Power crunch, political interference behind slow industrial growth: Experts

Experts have identified power shortage and political interference as the major reasons behind declining industrial growth rate in the country.
They said increasing consumption compounded with lower productivity and weak supply side has led to higher inflation in the country.

The government has announced to bring inflation down to 7 percent from existing 9.6 percent in the current fiscal year.

Industrial sector growth was limited to just 1.5 percent in fiscal year 2010/11 due to shrinking industrial productions amid deepening power shortage and frequent labor unrest.

“Increasing consumption is not negative for economy if we enhance our production capacity and lessen our import dependency,” said former finance secretary Rameshore Prasad Khanal.

Speaking at an interaction on ´Global Economic and Financial Market Developments and Outlook-Implications for Nepal´ on Monday, Khanal said power outage and politically-instigated labor trouble were the two main reasons behind low productivity in industrial and service sectors. He said commodity price volatility, especially food prices, was harsh on Nepali people even though the national economy remained relatively unaffected during the global financial meltdown.

“Though we escaped unscathed during the global meltdown, we have problems within us. Low production capacity and waning competitive strength is our biggest threat at the moment,” said Khanal.

He also suggested putting in place an internal control system and effective monitoring mechanism in banks and financial institutions to ensure financial sector stability.

Sanjaya Pantha, senior resident representative of International Monetary Fund (IMF) to India and Nepal, said increasing remittance and credit flow from the financial sector on the bank of shrinking manufacturing sector has led to higher inflation.

He also underlined the need for strong supervision and enforcement of prudential regulations to safeguard the health of financial sector.

Professor Madan Dahal said government inefficiency and massive corruption inside the state apparatus were the major reasons behind lower economic growth rate.