4.

1 PERFORMANCE OF NEPALESE ECONOMY

Any country’s economic situation, whether it is moving towards its up heals or a downturn, is
measured by its Gross Domestic Product (GDP). GDP is all economic activities made by both
domestic as well as foreign factors of production within a country. Measuring just a GDP is
insufficient for a country to know where it is heading regarding its economic situation. So,
country’s economic performance, which is indicated by real GDP and its growth rate, is must for
policy maker and planner to implement its strategic plan in long run and to achieve its targeted
objectives in short run. Higher GDP growth rate indicates well performance of economic
activities. In the context of Nepalese economy as we can see in below fig … its real GDP is
increasing during study period (1990-2016). However, growth rate in real GDP is fluctuating
over its time period means its growth rate is volatile. The average growth rate during study
period is 4.42 % but this doesn’t indicate its growth is oscillating near to its average due to the
fact that the country during its study period has experienced many external shocks. Its maximum
growth rate is 9.49 % in fiscal year 1996 and minimum growth rate is 0.12 in 2002. The reason
for maximum growth rate in 1996 is due to impact of privatization policy adopted by Nepal
(1992). Minimum growth rate in 2001 is due to political instability due to Maoist people’s war.
A growth rate is 6.1 % in 2009 which is positive impact of peace process between government of
Nepal, Maoist and constitutional assembly. And growth rate is 0.4% in 2016 is due to disastrous
earthquake in 15th April 2015 and trade blockade by India

Table 4.1: Trend of growth rate of GDP of Nepal from 1990 to 2016

Nominal RGDP growth

year GDP Deflator R.GDP rate
1990 103416 40.3 256615.4

1991 120370 44 273568.2 6.61

1992 149487 52.3 285826 4.48

1993 171492 57.7 297213.2 3.98

1994 199272 62 321406.5 8.14

1995 219175 65.9 332587.3 3.48

1996 258913 71.1 364153.3 9.49

1997 280513 76.2 368127.3 1.09

1998 300845 79.3 379375.8 3.06

1999 342036 86.3 396333.7 4.47

2000 379488 90.3 420252.5 6.04

2001 441519 100 441519 5.06

2002 459443 103.94 442027.1 0.12

2003 492231 107.13 459470.7 3.95

2004 536749 111.6 480957.9 4.68

2005 589412 118.86 495887.6 3.10

2006 654084 126.18 518373.8 4.53

2007 727827 135.38 537617.8 3.71

2008 815658 142.94 570629.6 6.14

2009 988272 165.77 596170.6 4.48

2010 1193679 189.56 629710.4 5.63

2011 1366954 211.65 645855.9 2.56

2012 1527344 224.13 681454.5 5.51

2013 1695011 237.77 712878.4 4.61

2014 1941624 257.5 754028.7 5.77

2015 2130150 272.13 782769.3 3.81

2016 2247427 285.93 786006
 0.41
average 753051.5 130.2174 490030.2 4.419569572

Sources: Economic Survey (2007/08 and 2016/17)

Figure 4.1: Trend of Growth Rate of GDP of Nepal from 1990 to 2016

RGDP growth rate

10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
-
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

4.2 Inflow of Remittances

Remittances under this topic are worker’s remittances. Increase in remittances means most of the
workers works outside the country. After liberalization, globalization and privatization policies
adopted by Nepal, most of the skilled and unskilled workers work outside country. The flow of
remittances increasing at slow rate from 1990 to 2005 and increasing rapid rate from 2006 to
2016. However, growth rate of remittances are ups and down during the study period. Maximum
growth rate is 314% in 1999. The minimum growth rate is negative 15.43 % in 1995. Average
growth rate is 31.69 %.

Table 4.2: Inflow of remittance from 1990 to 2016.

year Remittances G.remittance

1990 2128.3
1991 2316.5 8.842738336
1992 2994.3 29.25965897
1993 3469.1 15.85679458
1994 5063.6 45.96292987
1995 4283.6 -15.4040604
1996 5595 30.61443646
1997 6987.8 24.89365505
1998 10314.6 47.60868943
1999 42759.1 314.5492797
2000 53525.2 25.17850002
2001 55805.9 4.260983611
2002 61530.6 10.25823434
2003 58600 -4.76283345
2004 65500 11.77474403
2005 97700 49.16030534
2006 100100 2.456499488
2007 142700 42.55744256
2008 209700 46.95164681
2009 231700 10.49117787
2010 253600 9.451877428
2011 359600 41.79810726
2012 434600 20.85650723
2013 543300 25.01150483
2014 617300 13.62046751
2015 665100 7.743398672
2016 699000 5.096977898

Figure 4.2: Inflow of remittance from 1990 to 2016.

