When the finance minister announced the national budget on 29th May, he promised to continue old as well as initiate new policies to improve the agriculture scenario. At a time when the public is still confused about the viability of federalism, this was a commendable move by the government. But a question probing everyone is how effective will these policies be since the past governments are so well known for making empty promises?
A look at the national budget priorities will reveal that there are bountiful rosy policies catering towards modernizing farming, irrigation and much more. But a well-known truth is that policies are often not the hindrance to the farmers or the agriculture sector, but the implementation or rather the lack of it, is. What is much more important is to understand the hindrances to agriculture and not turn a blind eye to them. Discussed below are some barriers to agriculture that requires more attention than one might think.
Syndicates disrupt competitive flow in the market by setting prices as well as restricting new members in the market. Once a syndicate is established, it can be difficult for a government to control them. A report by Republica newspaper disclosed that farmers in Bhaktapur sell one kilo of big tomatoes to middlemen at NPR. 60, while the same tomatoes cost NPR. 115 per kilo at Kalimati retail market.
Competing with the Neighbouring Market
While Nepal imports fruits and vegetables from India, domestic productions are yet to find the market. Agriculture policy of Nepal must be at least a step ahead of the policy in India because India, with already 4 folds more population than that of ours, has more budget (in absolute terms) for its productive sector. Based on proportion, Nepal’s budget for agriculture is higher compared to India’s (India allocates 2.35% of its GDP on agriculture compared to 2.5% of Nepal’s GDP), but that isn’t enough to improve the agriculture scenario. Moreover, good policies are not enough because it all boils down to implementation. The Government should put an effort to buy the produce at minimum support price if the market price collapses.
With India already bigger than Nepal, both in size and economy, perhaps Nepal cannot compete with its agriculture economy. But it can at least gain comparative advantage in products like cardamom, ginger among others. (An Examination of Nepal’s Export Choice based on Revealed Comparative Advantage, Nepal Rastra Bank). Nepal should properly identify its comparative advantageous products and communicate with its southern neighbour. That way, both countries could design policies that would be of mutual benefit.
There is a reason for why Israel being smaller in size than Nepal (not to forget, a desert) with just 1.1% of its population directly dependent on agriculture, produces more than enough for themselves and even more to export; while Nepal with 60% of its population (directly/indirectly) dependent on agriculture does not produce enough to sustain itself, but rather imports from its neighbours. The difference is that Israel practices capital intensive agriculture; while labour cost makes a large portion of the cost of production of the agriculture economy in Nepal. Without proper investment in capital, Nepali agriculture will lag behind.
Nepal aspires to become a middle income nation by FY 2030. While it is true that the economy needs to graduate from agriculture sector and focus more on manufacturing, but the contribution of agriculture sector still remains pivotal in catalysing the economic eco-system.
 Indian Union Budget 2018 and Budget of Nepal 2017/18
Pic: Niranjan Shrestha | AP Photo