Ram C Acharya.
The paper compares the overall economic growth of Nepal and its two neighboring countries, China and India, for the last four decades. It shows that whereas China and India’s growth have been quite impressive, Nepal is increasingly falling behind its neighbours. The income gap between a Chinese and/or Indian and a Nepali has been widening in an alarming way. In an attempt to understand why it has happened, the paper invokes the economic growth framework and evaluates Nepal’s performance vis-à-vis its neighbors in all pillars of economic prosperity. The paper shows that it is not a single isolated factor that is causing Nepal’s economic backwardness, Nepal is failing in all pillars across the board and more so over time. Then, the paper asks: why that has been the case? There is no single answer to pin why Nepal’s economic growth has been so elusive.
What appears to be the case is that because of wrong economic policies on several fronts, Nepal is tightening its growth constraints rather than loosening them. As a result, it is increasingly falling in a trap that it will be more difficult to come out as the present policies continue erecting new and solidifying those old obstacles. Nepal’s major growth obstacles are distorted investment priorities, massive inequality of opportunity, pervasive rent-seeking activities, incentive-penalizing institutions and extremely self-centered own-payoff maximizing political parties. Until and unless people are motivated and have endowment to create wealth (which requires at least rule of law, better education, and cultural renaissance) Nepal will have difficult time to reverse its downward spiral. In a nutshell, Nepal’s economic growth challenge is to create hope – that this is a just society – and motivation – that everyone has to earn own living the right way – among Nepalis which requires herculean policy tasks.
Finally, the paper discusses whether there is anything worthwhile that we could learn in Nepal’s development trajectory from the recent ChatGPT surge. And the paper concludes with policy recommendations.
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Keywords: Economic Development, Investment, Trade and AI
Author: Ram C Acharya
ISED Canada
