Assignment on

Policy Review of Rural Urban Linkage of Nepal

Submitted to:

Ratna Rajyalaxmi Campus

Pradarshanimarga, Kathmandu

Tribhuwan University
Faculty of Humanities and Social Sciences
Department of Rural Development

Submitted by:
Suman Shrestha
Master in Rural Development (2nd Semester)
(Roll No.: 43)

Poush, 2080
Nepal, nestled in the Himalayas, is undergoing significant economic, social, and political
transformations. Traditionally agrarian, with the majority residing in rural areas, the nation has
seen agriculture play a pivotal role in its economy. Despite this, rapid urban growth, particularly
in Kathmandu, fueled by migration and economic activities, has emerged over time.

Known for its cultural diversity, Nepal boasts a rich tapestry of ethnicities, languages, and
traditions. In rural regions, these cultural practices are deeply ingrained, reflecting the country's
historical heritage. On the political front, Nepal has transitioned from a monarchy to a federal
democratic republic, a shift not without governance, political stability, and policy
implementation challenges.

Presently, Nepal grapples with a range of challenges and opportunities. Urban growth exerts
pressure on infrastructure, housing, and services, emphasizing the need for balanced
development between rural and urban areas. Recognizing the limitations of an agrarian focus,
there is a push for economic diversification, emphasizing the development of industries and
services.

As Nepal actively formulates and reviews policies concerning rural-urban linkages, it seeks a
delicate balance between urban development and the preservation of rural traditions. Key
considerations include enhancing connectivity, improving infrastructure, and addressing socio-
economic disparities. It is advisable to verify the latest information for accuracy and relevance.

In this context, we delve into the outcomes and limitations of the 14th National Plan (FY
2016/17 to 2018/19) and subsequently review the objectives and targets set forth in the 15th
National Plan (FY 2019/20 to 2023/24).

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14th National plan (FY 2016/17 to 2018/19)
The 14th National Plan, covering the fiscal years 2016/17 to 2018/19, was a pivotal phase for
Nepal following the enactment of the constitution. Crafted with the vision of cultivating an
independent, advanced, and socialism-oriented national economy, the plan set its sights on
achieving self-sufficiency in vital sectors, including agriculture, medicine, and energy.
A. Summarizing the 14th Plan:

B. Macroeconomic Sectors Summary:

Savings and Investment
 Gross Fixed Capital Formation (GFCF) increased from 28% of GDP in 2016/17 to 36.9%
in 2018/19.
 Private sector GFCF increased to 29% of GDP in 2018/19, driven by investments in
construction, hotels, hydroelectricity, and civil aviation.
 Public sector GFCF remained limited to 8% of GDP.
 Gross domestic savings and gross national savings reached 20.5% and 52.4% of GDP,
respectively, exceeding the targets.
Government Finance
 Government expenditure increased from 26.3% to 31.6% of GDP from 2015/16 to
2018/19.
 Current expenditure grew more than capital expenditure due to fiscal transfers, social
security, salary, and wages.
 Actual expenditure as a percentage of allocated amounts remained low.
 Revenue growth was 24.8% of GDP in 2018/19, aided by policies and institutional
reforms.
 Foreign aid increased but faced challenges, reaching NRs. 150.2 billion in 2018/19.
 Total government debt stood at NRs. 1047.1 billion, 30% of GDP, with internal and
external components.
Monetary Sector
 Average annual inflation was lower than the target at 4.4%.
 Broad money supply increased by 16.4% annually during the plan period.
 Net foreign assets reduced, and currency reserve growth slowed in the final year.
Financial Sector
 Private sector lending increased by 19.4%, slightly below the targeted 20%.

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  The total number of bank and financial institution branches reached 8,686, serving an
average of 3,363 people per branch.
Capital Market
 Stock market capitalization was NRs. 1567 billion in 2018/19.
 NEPSE index declined, influenced by various factors including rights shares, debentures,
bonus shares, and bank interest rates.
 The number of listed companies reached 218.
Foreign Trade
 Despite efforts to reduce the trade deficit, it increased continuously.
 Import growth exceeded export growth in the plan period.
 Trade deficit reached 38.1% of GDP in 2018/19.
 Foreign exchange reserves supported fewer months of imports over the years.
Cooperatives
 The number of cooperative institutions reached 34,763, with a share capital of NRs. 77
billion in 2018/19.
 Cooperative savings and loan investments were 346 billion and 333 billion rupees,
respectively.
 Progress in employment generation, women's participation, and cooperative farming was
limited.
C. Thematic Sectors Summary:
1. Economic Sector
Agriculture, Food Security, and Irrigation
 Targeted growth rates for agriculture were set for each fiscal year.
 Actual growth rates varied, with achievements and shortfalls.
 Self-reliance in vegetables achieved, but not in fruits.
 Challenges in irrigation progress due to geographical complexity, natural disasters, etc.
 Progress in freeing bonded laborers but challenges in grants distribution.
Forest Management
 Forest area coverage is 44.74%, with 40.36% dense forest.
 Challenges in fulfilling internal demand and contributing to employment.
Industry

