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The Trade-off Between Social and Economic Development

Nepal has recently adopted federalist approach with the aim to bring economic as well as social transformation. We aspire to become an egalitarian society, ensuring equitable economy, prosperity and social justice. We also aspire to achieve perpetual peace, good governance, development and prosperity. While as a political document there does not seem to be much of a problem with either one of these, from an economic perspective, there appears to be a slight bit of tension among these aspirations.

Both economic development and social development has been a leading concern for Nepal. On one hand Nepal aims for achieving high income equality and poverty reduction through inclusive growth, while on the other it aims for high economic growth with increased productivity. Both goals are such that, social development through inclusive growth needs economic compromises and economic growth through productivity enhancement is likely to create more unequal distribution of income and assets.

Nepal, since 2000 has been giving eminent priority to inclusive participation, gender mainstreaming and poverty reduction. A series of positive impacts – poverty reduction to 13% in 7 years from its initial 33%, decline in hunger by 22.5%, reduction in Gini Coefficient to 0.35, resolved gender issues with increment in household headed by females, increment in average household income by 2.5%, net primary enrollment ratio of 96.6% and improvement in overall health outcomes – to name a few, can be regarded as astonishing achievement for Nepal. These achievements portray the dedication of Nepal over the past decade towards social development. The government of Nepal allocated more than NRs. 33 billion for social security alone.

However, these achievements have not been able to tackle the underlying challenges of Nepalese economic concerns as in the same period Nepal also faced slow economic progress with low PCI of US$850 in 2017 and is still lying among the 48 least developed countries despite its goal to upgrade itself to developing nation by 2022. The decline in employment from 84.3% in 2000 to 81.7% today, despite of majority of people migrating for foreign employment shows lack of productive, employment generating activities. The slow industrial progress with decline in agriculture productivity with only 2/5th of arable land illustrates that Nepal has been deteriorating in terms of investment climate, industrial growth and agricultural productivity. The inability of government to invest in priority projects is hindering the expansion of other sectors as well, further leading to slow economic growth. This depicts a contradictory picture of Nepal’s progress than compared to social development.

We cannot completely deny the role of remittance, aid and migration in the various social achievements. Thus, we can say that there is food in our belly but yet we are not self-sustainable. Despite the deteriorating macroeconomic variables of Nepal, the indicators of social sector enhancement showed more positive results. This makes it apparent that in case of Nepal, the achievement of social progress is negatively correlated to the achievement of economic progress. One important question for Nepal to dwell over, at this juncture then would be, will it be rational to compromise, as a country, a fair portion of otherwise potential economic growth for social growth?

The achievement of both the goals together seems to be paradoxical. Economic growth being a pre-requisite, Nepal for social development can either aim for equality of opportunity or equality of outcome. Focusing on outcome equality is practically not a rational or possible goal and more equal distribution of income might create additional problems resulting in stagnant economy. Nepal can achieve economic growth and social development by focusing in equality of opportunity. However, we need to understand that this approach is likely to create social and income disparity. Equality of opportunity will hamper the equity and equality goals of Nepal as everyone is not equal and all will have different ways to avail the opportunities. Some will benefit highly while others might not. Which of the two is more logical approach, is for us to decide. It is a trade-off.


Ayushma Maharjan

About Ayushma Maharjan

Ayushma Maharjan pursued development finance as part of her undergraduate education. She is currently working as the Research and Communications Officer. She has been focusing on writing blogs and articles and has been researching on contemporary economic issues of Nepal. She aspires to craft conducive reforms through evidence-based policy making and redefine the policy discourse in Nepal .

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