One-third of economic activities concentrated in Valley: NRB
KATHMANDU, AUG 31 -
One may have thought it was only politics, but economic activities of the country are also Kathmandu-centric. A study recently conducted by the Nepal Rastra Bank (NRB) shows that one-third of the country’s total economic activities are concentrated in Kathmandu Valley.
A report of the study titled ‘The Share of Kathmandu Valley in the National Economy’ has estimated economic activities in two scenarios—reference and alternate.
As per the reference scenario (based on published data), the total monetary value of economic activities in the valley is Rs 316 billion, which accounts for 23 percent of the country’s gross domestic product (GDP). In the alternate scenario (underestimated data), the total value of economic activities in the valley is Rs 418 billion, 31 percent of the GDP.
The NRB used for the study the expenditure approach of national income accounting of the fiscal year 2010-11, considering consumption, gross capital formation and net exports as the element of the economic activities.
The study underlines the fact that economic activities are always urban-centric. Economists say the findings of the survey are “very realistic” and that economic activities being urban centric is a global phenomenon.
“Once the economy advances, the contribution of the service sector increases and the service sector is mostly concentrated in the cities,” said Rameshore Prasad Khanal, the economic advisor to the prime minister.
The study brings to light some interesting facts. There is higher concentration of banks and financial institutions (BFIs) in Kathmandu Valley, consumption is high and capital formation is low.
The valley alone consumes 31 percent of the country’s total petroleum products’ import. In case of LPG consumption, it is as high as 60 percent.
The study reveals that about 15 percent (4 million of the 26.6 million) of the total population is consuming 60 percent of LPG in the vally. It further shows that valley dwellers benefit most from subsidies given on LPG. “The findings can be an awakening for policy makers as all the subsidies ultimately reach a smaller segment of the population,” said executive director of the NRB Min Bahadur Shrestha, who also led the team that carried out the study. “Also, that segment of the population’s purchasing power is higher than that of other parts of the country.”
Similarly, the consumption of electricity is equally asymmetrical with valley dwellers consuming 29.2 percent of the total power distributed by the Nepal Electricity Authority. The valley’s share in the total food consumption accounts for 19.8 percent.
However, the capital formation of the valley is not in line with the consumption as it is estimated at Rs 63 billion—15 percent of the national level gross capital formation.
Khanal said consumption was high in the valley because of two reasons—a bigger population and higher purchasing power. “Capital formation on the contrary is higher outside the valley because the government’s investments in infrastructure is mostly outside Kathmandu,” said Khanal. “Also, the government’s contribution is larger in the total capital formation.”
According to the study, an estimated total value of exports of goods and services of the valley is Rs 43 billion, whereas the value of imports is Rs 118 billion.
The study says the valley is still the largest market for BFIs. It shows 26 percent of the BFIs’ branches are in the Capital. Sixty percent of the deposits of BFIs’ come from the valley’s three districts, while they lend 44 percent of their total lending in the valley.
Source: The Kathmandu Post