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  Manufacturing industry contributes 5.6% to GDP in FY 2018/19.
 Increased number of industries and investments due to improved electricity supply.
Supply
 Transportation of food grains exceeded the target.
 Challenges in achieving storage targets in the national food security store.
Tourism
 Tourist arrivals increased by 71% in FY 2018/19.
 Factors include political stability, earthquake reconstruction, and improved infrastructure.
2. Social Sector
Education
 Progress in net enrollment, retention, dropout rates, and gender parity.
 Net enrollment rates at basic and secondary levels reached 93% and 46%, respectively.
Health
 Mixed progress in reducing infant, child, and maternal mortality rates.
 Challenges in achieving targeted rates.
Drinking Water
 Basic drinking water reached 89% of the population.
 99% of families benefited from basic sanitation facilities.
Youth
 Youth skills and leadership development training reached 1,415 youths.
 17,000 youths became self-employed in FY 2018/19.
Sports
 Construction of cricket grounds and covered halls.
 Training for 15,000 players annually.
C. Infrastructure Sector
Energy
 Electricity generation capacity underachieved, but progress in transmission and access.
 Challenges in reconstruction, land acquisition, and staff transfers affecting targets.
Roads

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  Strategic road network length reached 13,448 km.
 Achievements in construction but challenges in major programs and road developments.
Railways
 42 km of tracks opened, and project reports prepared for Mechi–Mahakali railway.
 Challenges in experience, resources, legal issues, and coordination.
Information and Communication
 Achievements in telephone, mobile, internet, radio, and television access.
 Initiatives for broadband internet service.
Housing and Urban Development
 Construction of housing units and government buildings completed but fell short of
targets.
 Challenges in achieving goals related to public housing, smart cities, and model
settlements.
Science and Technology
 23% of students pursuing technical subjects in higher education.
 Employments generated, DNA databases prepared, and study centers established.
Reconstruction
 More than half of the government, school, and health institution buildings reconstructed.
 Challenges in archaeological heritage and security force buildings construction.
 95% of earthquake-affected households signed grant agreements for house construction.
D. Crosscutting Sectors Summary:
Gender Equality and Inclusion
 Policies and programs to eliminate gender-based violence.
 Implementation of the Code of Conduct for Sexual Harassment.
 Allocation ratio of gender-responsive budget increased in FY 2017/18 and 2018/19.
 Emphasis on addressing security and welfare issues for women, children, disabled, and
senior citizens.
Labor and Employment
 Labor force participation reached 38.5%.
 Decrease in people going for foreign employment.
 Remittance income increased in FY 2018/19.

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  Emphasis on generating employment within the country.
Social Security
 17% of the population affiliated with the social security program.
 Contribution-Based Social Security Act and Prime Minister’s Employment Program
implemented.
 Increased participation of private sector employers in the social security fund.
Disaster Management
 Collection of data on earthquake damage in 31 districts.
 Mason training provided to over 40 thousand people.
 Formulation of Disaster Risk Reduction and Management Act and Post Disaster
Recovery Framework.
Local Development
 Improved service delivery at the local level after local elections.
 Accelerated development activities and infrastructure construction.
 Need for enhanced organizational structure, manpower selection, fund transfer,
monitoring, and evaluation.
Peace and Security
 Approval and implementation of the National Security Policy.
 Monitoring of urban transportation and criminal incidents through CCTV cameras.
 Identity card distribution and online registration of personal events.
Good Governance
 Formulation and implementation of Civil and Criminal Codes.
 Challenges in achieving goals related to performance agreement, civil servants' trade
union code, and management audit.
 Adoption of information technology in the judiciary remains a challenge.
Fiscal Good Governance
 Implementation of various reform programs.
 Settlement of arrears, but challenges in auditing and arrears accumulation.
 Need for effective implementation of Financial Management Information System and
Treasury Single Account.
Sustainable Development Goals (SDGs) Implementation

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  Internalization of SDGs into planning and budgeting processes.
 Prioritization of projects aligned with SDGs.
 Needs Assessment, Costing, and Financing Strategy estimated financial resources
required for SDGs.
 Policy, legal, and institutional architecture created for effective SDGs implementation.
 Monitoring and evaluation system developed, involving parliamentary committees and
strategic partnerships.
Conclusion:
Despite challenges, the Fourteenth Plan contributed to economic stability, social development,
and progress towards key indicators. Some targets were achieved, while others showed progress
but needed qualitative improvement.

