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ABSTRACT Nepal initiated a development policy and plans to both modernise and develop its predominantly agricultural economy only in the early 1950s. In the last four decades, the country has implemented nine five-year plans and invested billions of rupees to develop its economy. This article examines the poor performance of past development efforts in the light of a myriad of challenges, local and global, economic and political, structural and institutional. It concludes that the economic reforms which have been introduced vigorously since the restoration of democracy in 1990 will not yield the desired results unless they effectively and positively contribute to improving the agricultural sector, lead to higher productivity and growth, generate increased mobilisation of domestic resources, alleviate poverty, and bring about greater social equity.
Economic development, whichever way it is defined, should have one fundamental goal: an improvement in the general welfare of the people. Although attaining higher economic growth is one of the important elements of economic development, it will not be sustained if it is not accompanied by a reduction in inequality and an alleviation of general poverty. Economic development also will not be dynamic and sustainable if the improvement in the general welfare of the people does not lead to social change (a change in attitudes and beliefs). Economic development thus becomes a multidimensional and complex process embracing not only economic, but also social, political and institutional factors.
With a per capita income of US$200 in 1996, Nepal is one of the less-developed countries. Nepal also is ranked by the United Nations' Human Development Report as one of the countries with the lowest human development index, and is beset with problems of massive inequality, both between population and regions. World Bank estimates show that over 40% of the population fall below poverty income levels. There are both natural and socio-economic factors responsible for the poor state of the economy: the former include its poor resource endowments and landlocked and mountainous geography; while the latter includes a subsistence agricultural base, underdeveloped socio-economic infrastructures, limited size of the domestic market, and lack of adequate capital and technical know-how. Its history is also a factor in the underdevelopment of Nepal's economy.
Compared with other countries which have a long history of developing their...