Economics · Chapter 1
Study notes aligned to the official NEB syllabus.
The main characteristics of Nepalese agriculture are as follows.
Subsistence farming: Most Nepalese farmers follow agriculture as an occupation for subsistence. There is little commercialization of agriculture. A farmer's production in Nepal is just enough for the sustenance of life, that is, just enough for their own consumption, and there is hardly any surplus product left for sale. Commercial farming is practiced in very limited areas, and the growth of agriculture as a commercial sector is taking place at a slow rate despite continuous efforts of the government.
Monsoon based agriculture: Nepalese agriculture is highly based on the monsoon for irrigation. The monsoon is mostly uncertain and inadequate, and precipitation is limited to a few months in a year. As a result, monsoon rains do not facilitate farming round the year. Regular irrigation facility is needed for the commercialization of agriculture. Only 58.6 percent of the irrigated command area had irrigation facilities till mid-March of fiscal year 2021/22, but only 33 percent of land has year round irrigation facility.
Traditional farming practice: Nepalese farmers use primitive technology in agriculture. They still use the same tools and methods used by their ancestors. Modern and scientific techniques, tools, improved seeds, fertilizers and so on are not commonly used by the majority.
Low productivity: Another characteristic of Nepalese agriculture is low per unit productivity of land and labour. Labour productivity is not only very low, it is also declining. Agricultural productivity is far below that of developed countries. Low productivity of agriculture has resulted from the use of inferior seeds, traditional methods of farming, lack of irrigation facility, uneducated farmers, and lack of awareness and necessary information about the inputs of agriculture.
Under-employment and disguised unemployment: Under-employment and disguised unemployment are general features of Nepalese agriculture. Agriculture is highly seasonal in nature. Due to this, people are not employed all the year round, and there is employment for less than half a year. Similarly, the marginal productivity of increased labour in agriculture is almost zero. Due to this, disguised unemployment exists in Nepalese agriculture.
The agriculture sector plays a crucial role in the Nepalese economy. The contribution of agriculture to the GDP of Nepal was 26.21 percent in fiscal year 2020/21. Similarly, the contribution of the agriculture sector (agriculture, forests and fisheries) to GDP is estimated to be 25.8 percent in FY 2020/21. Also, 73.9% of the population depends on it for their employment and livelihood. Nepal is a least developed country. Hence, development of the agriculture sector is the key to economic development in Nepal.
The importance of agriculture in Nepal is discussed in the following points.
Source of livelihood: Agriculture is the main source of livelihood of Nepalese people. According to the Labour Force Survey 2018, 73.9% of people depend on agriculture for their employment and livelihood. Agriculture has provided employment to 74.74 percent of the labour force. Hence, it is a major source of employment and income for Nepalese people.
Source of raw materials: The agriculture sector is the major source of raw materials for agro-based industries. Most of the industries in Nepal are highly based on agriculture for raw materials. For example, the sugar industry needs sugarcane, the juice industry needs fruits, and tea industries need raw green tea leaf, which are produced in agriculture.
Source of national income: Agriculture is the main source of national income in Nepal. The contribution of agriculture to GDP was 23.9 percent in fiscal year 2021/22. Agricultural productivity at present is said to be low. Hence, it has potential to grow to a large extent. If the productivity of the agriculture sector increases, it can contribute to the growth of national income. Therefore, a progressive agricultural sector means higher growth in national income and a higher level of economic development in the country.
Basis of foreign trade: The foreign trade of Nepal is mostly based on agricultural products. Juice, oilseeds, tea, bones, leather, flour, ghee, live animals and so on are the main exportable items from Nepal. Agriculture contributes about two percent of the total exports. It is also one of the good sources of foreign exchange earning of the country.
Basis of employment opportunities: Agriculture is the main source of employment opportunity in Nepal. It provides employment opportunities to about 71.74 percent of the total working population of the country. Since agriculture is a highly labour intensive occupation, it generates direct and indirect employment opportunities to skilled, semi-skilled and unskilled manpower.