Chandan Sapkota’s Blog


External sector strengthened as lower import development and higher remittance inflows soon after the earthquake increased current account balance and balance of obligations surpluses (5.1% of GDP and 6.8% of GDP, respectively). Fiscal performance remained dismal as approximated real capital spending was just about 70% of planned capital spending, and income mobilization grew at 13.8% against 20.5% in FY2014.

Capital spending remains woefully low at around 3.5 to 4.0% of GDP. The reduced expenses performance and relatively high revenue mobilization resulted in a fiscal deficit of around 0.2% of GDP (with primary surplus around 1.6% of GDP in FY2015). Migration slowed up immediately after the earthquake, unprecedented level of international assistance (primarily led by India as well as PRC and the united states) was mobilized, and the affected people struggled to normalize home activity.

About a million people fell below the poverty range. 6.7 billion (half of it needed for housing and human being settlement), almost 25 % of FY2015 GDP. 4 billion to finance post-earthquake rehabilitation and reconstruction (which is more than the share to be shouldered by the general public sector). So, money was not an concern. The capacity to invest it was. To give momentum to the, the federal government focused FY2016 budget (and monetary policy) on “building back better” and faster.

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To this end, an ordinance was promulgated to determine National Reconstruction Authority. The ordinance never managed to get to the parliament within 30 days and hence its life finished drastically. A expenses on NRA is pending in the parliament. It has become a victim of politics infighting, delaying post-earthquake reconstruction (urgently needed for short-term recovery and for long-term preparedness in this seismically energetic country).

Initial euphoria about post-earthquake reconstruction has dampened. Now, that’s the storyplot about post-earthquake economic tragedy activated by the natural devastation that affected top of the and middle belts of traditional western and mid-western administrative regions. Enter the problems in the Terai region and the incapacitating effect on the economy. The crisis was brewing before the promulgation of the constitution as some Madhesh-based politics parties objected to some provisions included in the draft constitution, that was handed by an mind-boggling majority in the Constitution Assembly. The primary point was the demarcation of federal state governments in the Terai region.

With no versatility (both sides) proven to settle the problem politically, the soreness, disdain (not all but among some) and alienation increased. Consequently, protests and the state’s a reaction to protesters (at times excessive on both sides) intensified. India came into the picture to impact changes to the constitution and many analysts allege that it’s imposing an ‘unofficial blockade’ on the borders.

Supporters of protesting celebrations picketed the border areas, halting the movement of goods and services practically. What, how, who, when, etc narrative differ predicated on the ideological leaning (passion is overpowering reason and cool-headedness) of analysts, consultants, journalists, lawyers, politicians, etc (however ‘independent’ these are). Anyway, the concentrate here’s economy. The supply disruptions (some allege it as official/unofficial blockade by India) have affected pretty much every financial activity.

The Terai belt is considered an important agricultural and commercial hub, and they have all the major custom points along the major boundary crossings with India. The Terai region accounts for about 51% of agricultural output, 52% of commercial result and 40% of services output. The population of Terai diverse in terms of ethnicity (quite, class, vocabulary, income, vocation, etc) is about 50% of total population. The subnormal monsoon was impacting plantation and therefore potential agricultural output already.

The disruption to household agricultural activities and lack of chemical substance fertilizers along with doubt over timely harvesting have dented the perspective for agricultural output. Industrial activity has come to a grinding halt. Mining and quarrying, and building works have not progressed much due to the delay in post-earthquake reconstruction. The lack of way to obtain raw materials or intermediate goods (including petroleum gasoline and LPG cooking gas) along with the closure of production plants have affected manufacturing and building activities.

Industrial sector will most probably grow at a poor rate. Meanwhile, services sector, which is basically based on remittance-financed imported goods, has been crippled severely. Wholesale and retail trade (which is by far one of the most crucial and stable drivers of growth in addition to agricultural output) has been severely disrupted.