Experts cast doubt on govt's ability to acehive growth targets

KATHMANDU, July 14 : The government´s target of achieving 6 percent economic growth in the fiscal year 2014/15 has drawn mixed response from economists.

Former vice-chairman of National Planning Commission (NPC) Dipendra Bahadur Chhetri said economic growth depends on agricultural yield which is dependent on monsoon. “Therefore it cannot be achieved,” he added.

Agriculture contributes one-third of total gross domestic product (GDP). But erratic rainfall this year shows agricultural yields will not increase significantly.

Riding on good agricultural yields, the economic is projected to grow by 5.2 percent in fiscal year 2013/14. Country´s agricultural growth is projected to rise by 4.7 percent in 2013/14, compared to growth of mere 1.1 percent in 2012/13, the Economic Survey that the government released on Thursday showed.

“Ongoing monsoon hints at low agricultural yields in the coming fiscal year. Also there is no concrete plan and programs for the development of other key sectors like development works, manufacturing sectors and infrastructure development,” added Chhetri.

The government has allocated Rs 116 billion for capital expenditure in 2014/15, up from Rs 85 billion allocated for the current fiscal year, to achieve high economic growth. But experts express doubt on the plan, saying that the budget lacks proper and concrete plans to address prevailing bottlenecks.

Experiences say capital expenditure induces more private investment - around four times higher than the government´s expenditure.

Dilli Raj Khanal, another economist, said the budget could have taken new measures of monitoring its development works, particularly on durability, cost-effectiveness and to make personnel responsible for implementation lapses, instead.

“No programs have been unveiled to improve spending capacity of the government,” Khanal said, adding that revision of some laws along cannot make expected changes. “We need a complete overhaul in the way development programs and implemented.”

Experts, however, have lauded the government commitment to bring about legal reforms and introduce new laws on contract farming and foreign direct investments. However, this is not the first time that commitment has been made to formulate new laws.

To graduate Nepal into a developing country, the government needs to spend 11 percent of GDP for capital expenditure. But the government has only allocated only six percent of GDP for the purpose.

Former finance secretary Rameshore Khanal, however, defended the budget, saying that it has tried to transform monsoon-dependent agriculture into commercial farming by announcing number of plans and programs.

“There are programs like providing 50 percent grant on import of milking machines for cow farms having more than 20 cows. Similarly, the government has capped bank rates for agricultural loans at 6 percent to encourage commercial farming,” he added.

Khanal also said the manufacturing sector will see corresponding growth along with the reforms. He, however, said the policy of providing incentives worth Rs 1 billion to big investors and industrialists from taxpayers´ money cannot lure investments.

 “The government should instead address problems faced by investors in the field, clear bottlenecks and arrange efficient service delivery mechanism,” added Khanal.

Source: Republica