The world is beset by unprecedented challenges brought on by the Covid-19 pandemic, and Nepal is no exception. Most sectors of the economy are functioning at alarmingly low capacities.
Inflation, price levels, economic growth, national income, GDP, and employment are allotted almost equal weights in macroeconomic calculations in normal times. Clearly, the first priority now needs to be employment generation in all sectors so as to ensure all households meet their basic needs. But doing so may compromise economic growth and contribute to inflation. Greater weight for employment generation might also result in less GDP and less per capita income.
In this time, the previous levels of profits, wages, and dividends cannot be expected. Thus all actors in the economy, be they households, businesses, banks and financial institutions, and other stakeholders should be prepared to sacrifice to cope with this unexpected situation.
Innovative and practical solutions will be needed to save people from disease and starvation. The moment the Covid-19 pandemic starts declining, people’s lives will start going back to normal.
Nepali agriculture is agrarian. Apart from being a dominant sector of the economy, it is a way of life for most Nepalis. Paradoxically, in recent years, this sector has gotten less attention from stakeholders primarily due to emigration of huge number of youths in search of jobs abroad. The old parents are too weak to carry on cultivation at home, resulting in barren lands and neglected animals. However, old parents and weak members of rural community have been supported by remittances sent by their family members, relatives and friends from abroad. Due to the pandemic, foreign jobs have been lost and less is coming in terms of remittances.
Against this backdrop, Nepali planners and policymakers ought to reorient their vision of development, and design programs and projects accordingly. In general, the tendency among development planners is to gradually shift economic structure from primary to secondary to tertiary sector. The main reason offered in favor of this structure is productivity gains. But the current Covid-affected world needs a reversal. On the whole, this change implies a reduction in total production. (A sacrifice by all stakeholders.)
There is a trade-off between total production sacrifice and increased employment. For humanitarian reasons, Nepal needs to opt for the second, that also in favor of employment for unskilled labor. Basic human needs like food, clothing, shelter and healthcare should be immediately provided to poor and all those returning from abroad. This implies an assurance of minimum income to all so as to sustain their life during this pandemic. For this, the first priority should be agriculture and arranging for two square meals a day for these workers.
High production and productivity growth require deployment of new technologies and instruments. At present, due to the paucity of financial resources this proposition seems less plausible in Nepal. Likewise, inflow of foreign assistance, both bilateral and multilateral, at concessional terms, cannot be expected as most countries are now focusing on reviving their own economies.
This situation warrants vigilance in adopting a prudent use of resources at our disposal. While designing and implementing relief programs and projects to the workers cited above in terms of employment and income, we should look for optimum economic benefits. This means we should focus on retaining our youths, including those who have come back from abroad. We are cognizant of their contribution to our economy over the years in terms of remittances.
But time has come to change their contribution and directly involve them in nation-building, paving the way for sustainable development and rapid socio-economic transformation. The cherished goal of employment generation could succeed with a coordinated approach of government agencies.
The author is former Chief Economic Advisor of Nepal Rastra Bank