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It can be said that agriculture and tourism reserve the major contribution to the national economy of Nepal. About 80% of the population in Nepal is dependant to the agriculture. Besides this, only about 15% of the peoples are exercising the modern method of the agriculture production. Rests are following the traditional method of the production.
According to the recent monetary policy, the growth rate didn’t up to the level of 5% while the inflation rate is over the 8.5 % of the country of Nepal in the fiscal year 2014/2015. To sort out such challenge and to reduce the rate of inflation, Nepal need to add up the production of more goods and services, need to formulate effective monetary policy, need to control the money market that will more or less please the running inflation rate to break down to some extent.
Major challenges to the economic development in the current context of Nepal are the lower level of national domestic production itself, lower per capita income, higher level of poverty, under utilization and miss utilization of the available sufficient natural resources, higher level of unemployment, higher dependency with the assistance of foreign countries and remittance inward to Nepal. However, the most challenging thing to notice out is the lack of capital.
Especially after the 7.9 Richter magnitude earthquake in Nepal on April 25, 2015, Nepal lost many emerging capital structures. Due to the effect of the foreign assistance, the level of budget is likely to increase by the 2 millions while the gross domestic production is likely to reduce by 1.5% in the contemporary scenario of the economy. This state can affect the economy adversely. To recover such challenges and the broken GDP, Nepal need to focus on the capital market than money market to accumulate more level of capital.
Capital is the stock of wealth that can yield goods and services in the future. In the present context, capital formation is defined as an accumulation of financial, human and natural capital. Here financial capital refers to the stock of deposited amount to the saving account. Human capital consists of the both the skilled and unskilled manpower and the possible productivity of such manpower and natural capital is the sum of all the natural sources that they are capable of accelerating the possible extra amount of capital.
Especially to the contemporary Nepal, lack of capital and its formation really backward the country to the poor economic condition. The behind the need of more capital formation is to increase the market share and the prosperity of economy. Capital formation helps the exiting firms and companies to expand their activities more to the capital intensive projects and activities. Capital formation leads the surplus balance of trade on the international trade by exporting more final goods and services. The basic purpose of capital formation is to enhance the creditworthiness and the productivity of economy.
Capital formation is a process. It forms regularly and phase by phase. Capital is a major component of saving and the income level in an economics. Higher the income, higher will be the level of saving and possibility of capital formation. To mobilize the saving of various individuals and institutions, financial institutions and intermediaries play a significant role. Hence the capital formation is the process of mobilizing saving into capital assets with the help of financial market.
Nepal needs to follow the various mechanisms to form and generate the capital more significantly. Since Nepal is rich on the natural resources, it needs to pay more concentration to the forming of natural capital. First adding value to the natural products that are produced from natural resources, second recording natural stocks for optimum extraction, third planning natural product extraction schemes and last exploring other possible opportunities for higher income generation is the only outstanding mechanism for capital formation on today’s context.
Besides this, direct investment to the common equity and other securities, increasing the portion of retained allocated surplus, raising the percentage of allocated revenue that is retained per year, for e.g., ABC company in Nepal, where 18% of gross earning revolved over 3-4 years, raising non member equity capital especially on the co-operative sector, agreeing on the investor- owned firms as joint venture or as license agreement or as merging or as joint ownership of profit subsidiaries are the some possible strategies and mechanisms to raise the capital structure.
However for those to meet, effective urbanization policy, industrial and agricultural policy with effective land management needs to formulate and to be implemented. Country need to focus mostly on manufacturing activities, advance technology and soft loan to agriculture, perfect monetization of the all the produced goods and services even to the rural part of Nepal, effective mobilization of foreign loans and assistance to the productive sector, initiating mandatory business policy for all the peoples of country, modern mechanism to the agricultural production rather than the subsistence level production, making sound policies and laws to control the caste, religious, cultural and social matter of higher consumption to the unproductive sector such as on gold, solver, real estate, housing etc. Then after, the suggested mechanism can work perfectly.
If country of Nepal follows the above mentioned mechanisms for capital formation with close coordination with the good governance and the effective policy makings, Nepal can change its forehead finally to top developed country with better human development index. Nepal can bring out the higher level of capital and the utilization of it that will ultimately reflect the prosperous economic development with its sustainability to many generations ahead.
