The Democratic Transition in Nepal - Assignment Example

The Democratic Transition in Nepal Nepal is one of the poorest and least developed countries in the world with more than half of its population living below the poverty line. This purely agricultural country takes 80per cent of its population into this primary sector with a contribution gained around 40 percent of annual income. Jute, tobacco and sugarcane processing are the main secondary sector of economy, i.e., industry. Textiles and carpet manufacturing units have emerged as a major income sharing sector for the country with a contribution of over 80 –per cent of foreign income is drawn from it. Mica, hydropower and forest products are the other sources of income for this country. Federal Democratic Republic of Nepal The only Hindu nation in the world is a picturesque unit of living for visitors and dwellers as well. An estimation done last year shows a population of about 29,331,000 people with the annual growth rate of 2.2 per cent. The country has its capital Katmandu, a very historic city. The people of this country, commonly called Nepalese speak Nepali and English for their communication. The country follows several political aspects adopted from India. The currency of this country is Rupees. Population: about 29,331,000 (2009 estimate) The geographical location of Nepal is at southern Asia. It shares its boarders with India and China. This roughly trapezoidal shaped country’s troposphere is uncommonly diverse. The total area of land mass is 147,181 Sq. Kms. It spreads a long line of 800 kms with a width of 200 Kms. Nepal can be seen as three physiographic areas; the Mountain Hill, Siwalik region and Terai regions. This diversity accounts for the abundant river water in the country. This environmental unevenness intersects Nepal’s north to south flowing river systems. Economic indicator Nepal is surely a very poor country. Lack of exploitation methodology implemented on natural resources accounts for the failure of increase in living standards of the people. Even today, about half of its population live below the international poverty line(IPL) of US$1.25 a day. The country’s telecommunication system is under rated at the world standards of the current point of international usage of phones. An alarming figure of over 19 people is estimated to use one phone. Jaggedness of the landscapes add to the failure of installation of land line telephones. They are limited to the use of city and town centers only. Nepal’s economy stands at 115th position in the world level. Over 70 percent of the work force in the country contributes to 40 per cent of its GDP. Rest of the work force and productivity centers gather the remaining portions of the revenue with service sector comprising 41 per cent and industry bringing a noticeable 22 per cent. Political indicators Nepal Government spends only a mere US$1.789bn towards administrative expenditure every year. This meagerness shows the ineffective administration system operated in the country. Responses and answerability of the country show a diminishing negative trend with -0.89 queries are answered in an overall level. The country’s political stability is at stake. It dips far below the dangerous level at -2.13, i.e., probably no government is fit enough to complete the term with confidence. This draws back Nepal’s economic progress from its strive for promoting basic economic needs. Further, against the world level of expected effectiveness, Nepal government falls down to a mean line, a rather disappointing -0.81. Inefficient government leads to pauperism of its people. That is what happens to Nepal now. The administration itself is very weak with a Regulatory Quality shamefully less than estimated level standing at -0.65. This trend is one of the worst found across the globe. The failure in administrative quality controls ends in failure of Rule of Law. The status of Nepal’s ethics of Rule of Law is far below the required average level. The index of -0.64 shows devastated social and political conditions prevailing in Nepal. Social indicators Social indicators of Nepal speak much about its economic backwardness. The factors of GDP include literacy, life expectancy mortality and birth rates, poverty ratio etc. The more the people are literates; the more are the chances to employ them. But in Nepal, this index is far low with complete literacy status showing 0 per cent level. That means, there is little or no guarantee of an adult above 15 years to be educated. Whereas, the life expectancy at birth shows an average index compatible with all third world countries. The lower years of expectancy shows less productivity of human resources in a country. This cause alone adds to the poverty in Nepal. Apart from that, 60 out of every 1000 infants die every year. This mortality rate shocks the country’s expected work force for the future. This rate is alarming to notice that the births are registered at only less than half of proportionate mortality with an approximate 29 births out of every 1000 