Meaning of Economy

The most crucial business for a society is to maintain the different needs of members. There must be the provision of food, shelter, clothing, health, education, etc. in society. Those provisions are not possible without production function. Activities which are related to production is called economy in society. Thus, economy is the system of production, distribution, exchange and consumption of goods and services in society. Man is not only a social being, s/he also an economic being. S/he is engaged in some economic activities. These activities are so multifaceted, varied and complex that they constitute what is known as an economy. It may be treated as a system. It fulfills the basic functional necessities of social system. The economy of society evolves out from various regulations adopted by the society for providing stability to it production, distribution, and other economic variables. Every nation has its own type of economy based on the specific policy of political economy.

Nepalese Economy

Nepal remains as one of the least developed country where more than 25 % people are below the poverty line. Nepalese economy, despite presence of great opportunities for higher growth rate through development of potential sectors of the economy including agriculture, tourism, forestry, mines, and human resources, has been perpetually bearing the challenge of low economic growth rate. Nepal is facing low economic growth rate and wide spread poverty though out the country. Since the restoration of democracy, the government of Nepal have been directing its efforts towards the acceleration of economic growth as well as elimination of absolute poverty. The international community and international and national non-governmental organizations have also been providing the contributions for the economic growth of the country. International aid constitute a significant portion of in Nepal’s annual budget and development plans but Nepal has low economic growth.

Characteristics of Nepalese Economy

  • General poverty and low per capita income-: The majority of people in Nepal posses' low level of income because of their extremely low level of production. Poverty is reflected in very low PCI as compared with that of developed countries. Despite the fact Nepal has low PCI and its poverty is reflected in low standard of living and consumption.
  • Unutilized natural resources-: Natural resources in Nepal are either unutilized or underutilized. In fact, Nepal is not poor in natural resources like land, water, minerals, forest, but they are not properly utilized. Underutilization of natural resources is mainly due to our inaccessibility, scarcity of capital, primitive technology and limited market.
  • Lack of capital-: Nepal is suffering from chronic shortage of capital which is largely responsible for low per capita income in economy. Deficiency of capital is common characteristic which is both a cause and an effect of poverty. It enlarges the dependence on foreign capital. It finally discards the development of agriculture, industry, and social services. Thus, the economy remains in primitive stage.
  • Excessive dependency on agriculture-: Nepal is pre-dominantly agricultural and primary goods producer. In other words, 66 percent of its population is engaged directly or indirectly in agricultural occupation. Since agricultural work is carried out with primitive technology, the production is not satisfactory. It is clear that pre-dominance of agriculture is the natural condition and this one sided distribution of population is not conductive to economic development.
  • Foreign trade orientation-: It has been noticed that Nepalese economy is foreign trade oriented. It is replaced by its dependence on production of few primary goods. The ratio of import and export is imbalance. Heavy dependence on import has totally crippled the growth and development of Nepalese economy.
  • Existence of under-employed and disguised unemployment-: The Nepalese economy is generally characterized by the existence of underemployment and disguised employment. Disguised unemployment is confined to the agricultural sector and it is the result of excessive pressure of population on agriculture and land. It creates a situation in which it becomes difficult to identify any person as unemployed or underemployed in the family.
  • Dualistic economy-: The economy of Nepal is dualistic in the sense that that is composed of market and subsistence. The market economy is found in the urban areas while the subsistence economy is found in rural sector. The subsistence sector is totally primitive and back warded and does not contribute to the growth and development of market economy.
  • Technological backwardness-: Nepal is backward in the level and character of economic performance. So, primitive technology resulting in high labor productivity cost and low per capita income. Technical backwardness is regarded as a crucial factor in the lack of progress and development of Nepalese economy.
  • Lack of infrastructure-: Nepal is recognized by the fact that it lacks infrastructure needed for the proper growth and development of economy. The means of transportation and communication are not totally developed and the power generation is insufficient to meet the growing need of the economy.
  • Economic backwardness-: Economic organization plays a vital role for the economic development of Nepal. Since economic backwardness has been a regular feature, the economic feature and financial institutions are not developed. There is a lack of integration among different parts market and the money rates needed for international trade.
  • Disparity in wealth and income distribution-: An important feature of Nepalese economy is a disparity in income and wealth distribution. The elite group seems influencing the decision making level in different sector. As such are major share of government wealth does not go to the personal betterment rather than the social welfare and benefit.