Economics - XI

Agriculture
Characteristics of Nepalese Agriculture: Nepal is an agricultural country. Nepalese agriculture has its own characteristics which are as follows: a. Subsistence farming: One of the major characteristics of Nepalese agriculture is its subsistence farming. Majority of Nepalese people follow agricultural occupation. But there production is just enough for their own consumption. Commercial farming system is very limited in Nepal. b. Monsoon based agriculture: Nepal is rich in water resources but agriculture sector has to depend on monsoon rainfall. About 40% of the total cultivated land has irrigation facility and the rest of the land has to depend on monsoon rainfall. c. Small size of land holding: The land holding size is very small in Nepal and it is declining over the years due to high population growth. About 75% of the land holding is below 1 hector and 8% of the land holding is above 3 hector. This small size of land holding is economically not suitable for commercial farming. d. Primitive(Traditional) farming practice: Nepalese farming practices are still primitive as compare to similar other countries. They still use same tools and methods used by their forefathers. Modern tools, improved seeds, fertilizers, etc. are not commonly used by the majority of farmers in the country. e. Low productivity: Nepalese agriculture is characterized by low production and productivity in terms of output of per hector. Agriculture productivity in Nepal is very low as compare to developed countries. This is due to the use of inferior seeds, traditional methods of farming, lack of irrigation facilities, uneducated farmers, etc. f. Dual ownership of land: There is dual ownership system of land practice in Nepal. Dual ownership means two parties have been right over same land. The two parties are land owner and tenant. This creates problem in the development of agriculture. Importance of Agriculture: Nepal is an agricultural country. About 76% of the total population are engaged in agricultural occupation. Thus, agriculture is the backbone of Nepalese economy. The importance of agriculture in economic development are as follows: a. Source of livelihood:
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Economics - XI

Agriculture is the main source of livelihood of Nepalese people. About 76% of the population is depended on agriculture. It has provided employment to more than 65% of the labour force. b. Source of food grains: The agriculture sector provides the basic food requirements of the growing population. It provides various kinds of food crops, cash crops, fruits, vegetables, etc. which are essential consumption of human life. c. Source of industrial raw materials: Agriculture is the source of raw materials for agro-based industries in Nepal. It provides raw materials like sugarcane, tobacco, jute, tea, food grains, milk, skin, etc. d. Source of national income: Agriculture is the main source of national income. It contributes about 40% of the GDP of the country. e. Source of public revenue: Agriculture sector is regarded as one of the major source of public revenue. The government generates its revenue through land tax, registration fees, export duty, etc. f. Maintains environmental balance: Agriculture promotes healthy environment by providing greenery and forestry in the country. It helps to preserve bio-diversity and controls soil erosion. g. Supports development: Agriculture development stimulates and supports the development of other sectors. The growth of agriculture increases capital formation. The increased saving and investment can be invested in health, education, public welfare, etc. This helps to develop the non-agricultural sector. Problems of Nepalese Agriculture: Agriculture is the backbone of Nepalese economy. Therefore, this sector has given topmost priority in all economic plans of Nepal. But the development of these sectors is not satisfactory. There are various problems in agricultural sector which are as follows: a. High pressure of population on land: There is high pressure of population on land. Majority of farmers have less than one hector of land. Since, non agricultural sector hasnt still developed, agriculture is the main source of employment to Nepalese people. b. Use of traditional technology:

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Economics - XI

Majority of Nepalese farmers are uneducated. So, they use traditional technology in agriculture. They are unknown about new techniques of production, improved seeds, fertilizers, scientific equipments, etc. c. Lack of irrigation facilities: Irrigation is the life blood of agriculture. But the irrigation facilities are inadequate in Nepal. Nepals agriculture is still largely depended in monsoon. But monsoon in uncertain. d. Lack of agricultural credit facility: There is lack of adequate agricultural credit facility in Nepal. Majority of Nepalese farmers are poor. They need credit to make investment in agriculture. e. Lack of marketing facilities: There is lack of marketing facilities in rural Nepal. The agricultural marketing system in Nepal is unorganized. The farmers are compelled to sell their products to local shopkeepers at low prices. So, they are discouraged to produce more. f. Lack of storage facility: There is lack of storage facilities in rural areas of Nepal. Farmers are compelled to sell their products at low prices during harvesting season. g. Lack of agricultural research: There is lack of agricultural research related to cropping productivity, suitability of crops, technology, etc. Similarly, the agricultural techniques are concentrated in urban areas. h. Lack of physical infrastructures: Development of agriculture depends on the availability of physical infrastructures for modernization and commercialization of agricultural sector. Road, irrigation facilities, storage facility, market centres for the exchange of agricultural products. But there is lack of such facilities in Nepal for the development of agriculture. Sources of Agricultural Finance (Sources of agricultural credit): Nepal is an agricultural country. About 76% of the population are engaged in agriculture occupation. Majority of Nepalese farmers are poor. Their income is insufficient even to meet their subsistence need. Therefore, they need credit (loan) to make investment in agriculture. There are two major sources of agriculture credit. a. Traditional/Informal sources: From ancient times, Nepalese farmers are dependent on traditional sources of finance. Due to non-availability of other sources they have to bear high rate of interest on this source. This source includes the following sources. a. Friends and Relatives:
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Economics - XI

Farmers also take loan from their friends and relatives. Generally, they get such loans with or without interest. b. Village money lenders and landlords: From the very beginning the village money lenders and landlords are the main source of credit to the farmers but they charge high interest on loan. c. Merchants and traders: The farmers may receive credit form merchants and traders. They provide credit during the pre-harvesting season. They also charge high rate of interest. b. Institutional/Formal sources: Institutional sources are legally established for the development of agricultural sector under the policy of the government. This source includes the following sources: a. Agriculture Development Bank(ADB): It is regarded as the most important institution for agricultural credit. It provides short-term, medium-term and long-term credit to farmers. It provides about 80% of the total agriculture credit. It charges low rate of interest. b. Commercial Banks: It is another source of institutional agriculture credit. This banks provide loan to agricultural sector under the priority sector credit programmed. This banks also charges low rate of interest on loans. c. Co-operative society: Co-operatives are also providing loan to the farmers at low rate of interest. Its main objective is to make available cheap credit and agricultural inputs to farmers. d. Rural Development Bank: This bank provides loan to the farmers for agriculture and cottage industries. It also charges low rate of interest on loan. Agriculture Marketing in Nepal: The market where agriculture products are purchased and sold is called agriculture marketing. There is no organized agriculture marketing system in Nepal. Agriculture market in Nepal is segmented and small due to lack of adequate transport and communication facilities. The farmers producing different products sell to the local shopkeeper at low prices. They also sell their products in local market called Hat Bazar organized in weekly or monthly basis.

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Economics - XI

Problems of Agriculture marketing in Nepal: There are various problems of agriculture marketing in rural areas of Nepal which are as follows: a. Lack of transport and communication facilities: There is lack of adequate transport and communication facilities in rural Nepal. The cost of agriculture products and agriculture inputs increases due to high transport cost. Thus, Nepalese farmers are not getting sufficient benefit from agriculture sector. b. Lack of storage facilities: There is lack of storage facility in rural area of Nepal. The farmers have to sell their products immediately after harvest but the prices of agriculture products fall during harvesting season. c. Lack of adequate institutional credit facility: Most of the Nepalese farmers are poor so they need credit to operate agriculture. But there is lack of adequate institutional credit facility in Nepal. d. Non-uniformity of weights and measure: The system of measurement varies from place to place in rural areas. The merchants do not use proper weight and measure while purchasing agriculture goods from farmers. e. Lack of grading and standardization: The grading and standardization of agriculture products is almost Nil in rural areas. The better quality products high prices. But Nepalese farmers are unknown about this. f. Existence of middlemen: Most of the farmers sell their products in local market to middlemen. The commodities are passed through the middlemen to ultimate consumers. This aids the cost of commodity. Due to this the consumers have to pay high prices and farmers are not getting sufficient benefits.

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