people are recorded. Poverty headcount ratio at national poverty line is marked at 30.9 as per the statistics of 2004. This data shows that about 40 per cent of the population lives far below the poverty line. The disparity between the rich and the poor is assessed in the country is terrifically high. As per the Gini Index of 47.17(2003) of Nepal, an average rich has nearly double the asset of an average poor. This discrepancy of riches levels reflects Nepal’s vulnerability of economic instability. The UNDP indicators mention that Nepal’s possibilities Human Development Index is too far low at 0.53 which is highly non- reliable for considering financial assistance. All these factors account for the mountain country’s sustained economic backwardness. Convergence of Economies of Nepal and U S The following data of convergence of economies of Nepal and USA gives detailed posture of their financial stability. The Gross Domestic Product (GDP) at Purchasing Power Parity (PPP) of Nepal is $31.634bn (2008) against that of $14.2trillion (2008) of U S. This shows the purchasing power of a country against the payment of its money to another country by means of foreign exchange. Where Nepal spends in billions U S does it in Trillions of Dollars. Another comparative study shadows down the possibilities of Nepal as anything near the U S as it stands at a per capita income of $1,144(2008) against that of $46,716 of the U S as per the statistics of 2008. Graphical Presentation of Estimated Convergence of Nepal economy with U S economy There can be a little estimated study over the convergence of the two economies. Let the Estimate Convergence of Per Capita GDP be (lnGDPus08 – lnGDPnepal08)/ (lnGRnepal – lnGRus) If the values are substituted, = (ln46716 – ln1144)/ (ln1.053 – ln1.029) = 3.709/ 0.0231 n=160.56 Estimated statistics shows that, as a result of the proportionate changes in the economic trends in 2170, Nepal’s economy will converge with the United States’s economy in terms of GDP per capita. US Economy an Overview The US has the world’s largest economy even after the recent failure in housing and credit markets. According to the CIA World Factbook, 2007 GDP was believed to be $13.84 trillion with 2.2% growth rate; whereas in 2008 it was projected to be just 0.9%. Government plays a crucial role in determining the economy of the nation through its fiscal policies. The major areas that determine the GDP ratio are service, industry, and agriculture sectors. In 2007, they made up 78.5%, 20.5%, and 1% of GDP respectively. In order to fix the GDP growth government controls money supply, tax rates, and credit control. In addition, it also regulates private business concerns in order to avoid monopolies. However, despite the competence, the economy bears alarming rate of national debt. According to the statistics, at the begging of 2008, the US federal debt was around $9.2 trillion. Regardless of higher GDP, Americans are exceedingly dependent on debt and higher amounts of loans (Economy Watch). Bilateral Agreements Among the financial supporters, US hold the significant role in Nepal. The first economic cooperation between these two countries was signed in January 1951. By 1991 the US bilateral contribution reached $451 million with an annual average of $15 million (Parajulee, 225-226). The US assistance to Nepal covered almost every important areas of its socio-economic aspects namely, agriculture, natural resources, education, human resources, health and population, industry, public administration, transportation, and communication. In addition to the financial aid US enjoyed a considerable influence on the political policies of the country through various multilateral agencies and private voluntary organizations (PVOs) through which the major portion of the contribution had been reaching the country. Subsequently, the US directly and indirectly involved in the 1990s pro-democracy movement in Nepal. The US has been a major influence on Nepal’s socio-economic and political scenario for decades. Conclusion Nepal is one of the most beautiful tourist destinations of south Asia that attracts thousands of international tourists every year. It is unique for its natural beauty and historical significance. The country’s economy stands at 115th position in the world level with a considerable low rate of GDP. The major cause of the nation’s backwardness in infrastructure development is its unusual geographical features and political inconsistency. It has been estimated that in 2170, Nepal’s economy will converge with the United States’s economy in terms of GDP per capita. Although rich in natural resources, due to the inappropriate methodology, the country has not yet succeeded to exploit its potential. The country has been relying on international donors namely US for decades to meet its requirements on socio-economic welfare. Works Cited Parajulee R P. The Democratic Transition in Nepal. Rowman & Littlefield, 2000. The US Economy. Economy Watch, 26 April 2010 http://www.economywatch.com/world_economy/usa/ Read More