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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,

Department of Economics, Patan Multiple Campus.

20015

EFFORT TOWARDS POVERTY ALLEVIATION


Nepal faces a severe problem of economic stagnation. Difficult topography and the difficult
natural environment are obstacles to development. The country has a high rate of population
growth, extremely low agricultural productivity, and weak agricultural support. Natural resources,
except water, are almost nonexistent, or their degree of exploitation is low. Rural economic
activity, also at a very low level, is not changing. Some of the factors responsible for economic
stagnation are beyond Nepal's control. The initial period of Nepal's planned development had
infrastructure and institution-building as major objectives. Investments to establish the basic
infrastructure is not fully reflected in growth terms. However, that policy can influence economic
growth in many ways, and the task is to exploit as many as possible of these policies for the
economic well-being of the Nepalese. (Sharma, Asian Survey, Vol. 26, No. 8, Aug., 1986), pp.
897-908.
Poverty measurement and analysis, inequality which kills social welfare, Monitoring and
evaluation, development targets and costs, strengthening statistical systems, public spending,
participation,
governance,
community-driven development,
gender,
environment,
macroeconomic issues , trade policy, rural poverty, urban poverty, Social protection, health,
nutrition and population, education, energy, transport, Water and sanitation, information and
communication technology, utilization of mining is the other sides problems Nepalese economy (A
sourcebook for poverty reduction strategies, World Bank, 2005).
But, our country is experiencing a type of republic banana. Out of them principally there are
three central problems in Nepalese economy which dominated national economy and they are the
fundamental challenges for economic development:
1. Poverty
2. Inequality
3. Unemployment
Poverty
Subjective Measures of Poverty
Subjective perceptions can be used to measure poverty. Such measures of poverty are based on
questions to households about (a) their perceived situation, such as, Do you have enough? Do
you consider your income to be very low, rather low, sufficient, rather high, or high? (b) A
judgment about minimum standards and needs, such as, What is the minimum amount necessary
for a family of two adults and three children to get by? or What is the minimum necessary for
your family? or (c) poverty rankings in the community, such as Which groups are most vulnerable
in the village? On the basis of the answers to these questions, poverty lines can be derived.
Answers to the second group of questions could provide a line for different types of reference
households, and answers to the first group of questions can be compared with actual income to
infer the income level that households judge to be sufficient. This income level could then be used
as the poverty line. Subjective measures can be used not only to assess the situation of a
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

particular household but also to set or inform the choice of poverty lines, equivalence scales,
economies of scale, and regional cost-of-living differences. It can also be useful to compare
subjective and self-reported measures of well-being to objective measures based on observed
income and consumption data. Self-reported measures have important limitations, however.
Subjective measures might reproduce existing discrimination or exclusion patterns if these patterns
are perceived as normal in the society. This might be the case in discrimination against girls or
other particular groups in society. Subjective assessments could then fail to capture discrimination,
which should be addressed by public policy. More generally, the observed perceptions of
poverty need not provide a good basis to establish priority public actions. This may be the case if
policymakers have a different time horizon or a different understanding of the determinants of
social welfare from the population providing the subjective measures of poverty.
Methods of Setting Absolute Poverty Lines
Different methods have been used in the literature to define absolute poverty lines (see Deaton
1997; Ravallion and Bidani 1994; Ravallion 1994; and Wodon 1997a). The choice of method
can greatly affect poverty measures and who is considered poor. It is important to derive poverty
lines that provide consistency in welfare measurement in space and time: two people with the
same real consumption should be considered either poor or nonpoor. As discussed in Ravallion and
Bidani (1994) and Wodon (1997a), the food-energy intake method defines the poverty line by
finding the consumption expenditures or income level at which a persons typical food energy
intake is just sufficient to meet a predetermined food-energy requirement. If applied to different
regions within the same country, the underlying food consumption pattern of the population group
consuming only the necessary nutrient amounts will vary. This method can thus yield differentials in
poverty lines in excess of the cost-of-living differential facing the poor. An alternative is the cost
of basic needs method, where an explicit bundle of foods typically consumed by the poor is first
valued at local prices. Ordinal ranking of welfare crucial for the poverty profile is more
important than cardinal ranking, with one household above and another below the line. For
comparisons over time, however, the stability and consistency of the poverty line need to be
ensured.
The linkage (nexus) of production relation of poverty:
Production is conducted within a network of discursive and non discursive relations technical, social,
ecological cultural, political and academic whose understanding is distorted by subject specific
views of reductionist science.

