Hari Bansh Jha’s Article Published in South Asia Analysis Group

ICCR Fellow, IDSA, Dr Hari Bansh Jha’s article, titled ‘Nepal’s Growth Strategy for Catching up with India and China’ was published in ‘South Asia Analysis Group’ on March 20, 2012.

Abstract

Nepal lies on the southern slopes of the Himalayas between two of the world’s fastest growing economies – India in the south and China in the north. India has been maintaining a sustainable economic growth rate of 9 percent, whereas China’s economic growth rate is still higher. With a growth rate of merely 3.4 percent, Nepal so far missed the chance to align its own development with the economic dynamic of its giant neighbours. This is all the more surprising because Nepal offers many possibilities for closer economic integration with the huge Indian and Chinese markets on its footstep, such as a big potential to produce hydropower, favourable laws regarding investment including FDI, diverse ecological belts suitable for different agricultural activities, an attractive tourism sector, and not least its very location as a prospective transit economy between India and China. But up to now, Nepal has been plagued by weak governance, inadequate infrastructure, power shortage, labour militancy, an expanding trade deficit, and a poor tourism policy. The core problem of Nepal’s development perspective is an institutional bottleneck. With a politically weak government and a politically divided society, the speed of economic development will remain below its potential. To overcome this bottleneck and to initiate a catching up process with India and China, a politically committed government should encourage private trade and capital flows especially with India and China, and otherwise focus on macroeconomic stability and the provision of public goods, such as the development of infrastructural facilities and higher investment in health and education services.

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