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alance of payments situa� on is found to be unprecedentedly nega� ve
during last ten months of FY 2010/11. The exis� ng Nepal-India Trade Treaty
is not in favor of increasing exports to India due to imposi� on of unfavorable
condi� ons, which include value added provision for local raw materials and
labor, quan� ta� ve restric� ons and sensi� ve and nega� ve list. This requires
moving towards “zero tariff regime” separately with India and China to
promote Nepal’s exports to neighboring markets with a popula� on of 2.5
billion. Although this arrangement would lead to a loss of revenue equivalent
to approximately Rs. 25 billion from customs du� es at the ini� al stage, reserve
of Indian currency would tremendously increase through export promo� on
and remi� ances, which would be instrumental to appreciate Nepali currency
and determine the exchange rate at par with India currency in the long run.
This is a challenging proposi� on and, therefore, it is necessary
to magnifi cently strengthen Nepal’s economy through improving
compe� � veness in viable areas of economy to make a quantum leap forward
in the economic front. The grim reality is that Nepal’s economic development
would remain awkward and backhanded unless exchange rate between
Nepal and India is determined at par through employing prudent economic
policies to improve terms of trade with India in favor of Nepal. The average
household economy of hills and mountains is rela� vely poor and extremely
fragile in comparison to the households in terai with be� er produc� vity,
infrastructure, industrial-base and easy access to India. Therefore, the issue
of improving subsistence economy of hills and mountains is also a crucial
agenda to deal with the problem of regional development and inclusive
growth that requires immediate a� en� on of the State.
The report published by ADB empha� cally illustrates that "investment
is not a constraint to growth in Nepal, but lack of visionary and determined
leadership with strong poli� cal commitment to fulfi ll aspira� ons of the
common people" is detrimental to economic progress and prosperity in
Nepal" (ADB, 2009). Although investment/GDP ra� o is as high as 30 percent
(Economic Survey, July 2011), economic growth rate evidently remained
dormant. Nepal, in recent � mes, increasingly lost her compara� ve advantage
and compe� � ve edges for variety of reasons over specifi c and conven� onal
exportable products noted above at the regional and interna� onal markets,
and new high value crops suitable for viable exports have not yet been fully
iden� fi ed except in the case of Yarshagumba.
The issue of moderniza� on and commercializa� on of agriculture with
implementa� on of scien� fi c land reforms program to increase produc� on
and produc� vity of food and cash crops have remained outside the
jurisdic� on of na� onal priority. Although government emphasized on the
commercializa� on of agriculture, major poli� cal par� es do not favor large or
estate farming but fragmenta� on of holdings by lowering down prevailing
level of land ceiling through implementa� on of what they call it scien� fi c
land reforms program. Under these circumstances, it would be virtually
impossible to a� ain the objec� ve of Green Revolu� on through mechaniza� on
of agriculture in small holdings. The exis� ng dual ownership of land has
Changing paradigms of aid eff ec� veness in Nepal 27