The forthcoming budget must focus on rural development as poverty has largely been a rural phenomenon.

By Lok Nath Bhusal

Although the country is undergoing a political transition, the forthcoming annual budget must focus on rural development as poverty has largely been a rural phenomenon. Deteriorating quality of life, presence of a gaudy elite coupled with alarming socio-economic disparities, erosion of manufacturing capacities, accelerating inflation, negative productivity, massive unemployment, tardy public service delivery, growing trade imbalance and unchecked corruption are the enormous challenges the government has to overcome right away. Out of the officially recorded 38 percent people below the national poverty line, the largest chunk resides in the rural areas of Nepal, resulting into an economically asymmetric society. As such investment would help explore business and economic activities and boost purchasing power of the people living under the poverty line in the rural areas, serious groundwork must be exercised in order to identify the major areas of intervention.

First, given the fact that 65 per cent of the population is engaged in subsistence agriculture, which contributes merely 40 per cent to the Gross Domestic Product (GDP), revitalization of this sector is extremely important to stimulate the rural economy. Unfortunately, agriculture sector has remained to be a disused area for the majority of the educated youth because of its stumpy rate of return and productivity. As this sector has many backward and forward linkages of far reaching consequences, the conventional wisdom – soft loans to farmers, cooperative mechanism, and subsidies – for its rapid development may not be sufficient to breaking the vicious circle of low yield, low income, low purchasing power and low living standards of the peasants.

Economic theory precisely suggests that in a developing economy like ours the areas of government intervention becomes progressively larger owing to the underdevelopment of market mechanism. However, the participation of private sector and civil society must be encouraged wherever possible through private sector-friendly policies to observe a sea change in our rural economy.
New initiatives such as comprehensive land reforms, creation of economic incentives through introducing appropriate tenancy system, and exploitation of both domestic and international markets are remarkably important components for rapid development of agriculture sector. For this, the government must allocate sufficient funds in the coming budget to create incentives that ensure full-scale utilization of the available land resources and its appropriate ownership, and thus revive the rural sector.

Secondly, the forthcoming budget must target social sector development, including education, health care, women, children, dalits, disabled, and other socially excluded people in the rural areas. In the education sector, investment should be made to increase enrollment rates and to reduce dropout rates at all levels of school and higher education. Funding research and development is equally important to bring about inclusiveness, quality, economy, efficiency and effectiveness in the education sector. In addition, to maintain competitiveness in the international marketplace, we ought to have qualified and professional manpower.

Health indicators such as infant, child and maternal mortality rates, average life expectancy can significantly be improved if the budget gives out sufficient money to bring significant achievements in the rural health sector. Indeed, in the past too, much has been spent both by the government and the donors in this sector, we still need to go a long way to make major improvements. After all, only the healthy citizens can contribute for a healthy economy through their increased productivity.

Furthermore, social inequality, which ultimately brings in income poverty, based on caste, gender, race, geographical area, and physical abilities must be wiped up through increased public spending for raising social awareness and specially targeted programs. Most importantly, it can be hoped that major social transformation is likely to take place given the fact that the recent proclamation made by the House of Representative regarding religion and the rights of women. Overall, public spending on social sector development must coincide with massive community mobilization at the grass roots level in order to create ownership in the development and reform process.

Thirdly, investment on rural infrastructure such as road, drinking water, electricity, telecommunication network must be prioritized in the forthcoming budget. Transportation facilities not only link the rural communities closer to the market, it also induces modern economic activities and stronger cohesion across various parts of the country and different communities. Moreover, it facilitates both internal and external tourism and trade by reducing transaction costs, reduces migration to the city areas, and reduces various hardships of the rural people. Likewise, adequate and potable drinking water supply has been one of the most important human rights, so government must ensure this to save its people from different types of water borne and communicable disease. As hydropower plays vital role in the development of agriculture and expansion of industries and transportation networks and therefore increases GDP, government must priorities small and medium scale hydro projects owing to its low income earning consumers. We can also earn foreign currency by exporting hydropower and save the same by substituting imported petroleum products.

Last but not the least, the state should make adequate investment to create employment opportunities in the rural sector in the coming budget. Since unemployment is the major determinant of poverty and socio-economic instability, the problem of poverty and disparity can be over come by maintaining equilibrium in job market. The government must recognize that one of the reasons for the emergence of Maoist insurgency was the deteriorating job market in rural areas. This made both the educated and uneducated youth disappointed, and this situation forced them to go for an armed revolt. Indeed, fulfilling the socio-economic needs of the people living in the rural areas should be the state’s principal priority; for our country labor intensive technology is more suitable than capital intensive ones. Employment generation is the product of investment and expansion of economic activities. Thus, it is no doubt that if the government invests sufficient amount of resources in the agriculture, social, and infrastructure sector, rural people will find more jobs and self-employment opportunities.

Finally, in the forthcoming budget, huge public investment in the rural sector in the areas of agriculture, social sector, infrastructure, and employment creation is extremely necessary to meet the growing expectations of the people under the Loktantric regime. Economic theory precisely suggests that in a developing economy like ours the areas of government intervention becomes progressively larger owing to the underdevelopment of market mechanism. However, the participation of private sector and civil society must be encouraged wherever possible through private sector-friendly policies to observe a sea change in our rural economy. To successfully manage the transition, amid widening fiscal and trade deficit, state must curtail royal expenses, reduce security spending, increase exports, speed up economic reforms, and mobilize external resources preferably grant and FDI to finance rural development and thus break the economic gloom.

(Currently working with the National Planning Commission Secretariat in Kathmandu, Bhusal holds Master’s Degree in International Development Studies from National Graduate Institute for Policy Studies, Tokyo and can be reached at [email protected])

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