Agriculture and Nepalese Economy: Dependent or commercial ?

Nepal is considered as the agricultural economy comprising 27 percent of total $30.64 billion (in 2019) of GDP. Out of 30 million people, around 65 percent are supposed to be engaged in agricultural activities. Composition of GDP has gone significant changes around the world, thanks to the massive growth of the service sector, and Nepal is no exception. The period up to 1990 used to be the golden age of agriculture with the contribution of 48.8 percent on national GDP and two third on total export. As per the data of Countryeconomy.com 2018, Nepal is 102th economy of the world in terms of nominal GDP. In terms of dependency on agriculture Nepal is in 15th position only behind the 14 poor African nations. Agricultural production accounts for 14.60 percent of GDP of India, that of Bangladesh and Bhutan are 13.07 and 15.89 respectively, where's the global average of the same remains 10.62 percent in 2018. 

Subsistence farming practices remain the main reason behind poor productivity of Nepalese farmers as only 25 percent of the farmers are somehow adopting commercial farming. Despite the tremendous innovation and discoveries around the world Nepalese agriculture is still labor intensive. Agricultural country Nepal is in 153rd position on crop production index and holds 79th position out of 113 countries in terms of food security. Nepal gradually became the net food importer after 1990 and the import bill of agricultural goods crossed Rs 200 billion marks in the fiscal year 2016/17 increasing five fold in the last 10 years. The import bill of vegetables and fruits was more than Rs. 38 billion in 2019. Nepal recorded the second highest export of $966 million in 2019 of which processed palm oil solely contributed $197 million. India has suspended the import of palm oil from Nepal and Bangladesh as the product originally comes from Malaysia and Indonesia. 

India is the largest trade partner of Nepal accounting more than two third on merchandise trade and one third on trade in services. Export market of Nepal has remained fairly unstable as India itself is in the process of agricultural transformation. Only limited agricultural products get access to Indian market for third country export after rebranding. Nepalese farmers are losing a huge chunk of revenue in the absence of branding and labelling. Getting access to Indian market has become harder year after year as India has converted its status from net food importer to large exporter in the last 50 years. India has expected to double their agricultural production by 2022 which in 2019 stood $ 265.51 billion. Concessional loans, export incentives, pension to farmers, mentorship programs,  irrigation facilities, subsidized seeds and fertilizers have boosted the morale of Indian farmers. The products get a fair price, even the government has promised to buy excess goods at a price certainly higher than that in the market. As a result, it has become the net exporter of agricultural goods. 

In the aftermath of the global crisis caused by Covid 19, the Government of Nepal estimated that more than two million people lost their jobs locally as well as in the international market. Statistics show 500,000 people enter into the job market every year where the rate of new job creation remains 50,000. As per the budget of 2020/21 the government is looking after agriculture for more job creation. It has raised the question in the mind of experts whether Nepalese agriculture is in need of more people or commercialization as ⅔ rd people are already engaged and Nepal ranks 13th in terms of people dependent on agriculture even higher than Bhutan. People engaged in agriculture remained 42.38 percent in India, 38.58 and 55.31 percent Bangladesh and Bhutan respectively. In India people engaged in agriculture has now declined to 39 percent from 70 percent in 1990. The case of developed countries is incomparable as 1.3 percent of US  labor forces are engaged in agriculture contributing $1.053 trillion (in 2016) on GDP, more than the total GDP of Indonesia, the 16th largest economy of the world. In the USA one farmer on an average produces food sufficient to 96 people.

The Government of Nepal has promised to bring revolution in the field of agriculture but the allocated budget remains Rs. 41.4 billion for the current fiscal. Poor capital expenditure exists as the age long issue of Nepal due to the unscientific programs and policies. The efforts of Nepalese government for the development of agriculture remains far from satisfactory. Commercial banks are required to lend at least 15 percent of their loans in agriculture but the loans are flowing into the unproductive sector. In the absence of motivation to farmers they are not in a position to take advantage of subsidized loans at 5 percent interest rate. Banks are hesitant to provide loans to some risk taking farmers in the absence of ultimate security from the government once the business fails. Crop insurance has started in limited districts but the scope is very limited. Every year farmers face the shortage of fertilizer and seeds. 

In the absence of a proper irrigation facility more than two percent economic growth of Nepal depends solely on weather. Access to market remains an everlasting issue for Nepalse farmers. Middlemen are dominating the market and the farmers are not in a position to compete against the subsidized imported goods. Despite the higher price in the retail market, original farmers get very low prices, even not sufficient to cover their cost of production. Nepalese farmers are yet to adopt recent discoveries specially from Israel, reasons could be many. FDI in the field of primary agriculture is restricted in Nepal and the minimum amount of FDI in either field shall be 50 million. The recent commercialization and modernization are largely from the few returnee migrants laborers. 

In a free market economy government is the facilitator with constructive plans, policies and regulatory measures. Being a least developed country, Nepal has added advantages on imposing import restrictions and providing subsidies as per WTO. Subsidies should not be taken as the long term cost as the developed countries have already removed it except protection against the loss from natural disasters. Agriculture should be taken into the consideration of long term strategies and the goals shall be sustainable and commercial agriculture. The productivity and living standards of the farmers can be improved with the adoption of advanced technologies and different inventions. Regarding the employment creation, agriculture should be taken as a short term solution with industrial development as the long term strategy, as dependency on agriculture is excessively high. Thus, sustainable and coordinated efforts are necessary to make agriculture as the real backbone of Nepalese economy.