book1

conspicuously discouraged investment in land for its improvement from
either side - absentee landlord and tenants. The investment of both the
government and private sector is minimal against what is urgently required
to sustain agriculture development.
In addi� on, a variety of subsidies have been provided to purchase
chemical and organic fer� lizer and seeds of high yielding varie� es in order to
boost produc� on and produc� vity of agriculture sector. The government has
the provision for 50 percent subsidy on the capital expenditure to the small
farmer coopera� ve ins� tu� ons in the purchase of machinery and equipment
for processing cardamom, tea, coff ee, ginger, nut and honey. Subsidies are
given to farmers on electricity tariff and credit to the coopera� ves and private
sector. Subsidies will also be provided to establish laboratory, pes� cide, seed
produc� on and packing, which are also crucial to enhance compe� � veness of
farmers and compete with Indian products (Budget Speech, 2011). Therefore,
subsidy is sensi� ve as well as vital instrument to increase produc� on and
produc� vity of agriculture and improve effi ciency and compe� � veness of
farmers. Thus, the issue of taxing agriculture sector requires not only greatly
moving towards moderniza� on and commercializa� on through promo� ng
agro-enterprise and agri-business but also developing na� onal consensus
among major poli� cal par� es to decide what kind of land reforms system
would be appropriate for agriculture development in Nepal.
The produc� vity index especially of food crops evidently remained
constant for over a long period (Economic Survey, July 2011) and
consequently, Nepal imported 25,000 MT rice from India for mee� ng urgent
requirements of the people living in food defi cit areas especially western hills
and mountains during FY 2009/10. The produc� vity index of manufacturing
goods increased at snail's pace. Also there is apprehension that infl ow of
FDI as well as indigenous investments are o� en disrupted primarily due to
extremely inadequate infrastructure with unprecedented long hours of loadshedding,
poor industrial rela� ons with rigid labor laws and tax regula� ons,
frequent bandh and strikes, and scarce resources to funding mega-projects
resul� ng in poor contribu� on of manufacturing sector confi ned to less than
6 percent of GDP. Most of the industries are running far below the capacity,
and many units opera� ng in industrial corridors especially in terai remained
virtually closed for more than 200 days in a year. Although overall impacts
of global economic meltdown on Nepalese economy have been moderately
less severe in recent � mes, lack of peace and poli� cal stability jeopardized
the possibility for developing physical infrastructure especially road and
hydropower, tourism, biodiversity, and promo� ng foreign employment and
remi� ances in Nepal.
Nepal's inability to match growing demand for semi-skilled manpower in
the interna� onal labor market due to poor quality of human resources has
created adverse impact on foreign employment and remi� ances. Every year,
around 400,000 labor force is added in the labor market of Nepal and of
which, 300,000 are absorbed in the interna� onal labor market, and there is
s� ll scarcity of job for remaining 100,000 labor forces at home. In compa� ble
28
Changing paradigms of aid eff ec� veness in Nepal