Dimension of The Economy, Problems and Challenges Facing Nepalese Economy, Employment Trends, Labour Market Issues

Dimension of Economy

The population size and growth rate, income level and distribution, natural resources, the degree of urbanization in agriculture and manufacturing activities, and other factors all affect how an economy is structured in a given nation. All of these factors are connected.

Following is a brief explanation of each of the four structural aspects of an economy:

• Economic Dimension:
  • It reveals the purchasing power and consumption habits of the populace. A country's economic performance can be measured using a variety of metrics. External economic performance is measured by the balance of payments and the exchange rate. Measures of overall outcomes in terms of output, prices, and employment are included in the concept of internal economic performance.
• Socio-economic Dimension:
  • It offers information on population statistics and shows the demographic make-up of a nation. A potential market must have a sizable enough population with the financial resources to purchase a firm's goods.
• Industrial and Agricultural Dimension:
  • This shows the country's capacity to produce things, provide services, and import raw materials. The capacity to offer goods, services, and raw materials to consumers and industrial units on the domestic as well as international markets increases with the strength of the industrial and agricultural foundation.
• Economic Development Dimension:
  • The plans for economic development are reflected in this dimension. It outlines general socioeconomic development policies, plans, and the process for allocating resources across various economic sectors.

Problem and challenges Facing Nepalese Economy

• Size of Market and Foreign Trade:
  • Productivity is affected by market size. Due to the fact that vast markets enable businesses to manufacture in large quantities. The worldwide market has supplanted the domestic market in the age of globalization. There is concrete evidence that open commerce has a good impact on development. The ideal market composition, both domestically and internationally, is crucial for market efficiency and boosting corporate productivity by ensuring that goods and services are produced by the most effective businesses. The recent financial crisis of 2008 is proof of how interdependent all of the world's economies are. The division of labor and specialization boost productivity. One of the main obstacles to Nepal's development is the trade balance. A large amount of foreign currency has been needed to import consumer goods rather than it in investment and capital formation.
• Monetary and Fiscal Policy:
  • By altering the demand for and supply of money, monetary policy is a crucial tool for maintaining price stability. By influencing the costs and accessibility of credit, the monetary policy of emerging countries also plays a significant influence in the development process. The need for money rises when an economy develops as a result of monetization, increased agricultural and industrial production. However, monetary policy can use a high rate of interest to reduce the balance of payment deficit. Fiscal strategy should be focused on investing in essential infrastructure in order to increase jobs and revenue. As a result, the capital expenditure scenario has not changed as much as was anticipated. To fulfill a formality, some building projects are completed by the end of the fiscal year.
• Physical Infrastructure:
  • By integrating the domestic market and providing low-cost connections to the markets in other nations and regions, well-developed infrastructure lessens the impact of distance across regions. An extensive and competent infrastructural base is essential for maintaining the smooth operation of an economy. Additionally, despite the fact that we import a lot of these fruits from our neighbors, the apple in Jumla has been damaged due to the lack of free interregional movement. Regular electricity supply promotes efficient production while assisting in the regular operation of the industry and business.
• Industrial Development:
  • Industries are essential to the growth of every nation's economy. The growth of Nepal's medium- and large-scale industries is modest. This sector's GDP contribution only accounts for 14% of the total. Due to a scarcity of raw materials and inadequate financial resources, even small-scale industries have not been able to develop well. Additionally, they are dealing with market composition as a result of the government's liberal stance. The major obstacle to industrial development is the weak industrial relationship between the labor force and the industries. The industrial sector has numerous issues, including a lack of available sufficient technology for a quality product, unclear regulatory provisions, weak market links, and a shortage of entrepreneurs.

Employment Trends

In Nepal, the economy has been changing as it gradually shifts away from the agriculture sector and toward other industries. The labor force is increasingly leaving the agriculture industry. The impact of this transition on the national economy is diverse. The following are the new trends in the labor market:

• The populace is giving up their traditional family businesses, such as cottage industries, small businesses, and artisanal farming. They are now drawn to new professions. Thus, other contemporary sectors must take on these displaced farm labor.
• The populace has been moving to cities in search of work as a result of the decline in employment prospects in rural areas. Even some people are moving abroad in search of work.
• The population and work force of Nepal are strongly impacted by immigration as well. Migration has slowly increased over the last few decades. This trend significantly affects how the labor force is made up.
• The growth of the communities along the highways provides evidence of the effects of the economic revolution occurring in the nation. New townships have created new work prospects for individuals in various locations.
• Since literacy and educational levels are consistently rising, educated women are now looking for employment opportunities. They continue to enter the labor force in Nepal in unprecedented numbers. Businesses now have a wider range of talent to choose from thanks to this trend.

There are benefits to having a more diversified workforce. Organizations must, however, ensure that all employees receive equal treatment in terms of employment, opportunity for promotion, and salary. To fulfill the objective of the company, strategic strategies must be developed for attracting, retaining, motivating, training, and employing people from a variety of demographic backgrounds. Policies like part-time employment, contract work, job sharing, child-care support, and flexible work schedules are also influenced by these demographic patterns.

Labor Market Issues

Mechanisms of the labor market are essential for ensuring worker stability and productivity. Regulations governing the labor market in particular play a significant effect in these areas. The legal frameworks governing the job market are strict in Nepal, and educational standards are often lower. These rules include the 1992 Labour Act, which forbids firing permanent employees (i.e. all employees with more than 240 days of employment). Regulations governing minimum salaries also apply to skill categories in businesses with more than 10 employees, as well as the requirement to contribute 10% of profits to a fund for workers' benefits. Thus, rigid regulatory frameworks have had the following adverse effects on the labor market and productivity (MICS, 20040):

• Being productive and efficient at work is discouraged.
• Business organizations have a tendency to use systems that need more cash.
• There is a disincentive for businesses to spend money on employee education and training.
• Business organizations are more likely to use Indian labor than Nepali workers for highly trained professions.
• Trade union opposition prevents the implementation of a pay and incentive structure based on performance.

Without changes to the labor market, Nepal will struggle to significantly boost its competitiveness and formal sector employment.

References:

• academia.edu/20423558/Factors_affecting_Nepals_Economics_Development
• slideshare.net/supuspa/economic-development-43051284