Economic enviroment Of Nepalese Business Environment
- 1. ECONOMIC ENVIRONMENT OF BUSINESS IN NEPAL Prayash Neupane
- 2. INTRODUCTION Economic enviroment refers to all economic surroundings that influence business. It affects business decisions relating to resource allocation, costs, profits and expansion. Important components of economic enviroment of business in Nepal consist of : I. Economic System II. Economic Structure III. Economic Reforms IV. Economic Policies V. Economic Cycle
- 3. Economic System Economic system determines the role of market forces and the scope of private sector participation in an economy. It can be free market economic system or can be centrally planned economic system. Nepal has mixed economic system. The role of private sector in Nepalese economy has been increasing.
- 4. Economic Structure It refers how the structure of particular sector operate in an economy which generates National Income. The important sector of Nepalese economy are given below:- I. Agricultural sector:- Consists of Food crops, Cash crops, Other crops, Livestock, Forestry, Fishing etc. II. Industry sector:- Manufacturing and mining represent industry sector. III. Service sector:- Consists of Trade, Transport and communication, Business, Construction, Education and health, Tourism, Electricity etc.
- 5. Economic Sector in Nepal ( % of GDP at Current Prices) Service Industry Agriculture 60 50 40 30 20 10 0 2001/01 2005/06 2008/09 Agriculture Industry Service
- 6. Economic Policies Economic policies are guidelines for business decision making. They are concern with aspects of growth, stability, employment, and balance of payments in the economy. The importance economic policies in Nepal are Industrial Policy, Trade Policy, Labour Policy, Fiscal Policy, Monetary Policy, Tourism Policy etc.
- 7. Some Important Economic Policies Industrial Policy:- Goal of industrial policy is to minimize poverty through sustainable industrial development based on public-private cooperative partnership. Trade Policy:- Main objective of trade policy is to enhance the contribution of trade sector in the national economy. Fiscal Policy:- Concern with taxation, public expenditure and public debt of government. Monetary Policy:- Concern with demand and supply of money, cost and availability of credit, inflation, foreign exchange and level of aggregate demand.
- 8. Economic Reforms Economic reforms are aimed at liberalization of economy. It can be internal through deregulation, relicensing, abolition of subsidies, administered prices and encouragement to private sector. It can be external through liberalization of trade and globalization of the economy. Economic reforms in Nepal consists of Capital Market Reforms, Financial Sector Reforms and Fiscal and Monetary Reforms.
- 9. Economic Reforms in Nepal Capital Market Reforms:- Consists of Securities Board of Nepal (ie, SEBON) and Nepal Stock Exchange (ie, NEPSE) Financial Sector Reforms:- Consists of Commercial Bank, Development Bank, Finance Companies, Insurance Companies, Microfinance NGO etc. Fiscal and Monetary Reforms:- Fiscal reforms are introduce by government through annual budgets. Monetary reforms are introduce by Nepal Rastra Bank through monetary policy.
- 10. Economic Cycle Economic cycle is recurring, fairly predictable, general pattern of periodic fluctuations in national economies. The economic cycle is the upward and downward movements of levels of GDP (gross domestic product). It consists of four stages called Expansion, Crisis, Recession and Recovery.
- 11. Stages of Economic Cycle Expansion:- Increase in production and prices, low interest-rates. Crisis:- Stock exchanges crash and multiple bankruptcies of firms occur. Recession:- Drops in prices and in output, high interest-rates. Recovery:- Stocks recover because of the fall in prices and incomes.