Regards !!
Sunil Paudyal
According to the recent monetary policy, the growth rate didn’t up to the level of 5% while the inflation rate is over the 8.5 % of the country of Nepal in the fiscal year 2014/2015. To sort out such challenge and to reduce the rate of inflation, Nepal need to add up the production of more goods and services, need to formulate effective monetary policy, need to control the money market that will more or less please the running inflation rate to break down to some extent.
Major challenges to the economic development in the current context of Nepal are the lower level of national domestic production itself, lower per capita income, higher level of poverty, under utilization and miss utilization of the available sufficient natural resources, higher level of unemployment, higher dependency with the assistance of foreign countries and remittance inward to Nepal. However, the most challenging thing to notice out is the lack of capital.
Especially after the 7.9 Richter magnitude earthquake in Nepal on April 25, 2015, Nepal lost many emerging capital structures. Due to the effect of the foreign assistance, the level of budget is likely to increase by the 2 millions while the gross domestic production is likely to reduce by 1.5% in the contemporary scenario of the economy. This state can affect the economy adversely. To recover such challenges and the broken GDP, Nepal need to focus on the capital market than money market to accumulate more level of capital.
Capital is the stock of wealth that can yield goods and services in the future. In the present context, capital formation is defined as an accumulation of financial, human and natural capital. Here financial capital refers to the stock of deposited amount to the saving account. Human capital consists of the both the skilled and unskilled manpower and the possible productivity of such manpower and natural capital is the sum of all the natural sources that they are capable of accelerating the possible extra amount of capital.
Especially to the contemporary Nepal, lack of capital and its formation really backward the country to the poor economic condition. The behind the need of more capital formation is to increase the market share and the prosperity of economy. Capital formation helps the exiting firms and companies to expand their activities more to the capital intensive projects and activities. Capital formation leads the surplus balance of trade on the international trade by exporting more final goods and services. The basic purpose of capital formation is to enhance the creditworthiness and the productivity of economy.
Capital formation is a process. It forms regularly and phase by phase. Capital is a major component of saving and the income level in an economics. Higher the income, higher will be the level of saving and possibility of capital formation. To mobilize the saving of various individuals and institutions, financial institutions and intermediaries play a significant role. Hence the capital formation is the process of mobilizing saving into capital assets with the help of financial market.
Nepal needs to follow the various mechanisms to form and generate the capital more significantly. Since Nepal is rich on the natural resources, it needs to pay more concentration to the forming of natural capital. First adding value to the natural products that are produced from natural resources, second recording natural stocks for optimum extraction, third planning natural product extraction schemes and last exploring other possible opportunities for higher income generation is the only outstanding mechanism for capital formation on today’s context.
Besides this, direct investment to the common equity and other securities, increasing the portion of retained allocated surplus, raising the percentage of allocated revenue that is retained per year, for e.g., ABC company in Nepal, where 18% of gross earning revolved over 3-4 years, raising non member equity capital especially on the co-operative sector, agreeing on the investor- owned firms as joint venture or as license agreement or as merging or as joint ownership of profit subsidiaries are the some possible strategies and mechanisms to raise the capital structure.
However for those to meet, effective urbanization policy, industrial and agricultural policy with effective land management needs to formulate and to be implemented. Country need to focus mostly on manufacturing activities, advance technology and soft loan to agriculture, perfect monetization of the all the produced goods and services even to the rural part of Nepal, effective mobilization of foreign loans and assistance to the productive sector, initiating mandatory business policy for all the peoples of country, modern mechanism to the agricultural production rather than the subsistence level production, making sound policies and laws to control the caste, religious, cultural and social matter of higher consumption to the unproductive sector such as on gold, solver, real estate, housing etc. Then after, the suggested mechanism can work perfectly.
If country of Nepal follows the above mentioned mechanisms for capital formation with close coordination with the good governance and the effective policy makings, Nepal can change its forehead finally to top developed country with better human development index. Nepal can bring out the higher level of capital and the utilization of it that will ultimately reflect the prosperous economic development with its sustainability to many generations ahead.
Regards !!
Sunil Paudyal