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Figure1: The linkage (nexus) of production relation of poverty


Academic

BIOGENIC DIET
Technical

HEALTH CARE

Ecological

END-USE APPROPRIATE ENERGY


CLOTH AND HOUSING
FUNCTIONAL LITERACY
Political

Cultural

Social

Poverty: the experience of many poor countries special reference to Nepal


The "Join the Club" view: This view argues that poor economic policies, for example,
infrastructure is poor, education is inadequate:
Poor product quality: Quality improvement clearly affects economic well-being as much as
does the quantity of goods.
Composition and distribution of output: A more unequal distribution which appears to be
occurring would have reverse effect.
Per capita output: population is also growing rapidly per person standard of living may
be constant or even declining.
National income and the environment: Dirty air and water toxic waste, noise accompany
production and the growth of GDP. The underground economy: Engage in illegal activities,
corruption is rampant, (Parliament, regulator, legislator: [Linguistic corruption, [change in
meaning to a language: Parmanda Jha], social, cultural, knowledge [human capital],
foreign aid, foreign loan, social capital, trade and market [cartel], Institutional corruption,
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

[policies within an organization that break the law], Data corruption, [change to data in
storage], Putrefaction [decomposition]).
Political corruption, as the dysfunction of a political system or institution in which
government officials, political officials or employees seek illegitimate personal gain
through actions such as bribery, extortion, cronyism, nepotism, patronage, graft, and
embezzlement.
Basic environmental pollution: such as urban air pollution, media pollution, private
information talent management regulation or brain management, innovation and technical
change. Theoretical economic incentives are assumed to promote more innovation and cost
reductions in pollution control, relative command and control. The magnitude of this effect
is an empirical question.
Corrupted forget moral principle and is a evil, malignance, sickness, of the economy which loss of
innocence or purity.
The "Missed the Boat" view: This view accepts the argument of the "Join the Club" views that, the
market failure argument: In efficiency or absence of well organized commodity. Factor and
capital markets is said to reduce considerably the ability to economic system to function
effectively without some form of external interference.
Commodity and factor markets are poorly organized
Absence of well organized commodity
Producers and consumers lack of necessary information; to act in a way conducive to
efficient production and distribution
Poorly developed in financial institutions
The market is too said lead to a misallocation of present and future resources
The resource mobilization and allocation argument: investment project must be chosen not
only on the basis of a partial productivity analysis dictated by individual industrial output
ratios, but rather in the context of external economies, indirect repercussions and long term
objectives.
The third world economies cannot afford to waste their limited financial and skilled
manpower resources on unproductive ventures.
Change their original religion: Hindu to christen.
Utilization of unskilled manpower.
It is argued that competitive markets will tend to generate in to socially low priority areas
and to disregard the extra benefits to be derived from a planned and co-coordinated
long term investment program.
The "Geographic Disadvantage" view: This view accepts the arguments of land lock country,
Very large in geographical and populated neighbors China and India and an opposite ideology.
Planning and program can not complete timely because of so many lame excuses.
Planning in Nepal has little to do with anything that happens in that country. Planned targets are
not met. Planned expenditures are not made. insufficient information, few and poor project
proposals, inability to program foreign aid, opposition of the finance ministry, and severely
limited capacity to administer development-given for the failure of planning. Special attention is

