•      Sun Jun 23 2024

Impact of political instability in economic sector

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Kathmandu: The Government of Nepal have a huge role in an economy from making policies to setting taxation and subsidies. If government remains unstable, it will badly affect the entire sector of country, including socio-economy. For a country like Nepal, the international communities wouldn’t be willing to invest in Nepal due to reasons like: unstable government, corruption, bureaucratic hurdles, inefficient implementation of existing procedures and requirements.

The Foreign Direct Investment (FDI) is very crucial to make the country moving forward in terms of growth, employment generation, maintaining balance of payment and keeping steady the foreign reserves.

FDI is more crucial to low and middle income countries because of low level of domestic employment, multinational companies –MNC investing in overseas to produce goods and services and setting up production plant will impact our capital inflow, employment, government revenue, improve infrastructure , new technology, high competition leading to decrease in price in goods and increase in trade.

Our country’s currency value is very less it is 1nepali rupees is equal to 0.0075 USD the impact of FDI will increase currency values and country’s GDP and resources will be allocated A lot of our resources are still not used, we have a very low label of technology , low employment opportunity and low production productivity.

Nepal faces challenges to attract international firms in current scenario but it’s not impossible as I mentioned about government’s crucial roles in an economy, to attract FDI government should implement investment friendly laws, flexible labor laws, giving less power to trade union, assurance of profits easily transferred to their home countries and security assurance. In past some firms faced issues with security and the information spread all over the globe which set a bad reputation so government should assure that in case of such scenarios government should be able to bear the loss.

According to Nepal’s annual budget for fiscal year government should implement expansionary policy it is to stimulate the economy and promote the economic growth, which will lead to more domestic firms come out. Our neighboring countries such as India and china are one of the fastest growing economies in globe which shows on their economy, they have sustainable government, investment friendly policies resulting everyone in globe willing to invest. Whereas our country is considered as slow growing economy and the root cause is unsustainability, one of the reasons for people to migrate in different countries is unemployment.

The Fourth Nepal Living Standards Survey 2022-23 report released by the National Statistics Office has revealed that as many as 20.27 percent of the population lived below the poverty line in 2023 compared to 25.16 percent in 2011.  Government implementing subsides to domestic firms would increase more employment rate and decrease poverty rate in country. More than 60% of employment in Nepal is covered by agriculture sector good employment opportunity in country leads to less migration and increase in living standard for people.

The government earns highest revenue from income tax but tax is not being used for transfer payment for people accordingly. Private firms’ motive to earn profit whereas government’s motive is welfare. People in ruler area go through major health crisis because they couldn’t afford for treatment because there is no health subsides from government, Educating every citizens is also key to country’s development but children in some areas still couldn’t afford to study the revenue’s collected by government is not being implemented on the right place which bring consequences like this. #Nepal

(Keisha Bhandari is a student of economics.)