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Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

Economic Crisis With and Without Lockdown

World economy has already been hit by recession owing to the corona virus crisis. Various estimates show that a deeper recession is looming large. Much of the reason behind the recession is accredited to draconian measures such as complete lockdown opted by the governments around the world to contain the contagion. Nevertheless, reckoning that the recession could have been completely avoided if these measures were not placed would be a biased analysis. But, if not for the lockdown, severity of the recession would not be the same.

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Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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६२ प्रतिशत रोजगारीलाई ध्यान दिउँ

नोभेल कोरोना भाइरस (कोभिड – १९) महामारीलाई दोस्रो विश्वयुद्ध पछि मानवताले सामना गरेको सबैभन्दा डरलाग्दो संकटको रूपमा लिइएकोछ । यो कुराले जनमानसमा थप त्रास सिर्जना गर्ने भएता पनि हामीले यसलाई नकार्न सक्दैनौँ । यो महामारी हालसम्म २१० देश र क्षेत्रमा फैलिसकेर २९ लाख भन्दा बढी मानिसहरुमा देखापरिसकेको छ भने दुई लाख भन्दा बढीको  मृत्‍युको कारक बनिसकेको छ  ।   स्वास्थ्यकर्मीहरु यस रोगका बिरामीको उपचारका लागि अहोरात्र खटिरहेक छन् भने वैज्ञानीकहरु यस रोगको उपचार पत्ता लगाउनका लागि पुरै लागिपरेका छन् । तर दुर्भाग्यवस, हाल सम्म कुनै ठोस सफलता हासिल पर्न सकेका छैन । सार्वजनिक स्वास्थ्यमा परेको यो संकटले आफ्नो साथमा आर्थिक संकट पनि ल्याउँदैछ । यद्यपि, आर्थिक संकट यो महामारीको प्रत्यक्ष प्रभाव नभईकन माहामरीलाई फैलन नदिन गरिएको रोकथाम विधिको उपज हो ।भाइरसको फैलावटलाई नियन्त्रण गर्न अपनाइएका बिधिहरु — सामाजिक दूरी, क्वारेन्टिन  , शैक्षिक संस्था बन्दी र अनावश्यक व्यवसाय बन्दी  देखी पूर्ण तालाबन्दीले आर्थिक क्रियाकलापलाई ठप्प बनाएको छ। हामीले  दुबै  — स्वास्थ्य र आर्थिक संकट — समाना गर्नुपर्ने अवस्था छ, र कुनै एउटालाई रोकथाम गर्न खोज्दा अर्कोको जोखिम बढ्ने देखिन्छ । अहिले हामीले दुबै महामारी र आर्थिक मन्दीको वक्रलाई समतल पार्नुपर्ने अभूतपूर्व चुनौती सामना गरिरहेकाछौँ । तथापी हाल महामारीको वक्रलाई समतल पार्नुले बढी प्राथमिकता पाएको छ जसका कारण आर्थिक मन्दीको वक्र गहरिंदै जाने सम्भावना बढेको छ ।

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Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Careful what you wish for!

During times of crisis such as the one we are currently facing, people’s expectations from the government tend to rise. The government is viewed as the monolithic entity which can help overcome the crisis and get everyone back to pre-crisis normalcy. This expectation from the people provides additional impetus to already expanding government, further steepening the slope of the government expenditure trajectory. People expect a huge stimulus package from the government so that their jobs and businesses would have an external shield. 

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Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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An Alternative Strategy to Nationwide Lockdown

We are now on 32nd day of nation-wide lockdown. Initially the government announced it for a period of a week but it has only been extending. As a corollary to the lockdown, we have now started to face an economic downturn. Daily wage workers are facing the major brunt. Continue reading

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Supply Side Restrictions: A source of rent for the sellers

The Ministry of Home Affairs has come up with the new executive order, which if comes into action will have stricter control over the production, distribution and consumption of alcohol. One of the proposed regulations of the government is to limit the number of liquor store to two in each ward of a municipality/sub- metropolitan city/ metropolitan city and one in each ward of a rural municipality. Apart from health damages, the government asserts that alcohol consumption is one of the major reasons behind rising domestic violence, rapes and sexual abuses. In that sense, government’s intention to regulate alcohol is fairly justified. But, the consequences of such action could be completely different from what is initially intended. Continue reading

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Fiscal Framework of Nepal: An overview

This article was originally published in The Himalayan Times on June 24, 2018.

