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Submitted by Raghu Bir Bista on
World Financial Crisis is a serious economic issue. In the globalization, its effect naturally falls on South Asian economy. However, how much it is can not be quantified yet without any research on it. Just considering three indicators such as CPI, declining FDI and fiscal deficit, we cannot reach in conclusion. If we do it, again we are manipulating issue and driving our development process and efforts somewhere. Thus, I request first of all analyze seriously because • What is cause of CPI? In my observation, there are four major reasons: lower agricultural productivity and production and unproductive investment in land and labor shortage, along with political turmoil. In recent years, agricultural productivity and production has been declining in rural areas because of political turmoil and conflict trap. How much it is we need again information because 48 thousand household displaced and more than 1.5 million population conflicts affected. However, there is not rehabilitation and normalization process for it. Secondly, remittance investment is used more on productive land because the government has not protective policy and plan for productive land. These lands are being barrened. Thirdly, outflow of labor that is good when remittance comes has created skill agricultural labor shortage. Finally, the government cannot monitor the market hoarding. Therefore, CPI is not because of world financial crisis. • Fiscal deficit: in my observation, there are many causes: over political expenditure, growth of trade deficit and budget deficit, declining FDI and private investment. Firstly, in recent years, the growth of political expenditure in Nepal due to unproductive large size of constitutional assembly and non performing political tours and travels is not like as size of economy, instead of spending social and infrastructure development. Secondly, the conflict trap has not permitted to operate economic activities normally. Its result is slow export growth rate but aggressive domestic import demands (fuel). Its result is declining FDI and private investment to recover economic activities. • Linkages with financial crisis: there are three global linkages: labor, investment and trade. In my observation, FDI is less than 0.5 percent in accordance with Government Record. Share and bond price signaling doesn’t show such effect. In Trade, export size hasn’t much more significance because of slow industrialization. In labor outflow, its remittance can not play a productive role in Nepal. If it declines, it reduces unproductive investment. In my conclusion, small economy of Nepal has not much more linkages because of least global integration in different economic sectors. In case of Bangladesh, India and Sri Lanka, there are possibilities because of much more labor, commodity and financial market global integration. In case of Nepal, World Bank can do the following jobs. • World Bank South Asia has spent huge money for research and development. Reports have shown its weak performance and effectiveness, although World Bank has invested huge money in development programs, like as other International NGOs. This has made also confusion scenario on what should do. Therefore, World Bank should improve its performance in terms of efficiency and productivity. • In India, the government has adopted fiscal and monetary packages along with development stimuli program. In case of Nepal, the government is just political gossiping. In this side, the World Bank can make the government serious and sensitive for adopting anti financial crisis policy measures.