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

paid to the tortuous release of funds and the effort to overcome basic political and administrative
factors through surface changes in the form of organization for planning.
Definition and Measurement of Poverty
The World Banks 2000 World Development Report defines poverty as an unacceptable
deprivation in human wellbeing that can comprise both physiological and social deprivation.
Physiological deprivation involves the non fulfillment of basic material or biological needs,
including inadequate nutrition, health, education, and shelter. A person can be considered poor if
he or she is unable to secure the goods and services to meet these basic material needs. The
concept of physiological deprivation is thus closely related to, but can extend beyond, low
monetary income and consumption levels. Social deprivation widens the concept of deprivation to
include risk, vulnerability, lack of autonomy, powerlessness, and lack of self-respect. Given that
different definitions of deprivation often go beyond physiological deprivation and sometimes
give greater weight to social deprivation, local populations (including poor communities) should be
engaged in the dialogue that leads to the most appropriate definition of poverty in a country.
George stated: The poverty to which in advancing civilization great masses of men are
condemned ... is a degrading and imbruting slavery, that cramps the higher nature, dulls the finer
feelings, and drives men by its pain to acts which the brutes would refuse.
Marshall stated: We scarcely realize how subtle, all-pervading and powerful may be the effect
of the work of man's body in dwarfing the growth of the man . . . the poor laborer may live and
die without even realizing what a joy there is in knowledge, or what delight in art; he may never
have conceived how glorious a thing it is to be able to think and to feel about things and with
many men. [Henry George, (1898) the Science of Political Economy, p. 125. 3. Henry George,
(1879) Progress and Poverty, pp. 298-99.]
Poverty in Nepal
Poverty in Nepal is a deeply entrenched and complex phenomenon. About 30.9 percent (World
Development Report 2008) of Nepalese live below the poverty line of US$12 per person/per
month. Despite some progress in poverty reduction in recent years and declining rates of urban
poverty, the problem remains widespread and most indicators suggest that it is on the rise.
About four fifths of the working population live in rural areas and depend on subsistence farming
for their livelihoods. In these areas household food security and poor nutrition are still major
concerns. Most households have little or no access to primary health care, education, clean
drinking water and sanitation services. Rural poor people are generally illiterate, have large
families, and are landless or have very small landholdings. Small, fragmented subsistence farming
is a characteristic of Nepalese agriculture, and the average landholding is only 0.8 hectares. Life
is a constant struggle for survival. The most vulnerable groups are the lowest social castes,
indigenous peoples and women.
Rural poor people in Nepal include:

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Destitute people, such as sick or disabled persons, abandoned children and displaced
persons
Extremely poor people, including illiterate or landless persons or those with very few
assets
Moderately poor people, such as those who have small farms but are often heavily
indebted
People who are nearly poor, including small farmers who are at risk of slipping deeper
into poverty as a
result of factors such as conflict, debt and land degradation.

Civil unrest in the highlands


Poverty, lack of economic growth, and increasing marginalization has led to political unrest and
violence in the highlands of Nepal. A Maoist rebellion that began in 1996 in the remote hill
districts of the Mid-Western region later intensified and spread across large parts of the country.
Many areas fell completely under rebel control. More than 14,000 Nepalese were killed in the
conflict and about 600,000 have been internally displaced or made homeless. In addition, more
than 2 million people are believed to have fled to India (Human right publication 2007). Fighting
has occurred largely in rural areas, and agriculture has been particularly affected. Many rural
areas have been devastated, remote regions have been kept in isolation, agricultural production
has severely declined and business investment has ground to a halt. Overall, the conflict has
wreaked havoc on the countrys economic performance. Following a ceasefire in April 2006, steps
have been taken to bring the decade-long conflict to an end, but the process is still in its very
early stages.
Why are Nepals rural people poor?
Land ownership in Nepal has traditionally been concentrated in the hands of a few. For most poor
rural families access to land is extremely limited. Almost 70 percent of households have holdings
of less than 1 ha and many of them depend on plots that are too small to meet their subsistence
requirements. Productivity levels remain low as a result of limited access to new farming
technologies, inputs and extension services.
Because of poor growth in the agricultural sector, living standards in rural areas are deteriorating
and poverty is increasing. The growing population has put huge pressure on cultivable land,
especially in the Terai region, which also supports many landless migrants from the hills.
Many factors contribute to chronic poverty in Nepals steep and mountainous areas. The rugged
terrain and harsh climate do not generate good crop yields. These areas are also physically
isolated, with poor communications and infrastructure and inadequate access to natural resources.
Increasing population pressure has led to unsustainable use of natural resources, including
overgrazing and deforestation. And erosion in the uplands causes flooding in the lowlands that
can be devastating to crop yields.

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Who are Nepals rural poor people?


