Dibyeswar Prasad Shrestha

NEPAL will be experiencing two challenges perhaps for the first time in history resulting from COVID-19 pandemic. The first is that a large number of youths will begin to return home once the restrictions are lifte. This does not mean that there will be no effect in other sectors of the economy like trade, tourism, industries etc. According to the Economic Survey 2018/19, about 4.4 million youths are currently working in different countries. It is estimated that about 500 thousand people annually enter the labour market in Nepal and due to low absorptive capacity, majority of the labour force is compelled to go abroad for employment. It would be too early to estimate the number of youth workers who will return to Nepal. However, the number is very likely to be significant exceeding more than a million or even more. The provision of employment to these youths will be certainly a big challenge for Nepal.
The second challenge is the significant decline in the flow of remittance in the country. The contribution of remittance to GDP is 25.1 per cent and remittance plays a crucial role in the country’s economy. Naturally, decline in remittance flow will directly affect the country’s economy. According to the World Bank there will be about 20 per cent decline in remittance globally in 2020. The South Asian countries enjoyed 6.1 per cent increment in remittance in 2019 but it will shrink to 22 per cent in 2020. The forecasts of Nepal Rashtra Bank and the World Bank indicate a decline of remittance by 10 per cent and 14 per cent respectively owing to coronavirus pandemic.
Nepal received Rs. 879 billion from remittance last year. Of this, about 50 per cent of remittance was received only from Gulf countries. It is expected to reach Rs. 900 billion in the current fiscal year. However, according to CBS the country will receive only Rs.716 billion remittances this year compared to Rs. 879 billion received last year. The contribution of remittance to GDP will also reduce to 19.01 per cent. The decline in the flow of remittance affects both micro and macro economies of Nepal. At the macro level, it affects foreign exchange, import, revenue, poverty situation etc. while at the micro level or households level, it directly affects day to day lives of 56 per cent of the households who receive remittance.
Remittance constitutes about 31per cent of family income and as high as 79 per cent of remittance money is spent on consumption, followed by repayment of loans, household properties, education and capital formation, according to Nepal Living Standard Survey 2010/11.
The most disappointing part of the whole story of remittance is that as high as 74.5 per cent of the migrant workers belong to unskilled workers followed by semi-skilled workers accounting for 24.0%. The skilled workers constitute only 1.5 per cent, according to Economic Survey,2018/19.
Agriculture is the most viable and potential area where this incoming labour force could be productively utilised if they are adequately managed to augment agriculture production. Agriculture is still one of the most important sectors of the Nepali economy. For instance, more than 60 per cent of the country’s total population is dependent on agriculture and agriculture contributes 27 per cent to country’s GDP. The approach paper of the country’s Fifteenth Plan also considers agriculture sector as the main basis for economic prosperity. It is encouraging that the country has already achieved self-sufficiency in eggs and moving towards self-sufficiency in milk and meat. However, despite significant proportion of the labour engaged in agriculture and largest cultivated area devoted to cereal crops, the country has been experiencing continuous negative trade balance in cereal crop in recent years.
Majority of farmers in Nepal are still practicing subsistence agriculture and the proportion of the families holding less than 0.5 hectares of land is more than 50 per cent. In order to increase agricultural production there is a need to encourage and promote commercialisation and mechanisation of present agriculture system to reap higher benefits. This is expected to reduce the cost and help make agriculture products competitive in the market. For this, the required inputs must be made available on time along with good irrigation facilities. The government should facilitate the marketing of products besides ending the existence of ‘bichaulia’ or intermediaries who enjoy the lion’s share of profits between farmers and consumers.
There is a need of insurance policies covering agriculture, horticulture and livestock products and the life of the farmers. The meagre 0.4 per cent of GDP currently devoted to agriculture research must be increased as well. There is no dearth of agriculture policies, strategies, plans and programmes in Nepal. There are Agriculture Development Strategy (2015-35), Prime Minister Agriculture Modernisation Programme etc. But most of them have been formulated for a normal situation. They may require revisit and rethinking now to suit the changed context brought about by coronavirus COVID-19 pandemic.
The attainment of self-sufficiency in agriculture will save billions of rupees annually. Once the goal is attained, the next step should be to aim for export by further augmenting and diversifying agriculture products as per the international market. The export of agriculture products will bring foreign currencies and this is expected to compensate the loss in remittance in the long run. This will generate employment opportunities which will help reduce unemployment and poverty.
Cottage and small scale industries based on locally available raw materials is another important area where these youths could get engaged productively. For this, the government needs to facilitate them by directing banks and financial institutions to provide concessional loan with nominal interest rate without collateral. Investment in agriculture, industries and other productive sectors could be significantly mobilised from NRN and local people if the existing rules and regulations regarding investment in Nepal is relaxed and simplified.
The development projects in the country suffer from the shortage of labour and these youth workers could be absorbed in these projects as they have skills and experience in construction works. The incoming youth manpower will not be a liability to the nation but could be an important asset to transform the economy and bring prosperity and happiness. Let us hope that the upcoming budget incorporates necessary provisions in this regard.

(The author is a former senior economist at the Department of Urban Development and Construction.)