CONTRIBUTION OF AGRICULTURE SECTOR TO NATIONAL ECONOMY IN NEPAL

CONTRIBUTION OF AGRICULTURE SECTOR TO NATIONAL ECONOMY IN NEPAL

Abstract:

Agriculture is the mainstay of majority of Nepalese people which provides employment, foods and shelter. However, the investment in agriculture in not encouraging, received around 3 percent of total government outlays during 2002 to 2014. In the study, Gross Domestic Product was regressed with Domestic Savings, Government Expenditure on Agriculture and Foreign Direct Investment on Agriculture with the data from FY 2002/03 to 2014/15. The Regression analysis showed that the contribution of Government Expenditure on Agriculture to Gross Domestic Product was found highly significant whereas the Domestic Savings and Foreign Direct Investment on Agriculture were found insignificant. Similarly, the compound annual growth rate of Government’s budget allocation to Ministry of Agricultural development was higher than that of the total national budget. In sum, the study concluded that the Government Expenditure on Agriculture is crucial for the national economy.

Major findings of the study:

The study regarding the contribution of domestic savings, government expenditure on agriculture and foreign direct investment on agriculture to the national economy reveals that these variables jointly contribute significantly thereby indicating the models goodness of fit. The study shows that government expenditure on agriculture is crucial for the GDP indicating per unit expenditure on agriculture could contribute more than 101 units to the GDP on the basis of analysis of data in the model tested. However, the government budget allocation to expenditure on agriculture is not that much interesting, receiving around 3 percent of the national budget thereby creating pressure to the ever increasing demands of farmers.

The annual budget growth rate of MoAD was found to be 22.74 % which is slightly higher than that of National budget. However, to satisfy the ever increasing demand of farmers to the service delivery, it is not sufficient.

The study has collected and analyzed as much data as available, however to come to the conclusion, it is recommended to study and analyze further time series information of many years.

Table 1: Details of budget outlay in MoAD and its share to the national budget during 2002/03 to 2014/15

FY	National Budget (Rs., 000)	MoAD Budget (Rs., 000)	Share of Agriculture Budget to National (%)
2002/03	96,124,796	2,423,526	2.52
2003/04	102,400,000	2,472,945	2.41
2004/05	111,689,900	2,692,284	2.41
2005/06	126,885,100	3,178,473	2.51
2006/07	143,912,300	3,516,279	2.44
2007/08	168,995,600	4,176,853	2.47
2008/09	236,015,897	5,759,500	2.44
2009/10	285,930,000	7,876,587	2.75
2010/11	337,900,000	10,523,526	3.11
2011/12	384,900,000	12,431,084	3.23
2012/13	404,824,700	12,297,141	3.04
2013/14	517,240,000	21,403,127	4.14
2014/15	618,100,000	23,283,178	3.77

Budget absorption of MoAD is good and increasing in overall. It is shown in following figure.

Figure 1: Trend of budget absorption (%)  by  MoAD during 2007/08 to 2012/13 in Nepal

Source: MoAD, Budget and Program Section, 2015

Note: This is the excerpt of the paper published in "The Journal of Agriculture and Environment Vol: 16, June 2015". 

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