Social discrimination plays a significant role in keeping the most disadvantaged people in rural
Nepal poor and marginalized. Excluded groups include smallholder farmers, landless laborers,
lower castes, indigenous peoples and women. Discrimination on the grounds of caste is officially
illegal in Nepal but is in fact widespread, especially in rural areas. Members of the lowest caste
(dalits, or untouchable) are the most disadvantaged group. Most people in the dalit caste work as
wage laborers for higher-caste farmers.
There is a wide gap between women and men when it comes to access to health, nutrition,
education and participation in decision-making. Infant mortality is much higher for girls, and
illiteracy is far more common among women than men. Many rural women live in severe poverty,
without any means of improving conditions for themselves and their families. Within households
women often have less to eat than men. Insufficient calorie intake can lead to chronic malnutrition
in the infants they feed.
The recent conflict caused the most productive members of households to leave the villages or to
take part in the fighting. As a result more and more women have been heading households alone
and taking on the burden of sustaining the rural economy. Women constitute more than 60 per
cent of the agricultural labor force but have little access to land, production technology and
training.
Poor families are often obliged to send their children to work rather than to school. In this way the
poverty cycle is perpetuated into the next generation. It is estimated that about one quarter of
the children in Nepal between four and five years old are engaged in some kind of family or
wage labor.
Where are Nepals rural poor people?
The highest concentration of poor rural people is found in the Mid-Western and Far-Western
regions. While the overall poverty rate for Nepal is 31 per cent, this figure increases to 45 per
cent in the Mid-Western region and 41 per cent in the Far-Western region (CBS). In these remote
hill and mountain zones the terrain is rugged, rainfall is low and the soil is poor and difficult to
farm. Agricultural holdings per household are the smallest in the country, and access to health,
education, roads, telephones, and electricity, water supply and sanitation services is very limited.
The conflict has exacerbated the extreme isolation of these regions. The Terai plains area has
good potential for food production but is increasingly overtaxed by the needs of a growing
population. The number of landless and marginalized poor people is rising in the region.
Inequality
High levels of inequality contribute to high levels of poverty in several ways. First, for any given
level of economic development or mean income, higher inequality implies higher poverty, since a
smaller share of resources is obtained by those at the bottom of the distribution of income or
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

consumption. Second, higher initial inequality may result in lower subsequent growth and,
therefore, in less poverty reduction. The negative impact of inequality on growth may result from
various factors. For example, access to credit and other resources may be concentrated in the
hands of privileged groups, thereby preventing the poor from investing. Third, higher levels of
inequality may reduce the benefits of growth for the poor because a higher initial inequality may
lower the share of the poors benefits from growth. At the extreme, if a single person has all the
resources, then whatever the rate of growth, poverty will never be reduced through growth.
We argue that, independent of inequalitys impact on poverty, inequality has a direct, negative
impact on social welfare. According to the theory of relative deprivation, individuals and
households do not assess their levels of welfare in terms of their absolute levels of consumption or
income only. Individuals also compare themselves with others. Therefore, for any given level of
income in a country, high inequality has a direct, negative effect on welfare. There are good
reasons to be interested in inequality and social welfare from the perspective of a comprehensive
evaluation of public policies and social programs that go beyond their impact on poverty.

Inequality in health: High rate of infant mortality, High impact health services, mortality,
morbidity
Inequality in education: Test results, male and female household heads, rural and urban
households, access to teachers, and quality of education.
Economic inequalities: Nepal Gini coefficient of 1996 was 0.366 consumption and 0.513
incomes, 24. 1% Population living below 1$ per day, and 68.5 % Population living below
2 $per day. 4% populations are sharing more than 80% of national income and output.
Inequality of power: top down approach for policy making, project selecting
Inequality trap for women: Fewer opportunities in health, education, economic welfare,
political power which also known gender inequality.
Inequality in the home: physical violence, sexual violence, tradition violence, household
decision.
Inequality of human capacities: Appointment in PEOs cronyism rather than competition.
Inequality of justices: Combating elite capture and discrimination.

