CNI calls for proactive action to revive economy

Confederation of Nepalese Industries (CNI) President Rajesh Kumar Agrawal has said the country’s economy is passing through difficult times despite positive indicators on the external sector. “Our foreign currency reserves appear stable, and the country enjoys relative comfort in goods and services imports. Inflation remains controlled, and interest rates have shown a downward trend,” Agrawal said. “However, the country’s private sector is suffering. GDP growth for the previous year was a modest 3.87 percent, with production and construction sectors demonstrating negative growth trajectories. Most critically, industries are operating at a mere 30-40 percent of their potential capacity, signaling significant economic distress.”

Agrawal identified several key challenges driving this economic slowdown. “Declining imports and exports are exerting considerable pressure on government revenues. The policy measures implemented to control international inflation and manage foreign currency reserves have inadvertently contributed to a substantial reduction in overall economic demand,” he said. “We are currently experiencing a policy-induced economic slowdown. It is absolutely critical to bring the economy out of this situation.”

Agrawal demanded proactive government intervention to cure these ills. Commending the finance ministry for including private sector representatives in the High-level Economic Sector Reform Committee led by former finance secretary Rameshore Khanal, Agrawal said the collaborative approach is crucial for developing comprehensive economic revival strategies.

He urged the government for economic reforms to reinvigorate the economy. “The current policies focused on reducing must be fundamentally reimagined. The focus should shift towards stimulating demand, which is currently at critically low levels. This demand contraction is creating a cascading effect, negatively impacting industries, creating liquidity challenges for financial institutions, and contributing to increased non-performing assets,” the CNI President added. 

Agrawal also criticized the management of institutional funds. “Funds of entities like Employees Provident Fund (EPF), Citizen Investment Trust (CIT) and Social Security Funds are currently parked in bank deposits which deliver low returns. These funds should be utilized to develop critical infrastructure projects,” Agrawal said, urging the government to increase its capital expenses significantly.

Agrawal called for a multi-dimensional approach involving short-term, medium-term, and long-term policy interventions to revitalize Nepali economy. “There should be an ecosystem that supports business growth, encourages investment and stimulates economic activity,” he added. 

He also called for strategic, forward-thinking economic policies that can revive, reinvigorate and propel Nepal’s economic landscape towards sustainable growth.