 350

300

250

200

150

100

50

0
1992

1994

1996
1993

1995

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
-50

4.3 Inflow of foreign aid

Budget is estimated revenue and expenditure of a country during a fiscal year period of time.
Nature of budget in developing countries are deficit i..e expenditure is made more than
government income. Such resource gap is fulfilled by foreign aid. The flow of foreign aid is
continuously increasing during study period. The growth rate of aid are ups and down. Maximum
growth rate is 33.7 % in 2012 and minimum is -23.47 % in 2003. Average growth rate during
study period is 10.10%.

Table 4.3: Inflow of foreign aid from 1990 to 2016.

year Foreign Aid Growth rate of aid

1990 5666.9
1991 6427.1 13.41474175
1992 5990 -6.800889981
1993 7800.4 30.22370618
1994 9235.6 18.39905646
1995 11557.2 25.13751137
1996 11249.4 -2.663274842
1997 14289 27.02010774
1998 15031.9 5.199104206
1999 16457.2 9.481835297
2000 16189 -1.629681841
2001 17523.9 8.245722404
 2002 18797.4 7.267217914
2003 14384.8 -23.47452307
2004 15885.5 10.4325399
2005 18788 18.27137956
2006 23576 25.48435171
2007 22239.4 -5.669324737
2008 26200.8 17.81253091
2009 29365.2 12.07749382
2010 36567.1 24.52528844
2011 48904.8 33.73989187
2012 58776.7 20.18595312
2013 51928.2 -11.65172594
2014 47460 -8.604573238
2015 54364.8 14.54867257
2016 55363.8 1.837586085
Average 24445.18889 10.10810376

Figure 4.3: Inflow of foreign aid from 1990 to 2016

Growth rate of aid

40

30

20

10

0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

-10

-20

-30

4.4 Correlation between GDP, Remittances, and Foreign aid.

Correlation shows degree and direction of relationship between variables. The value of
correlation lies between -1 to +1. The value of correlation

Fig 4.4: Correlation between GDP, Remittances, and Foreign aid.

AID NGDP RMPT

AID 1 0.96 0.94
NGDP 0.96 1 0.99
RMPT 0.94 0.99 1

4.5 Summary Statistics

The summary statistics shows mean, median, mode, kurtosis, skewness, JB test, probability of
GDP, Remittances and AID.

Table 4.5: Summary Statistics

GDP REMITTANCE AID
490030.240740 175380.503703 24445.1888888
Mean 7408 7037 8889
Median 459470.7 61530.6 17523.9
Maximum 786006 699000 58776.7
Minimum 256615.4 2128.3 5666.9
162866.613385 225011.759665 17062.5682332
Std. Dev. 8537 1279 664
0.38137337681 1.25782314253 0.86527586298
Skewness 69903 5132 25423
2.00222881654 3.17544771438 2.31694379785
Kurtosis 9163 3366 0023

1.77449618779 7.15416539857 3.89404693297

Jarque-Bera 2068 8934 8317
0.41178739519 0.02795713878 0.14269818601
Probability 76906 507211 05835

4735273.59999 660020.100000
Sum 13230816.5 9999 0001
689663877650. 1316387591677 7569412102.58
Sum Sq. Dev. 2051 .53 6667
Observations 27 27 27

4.6 Regression Analysis

Dependent Variable: LNGDP

Method: Least Squares
Date: 06/11/18 Time: 18:35
Sample: 1990 2016
Included observations: 27

Variable Coefficient Std. Error t-Statistic Prob.

LNAD 0.220261 0.042719 5.156064 0.0000

LNRMT 0.092691 0.015466 5.993032 0.0000
C 9.872545 0.266849 36.99674 0.0000

R-squared 0.982716 Mean dependent var 13.04812

Adjusted R-squared 0.981276 S.D. dependent var 0.337882
S.E. of regression 0.046234 Akaike info criterion -3.205745
Sum squared resid 0.051303 Schwarz criterion -3.061764
Log likelihood 46.27756 Hannan-Quinn criter. -3.162932
F-statistic 682.2946 Durbin-Watson stat 1.017619
Prob(F-statistic) 0.000000