Table: 1: Inequality Statistics of Nepal:


Total population (million), 2003:
Rural population (million), 2003
Population density (people per km2), 2003:
Number of rural poor (million) (approximate):
Rural population below the poverty line (%), 1995/96:
GNI per capita (USD), 2003:
Population living below $1 a day (%)1995/96:
Population living below $2 a day (%), 1995/96:
Population living below the national poverty line (%)1995/96:
Rural population below the poverty line (%), 1995/96:
GNI per capita (USD), 2003:
Population living below $1 a day (%)2003/04:
Population living below $2 a day (%), 2003/04:

24.7
21.5
2.2
9.6
44.0
240.0
37.7
82.5
42.0
44.0
240.0
24.1
68.5
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Population living below the national poverty line (%)1995/96:


Share of poorest 20% in national income or consumption (%):
Rural population below the poverty line (%), 2003/04:
Source: WDR

30.9
7.6
34.6

Figure 2: the Lorenz Curve of income inequality statistics of Nepal


100

90 80 -

% of income

70 Line of equality

60 50 40 -

(25.2)2003/04

30 -

(20.9)1995/96

20 10 0

10

20

30

40

50

60

70

80

+
90

+
100

% of income recipients

Unemployment
Unemployment is the state in which a person is without work, available to work, and is currently
seeking work. The rate is determined as the percentage of those in the labor force without jobs.
There are a variety of different types of unemployment, depending on the cause, and
disagreement on which is most severe. Different economic theories suggest different measures to
limit it and on its importance; Monetarism, for example, thinks that controlling inflation to facilitate
growth and investment is more important, and will lead to increased employment. There is
disagreement on how to measure unemployment. Different countries experience different levels of
unemployment; the Nepal currently experiences higher unemployment levels than the other
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

countries and it also changes over time throughout economic cycles. If the market for goods is a
buyers' market, Keynesian unemployment may ensue while a limiting production capacity is more
consistent with classical unemployment.
Surroundings of unemployment in Nepal

Frictional unemployment occurs when a worker moves from one job to another: imperfect
information in the labor market.
Classical unemployment: Classical or real-wage unemployment occurs when real wages
for a job are set above the market-clearing level. This is often ascribed to government
intervention, as with the minimum wage, Structural unemployment.
Structural unemployment: is caused by a mismatch between jobs offered by employers
and potential workers. This may pertain to geographical location, skills, and many other
factors.
If such a mismatch exists, frictional unemployment is likely to be more significant as well.
Seasonal unemployment: occurs when an occupation is not in demand at certain seasons.
Keynesian (Seasonal) unemployment: Cyclical or Keynesian unemployment, also known as
demand deficient unemployment, occurs when there is not enough aggregate demand for
the labor. This is caused by a business cycle recession and wages not falling to meet the
equilibrium rate.

Causes of unemployment

Keynesian view: Keynesian economics emphasizes unemployment resulting from


insufficient effective demand for goods and service in the economy.
Classical or neoclassical economics view: minimum wage laws, taxes, and other
regulations that may discourage the hiring of workers.
Structural unemployment problems: inefficiencies, inherent in labor markets.
Unemployment in a free market economy: that is the law of supply and demand is not
really applied to the price to be paid for employing people.
Government regulation: in under developing countries like Nepal unemployment is often
caused by burdensome

Costs of unemployment
Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay
mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction.
Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem,
leading to depression.
Dr. M. Harvey Brenner conducted a study in 1979 on the "Influence of the Social Environment on
Psychology." Brenner found that for every 10% increase in the number of unemployed there is a
1.2% in total mortality, a 1.7% increase in cardiovascular disease, 1.3% more cirrhosis cases,
1.7% more suicides, 0.4% more arrests, and 0.8% more assaults reported to the police.

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Another cost for the unemployed is that the combination of unemployment, lack of financial
resources, and social responsibilities may push unemployed workers to take jobs that do not fit
their skills or allow them to use their talents. Unemployment can cause underemployment.
Society: During a long period of unemployment, workers can lose their skills, causing a loss of
human capital. Being unemployed can also reduce the life expectancy of workers by about 7
years. High unemployment can encourage xenophobia and protectionism as workers fear that
foreigners are stealing their jobs. Rising unemployment rate concentrates the oligopsony power of
employers by increasing competition amongst workers for scarce employment opportunities.
Table 2: Unemployment rate of Nepal: 42% (2004 estimated
Year Unemployment rate
Rank
Percent Change
2003
47.00 %
9
2004
47.00 %
10
0.00 %
2005
47.00 %
183
0.00 %
2006
42.00 %
189
-10.64 %
2007
42.00 %
186
0.00 %
2008
42.00 %
184
0.00 %
Source: WDR

Date of Information
2001 estimated
2001 estimated
2001 estimated
2004 estimated
2004 estimated
2004 estimated