In order to ensure optimal outcome from the federal structure, it becomes imperative to have a proper fiscal arrangement at place. In a system with multiple tiers of government, power and responsibilities, especially regarding fiscal matters should be allocated among various levels of governments. The success of federalism is heavily dependent upon the way in which the powers and responsibilities are assigned to these governments. Principally, the literature on fiscal federalism emphasize on determination of expenditure responsibilities followed by revenue assignments. Tax assignment should be followed by assignment of the expenditure responsibilities as tax assignment is generally guided by the spending requirements at different orders of government. The basic principle that guides the allocation of expenditure responsibilities is the “efficiency principle”. Each expenditure headings should be analysed and allocated in such a way that efficient provision of public services could be ensured.

Scholars with primary focus on “efficiency principle”, have designed a revenue- expenditure framework in order to ensure efficient provision of public services. No countries have exactly replicated such design, however, the design has provided a basic outline for assignment of revenue and expenditure among various levels of government in federal countries. Nepal is no exception. Nepal’s fiscal framework does not exactly match the design provided by the scholars, but we can see similarities. Issues of national and international importance such as defence, international trade, foreign affairs, citizenship and migration have been allocated to federal government. Policies affecting the entire nations such as fiscal and monetary policies are also exclusively handled by the central government. States have responsibilities of managing land, irrigation and drinking water supply, transportation, higher education, intra-state commerce, and state-level electricity. Local government is assigned to look after health, sanitation, local market management, local road, rural road, agriculture road, and irrigation.

The constitution has provided grounds for assignment of revenue rights among three tiers of government. Federal government can levy customs duty, excise- duty, Value Added Tax (VAT), corporate income tax, personal/ individual income tax and remuneration tax. States have exclusive right to levy Agro-income tax, whereas local government can levy wealth tax, house rent tax, land tax and business tax. House and land registration fees, motor-vehicle tax, entertainment tax and advertisement tax are jointly levied by state and local governments. Similarly, on the non-tax revenue headings, passport fee, visa fee, gambling and casino fees are prerogative of federal government. Service charge/fees, tourism fee and fines are jointly collected by federal, state and local governments. The revenue assignment is made in such a way that federal government is able generate higher percentage of the total revenue, which is estimated to be about 70 percent. The rest is generated by states and local government.  As large share of revenue goes to central government’s coffer, vertical fiscal imbalance is inevitable. Additionally, as individual states and municipalities do not have same revenue base, horizontal fiscal imbalance can also be predicted.

In order to overcome horizontal and vertical fiscal imbalances, like other federal countries, Nepal has also made arrangements for inter-governmental fiscal transfers. Intergovernmental Fiscal Arrangement Act, 2017 has made provision of revenue sharing and fiscal- equalisation grant as two medium of fiscal transfers. It has been provisioned that the revenue generated out of Value added tax (VAT) and Excise is shared in 70- 15-15 percent basis among federal, state and local governments respectively. The distribution of these funds among the state and local governments are made by taking population, total area of the respective jurisdiction, Human Development Index (HDI), and low development indicators as the parameters. The weightage given to these parameters are 70 percent, 15 percent, 5 percent and 10 percent respectively.

Furthermore, sub-national government are also entitled to fiscal equalisation grant whose main aim is to reduce horizontal fiscal imbalances. The fiscal equalisation grant are distributed by the federal government to the sub-national governments on the basis of gap between need of expenses and capacity to generate revenue, Human Poverty Index, social and economic discrimination indicators, and indicators of infrastructure availability. The weightage assigned to these are 60 percent, 15 percent, 15 percent, and 10 percent respectively.

In addition to fiscal equalisation grant, there is also provision of conditional grants, complementary grant and special grant. The conditions for distribution of conditional grant is prescribed in the National Natural Resource and Fiscal Commission Act, 2017. The criteria for providing complementary grants and special grants have also been specified in the same act.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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