15th National plan (FY 2019/20 to 2023/24)

The National Planning Commission has recently released the 15th five-year plan, carefully
considering the impact of the COVID-19 pandemic on government priorities and the economy.
This plan serves as the initial phase of a comprehensive 25-year long-term economic vision. The
overarching goal is to elevate Nepal to the status of a high-income country with a per capita
income reaching USD 12,100 by FY2044. Under the thematic focus of 'generating prosperity and
happiness,' the plan is designed to establish a robust foundation for economic growth through the
development of essential economic, social, and physical infrastructures.
Long-Term Economic Vision (FY2020 – FY2044):
 Objective: Position Nepal as a high-income country with a per capita income of USD
12,100 by FY2044.
 Theme: Generating prosperity and happiness through economic, social, and physical
infrastructures.
 Graduation Goals: Move from LDC to a developing country by 2022, reaching middle-
income status by FY 2030.
15th Five-Year Plan Targets (FY2020 – FY2024):
 Economic Growth: Aim for double-digit growth, with an average GDP growth at
producers' prices of 10.1%.
 Poverty Reduction: Reduce the population under the absolute poverty line to 9.5%.
 Employment: Target a 50% share of formal sector employment.
National Targets for FY2024:
1. Infrastructure Development:

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  Road density: 0.74 km of road per sq km of land.
 Households with access to electricity: 95%.
 Population with access to the internet: 80%.
 Electricity generation: 5,820 MW, with 12% from renewable sources.
2. Social and Health Indicators:
 Literacy rate (15+ years): 95%.
 Human development index: 0.624.
 Gender development index: 0.963.
 Basic social security coverage: 60%.
3. Economic Indicators:
 Average GDP growth (at basic prices): 9.6%.
 Per capita income: USD 1,595.
 Export of goods and services: 15.7%.
 Share of formal sector employment: 50%.
4. Sectoral Growth and Investment:
 Targeted average growth in agriculture, industry, and services sectors: 5.4%, 14.6%, and
9.9%, respectively.
 The government aims to increase the share of industry and services sectors to 18.8% and
58.9%, respectively, by the end of the 15th plan.
 Estimated investment requirement of NRs 9.229 trillion over the plan period, with
contributions from public, private, and cooperative sectors.
5. Macroeconomic Impact (Share of GDP by FY2024):
a. National Accounts:
 Average GDP growth at producers' prices: 10.1%.
 Per capita income: USD 1,595.
 Export of goods and services: 15%.
 Gross domestic savings: 22%.
 Gross national savings: 47.5%.
 Gross fixed capital formation: 41.6%.
b. Fiscal Sector:
 Total budget: 43.3%.

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  Recurrent expenditure: 17.9%.
 Capital expenditure: 18.6%.
 Revenue: 30%.
c. Monetary and External Sector:
 Average annual inflation: 6%.
 Export of goods and services: 15%.
 Import of goods and services: 49%.
 Remittances: 22.1%.
 Foreign investment: 3%.
6. SDGs Financing Gap:
 Estimated annual financing gap for SDGs: NRs 585 billion per year for the period of
2016 to 2030.
 The overall annual financing gap is estimated at 12.8% of GDP throughout the period of
2016 to 2030.
7. Challenges and Considerations:
 Data presentation challenges due to different base years.
 Continuous monitoring and adaptability needed for successful implementation.
 Emphasis on public-private cooperation for achieving investment goals.
Conclusion:
The 15th Five-Year Plan and the Long-Term Economic Vision outline an ambitious trajectory
for Nepal's development. The emphasis on economic growth, poverty reduction, infrastructure,
and sustainable practices reflects a comprehensive strategy. Achieving these goals will require
collaboration between the government, private sector, and the public, as well as adaptability to
changing circumstances. Continuous monitoring and periodic reassessment will be essential for
the successful realization of these plans.