Dependent population (age of 0 to 14 and 60 above): Dependency ratio is the ratio of total
population in 0-14 and 60+ age groups to total population in 15-59 age group. The
percentage of economic active population is 52.8 and economic inactive population is 47.2
percentages.
Table 3: Distribution of population by broad age groups and dependency ratio, Nepal
((Percent)
00 - 14
15-59 years
60 years and
Tot
Dependency Ratio
years Male Female older
al Census
NLSS II
s
s
2001
Development
Region East
37.6
24.7
29.8
7.8
100 81.7
83.3
Central
39.9
24.8
27.8
7.4
100 79.7
89.9
West
39.2
21.7
30.0
9.1
100 90.9
93.2
Mid West
41.2
24.2
28.7
6.0
89.3
89.2
Far West
43.1
21.9
29.0
6.0
100 93.2
6.5
Ecological Zone
100
Mountains
39.9
23.6
27.9
8.7
89.8
94.4
Hills
38.4
23.5
29.4
8.7
100 84.7
89.1
Tarai
40.6
24.3
28.7
6.4
100 84.1
88.7
Urban/Rural
100
Urban
30.0
30.2
31.2
8.5
63.3
62.7
Rural
41.3
22.8
28.5
7.4
100 88.8
94.9
100
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Nepal
CBS, Nepal 2004

89.2

39.6

23.9

28.9

7.6

100

84.7

Normative and positive economics of poverty, inequality and unemployment


Normative economic statements express a subjective opinion and involve our value judgments
about how things should be. Government should do more to help eliminate poverty is a
normative economic statement. Each of these statements deals with what we think should be and
with making judgments about the rightness or wrongness of various aspects of the economy. With
normative economic statements, reference to the facts is conspicuously absent.

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Academic relation of poverty where subject, object and thesis (discourses) are mutually
constituted

OBJECT

SUBJECT

THESIS

ACADEMIC
T

C
S

Figure 3: Significant view of poverty as an alternative to the poverty sector approach


FOOD
Health
Housing
Energy
Clothing
Transport
Literacy
..

FERTILIZER
Water

CHEMICAL

Seeds

Organic

Pesticides

..

Machinery
..

..

National income and economic well- being


National income is reasonably accurate and extremely useful measure of domestic economic
performance. It is not, and was never intended to be, an index of societys overall well-being its
13 | P a g e

Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

total satisfaction. National income is merely a measure of the annual volume of goods and
services produced. Many things could make a country better off without necessary raising
National income, such as reduction of crime and violence, greater equality of opportunity,
improved racial harmony, better understanding between parents and children and reductions of
drug, sex and alcohol abuse, tax abuse.
Nevertheless it is widely held that there should be a strong positive correlation between real
National income and economic well-being; that is greater production should move society
towards the good life. Thus we must understand some of the shortcomings of National income
why it might understate or overstate real output, and why more output will not necessarily make
society better off.
Government can play promotional roles for economic development in Nepalese economy
through:
1. External and internal macroeconomic checks: Reset the trade and development policy,
proper utilize the foreign aid and foreign investment, harmonized with private sector
as a partner of development, correction of balance of payments, correct monetary
policy and fiscal policy, choose the reasonable development and planning theory, set
the priority and objectives of the planning.
2. Adjustment macroeconomic disequilibrium: Mobilize the unemployed labor force,
control rural urban migration, invest in human capital, improve health nutrition and
education for the poor, provide subsidy for deprive group, control the corruption,
develop the financial institution, reduce economic inequalities and redistribute of
national income and output, formulate bottom up approach for policy making, project
selection, more opportunities in health, education, economic welfare, political power
which also known gender inequality, control physical violence, sexual violence,
tradition violence, household decision, appoint in PEOs with a higher competition ,
provide equal of justices, stop combating elite capture and discrimination.
3. Stimulate needed social and economic changes rather than political shocks: The most
important is the political commitments, providing essential social services to all rural
people, decentralized rural planning, generating rural and urban capital formation,
diversify the rural economic activities.

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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

Figure 5: Effect of economic growth with political shock and stimulate.


Economic growth

40 Y
-

(25.2)2003/04

50 30 20 10 -

X1 +
t-2

+
t-1

t0

t+1

t+2

-10 -

+
t+3

t+4

t+5

t+n

Time Line

-20 -30 Y1

References
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.

20015

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