest which is 70.8. The reason of increase in average life span is due to the
improved in various sectors such as health, employment opportunities and a better living
conditions. Even the fluctuation of GDP did not affect the life expectancy rate.
The literacy rate of people ages 15 and above in the year 2010/11 is 59.6 and it increased and in
the year 2017/2018 it reached up to 67.9% . The literacy rate has increased as people might have
been aware about the importance of education and also better education facilitates are provided
by the government.
The percentage of children who drop out of school and those who enroll in school is still fairly
low, especially in rural areas. When we evaluate the cost of sending a transfer, we see that
paying 4.5 percent of the remittance as the fee is quite significant. Despite the fact that the cost
has decreased over the last decade, it has not changed as much as it should have given the rate of
GDP growth. Open defecation was practiced by 35.7 percent of Nepal's population in 2010/11,
which is a rather significant number; however, due to improved awareness and numerous efforts
over the last ten years, the percentage has dramatically decreased. In 2019/20, just 9.8% of the
population utilized open defecation. Access to clean fuels and technologies is still a problem in
Nepal. In 2015/16, only 23.1 percent of the population had access to clean fuels and technology,
compared to 27.6 percent the year before.
The access of electricity to the people is also in increasing but the percentage rate is fluctuating.
In the year 2010/11, 67.3% of population had access to electricity which increased up to 84.9%
in 2013/2014. but it decreased to 83.5% in 2014/15 and grew to 90.7% in 2015/16. So in some
years it increased and in some year it decreased according to the data. The far western reason
like Karnali still have poor access of electricity but in urban areas like Kathmandu people have
huge amount electricity.

Nepalese people suffers from the poverty. According to statistics from 2010/11, 25.21 percent of
the population lives below the national poverty which means that people are still unable to meet
basic needs such as food, clothing, and shelter. Malnutrition can also be seen on countries like
Nepal. When there was no growth in GDP in 2010/11, 9.2 percent of the population was
undernourished, and the percentage began to fall, reaching 4.2 percent in 2016/17, before rising
to 4.3 percent in 2017/18 and 4.8 percent in 2018/19. 24.4 percent of children under the age of 18
are underweight. Many children, particularly in rural areas, have limited access to nutritious
food and basic needs so they are undernourished.

So In conclusion we can see that Nepal has improved a lot in economic and development sector
but it is still not able to fulfill the target. During the pandemic Nepal’s economy has faces huge
loss and risk. When we look at the economy of Nepal over the last ten years, we can observe
many developments as well as the challenges and problems that Nepal has experienced over
time. The political and economic situation is in flux .Earthquake, Blockade, Government System
COVID (Common Viral Infections and Diseases) 19. There have been pandemics that have
continuously afflicted the world and also the economy of a landlocked country like Nepal. For
the better production they need to improve production factors like: land , labor , capital and also
need to provide better services on health, nutrition’s and a education system to increase the living
status of people.