TyroCity: Economics 11 Notes

Importance of Public Finance

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Steady state economic growth:
Government finance is important to achieve sustainable high economic growth rate. The government uses the fiscal tools in order to bring increase in both aggregate demand and aggregate supply. The tools are taxes, public debt, and public expenditure and so on.

2. Price stability:
The government uses the public finance in order to overcome form inflation and deflation. During inflation, it reduces the indirect taxes and genera expenditures but increases direct taxes and capital expenditure. It collects internal public debt and mobilizes for investment. In case of deflation, the policy is just reversed.

3. Economic stability:
The government uses the fiscal tools to stabilize the economy. During prosperity, the government imposes more tax and raises the internal public debt. The amount is used to repay foreign debt and invention. The internal expenditures are reduced. During recession, the case is just reversed.

4. Equitable distribution:
The government uses the revenues and expenditures of itself in order to reduce inequality. If there is high disparity it imposes more taxes on income, profit and properties of rich people and on the goods they consume. The money collected is used for the benefit of poor people through subsidies, allowance, and other types of direct and indirect benefits to them.

5. Proper allocation of resources:
The government finance is important for proper utilization of natural, man made and human resources. For it, on the production and sales of less desirable goods, the government imposes more taxes and provides subsidies or imposes taxes lightly on more desirable goods.

6. Balanced development:
The government uses the revenues and expenditures in order to erase the gap between urban and rural and agricultural and industrial sectors. For it, the government allocates the budget for infrastructural development in rural areas and direct economic benefits to the rural people.

7. Promotion of export:
The government promotes the export imposing less tax or exempting from the taxes or providing subsidies to the export oriented goods. It may supply the inputs at the subsidized prices. It imposes more taxes on imports and so on.

8. Infrastructural development:
The government collects revenues and spends for the construction of infrastructures. It has to keep peace, justice and security too. It has to bring socio-economic reformation too. For all these things it uses the revenues and expenditures as fiscal tools.

General Economics Data

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

According to NLFS, 2008, 73.9% of labour force is engaged in agricultural sector.
Agriculture sector is the primary sector of Nepalese economy.
About 34% contributions in the GDP by agriculture sector.
According to three year plans 2010/13, 69.48% of total irrigable land has irrigable facilities.
According to NLFS, 2010/13, 25.16% of Nepalese are below the poverty line.
The share of food crops is 49.5% cash crops are 28.1% and other crops 22.3%.

Introduction to Tourism Industry

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

Tourism Related Information, 2010

Tourist arrival in number	6,02,867
Foreign exchange earning	28,139 million

Number of tourist by purpose of visit

Purposes	Percentage
Trekking and Mountaineering	10.46%
Pilgrimage	11.65%
Business	3.55%
Official	4.37%
Meeting / Seminar	16.81%
Rafting	0.12%
Others	51.44%

Total Contribution in Gross Domestic Product (GDP) 24%

Direct Employment = 110000

Source: Economic Survey 2010/11

Nature of Economics

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. NATURE OF ECONOMICS
DEFINITION OF ECONOMICS
The term economics is derived from the word “oeconomicus” by Xenophon in 431 B.C. It is derived from two words economy and science. Economy means proper utilization of resources. It means economics is the science of economy or science of proper utilization of resources. It is comprised of theories, laws, principle related to utilization of resources so as to solve the economic problems, satisfy the human wants or need and so on. However, the economics is defined in different ways by different economists.
There are mainly three definitions of economics:-

a. classical or wealth definition (Adam Smith)-1776 A.D

b. neo-classical or welfare definition (Alfred Marshall )-1890 A.D

c. modern or scarcity and choice definition (Lionel Robbins)-1932 A.D

a. classical or wealth definition (Adam Smith)-1776 A.D The famous classical economist Adam smith for the firs time defined economics as “science of wealth”. The definition was given in the book “an enquiry to the nature and the causes of wealth of nations” published in 1776 A.D. the book is popularly known as “wealth of nations”. According to smith, labor is the main source of income or wealth. More wealth is accumulated only if more labor is used. Economics explains the human behavior and activities they do for wealth. This definition was based upon the assumptions of full employment, perfect competition, no governmental interventions, money just as a medium of exchange and so on.
This definition has following main proposition:-

i. economics is science of wealth

ii. labor is the only source of income

iii. there is perfect competition in product as well as labor market

iv. the government should not interfere the activities of people and business organizations

v. this definition is influenced by physiocracy and mercantilism.

Criticism:-
Wealth definition has over emphasized wealth. Economics is science of human activities rather than only wealth. Adam smith considers only material things or wealth as subject matter of economics but human beings require some immaterial things like self esteem or dignity, social prestige, national identity and so on too. The immaterial things are called essential things for human satisfaction. Wealth definition is based upon the theory of subsistence wage which is known as iron law of wage. The law was against the workers and in favor of employers. Adam smith doesn’t explain about scarcity of resource and choice of best alternative for the use of resources. The problem of scarcity and choice is burning issue in the modern economics but he fails to explain about the problems of scarcity and choice. The wealth definition is based upon assumptions of full employment and perfect competition but none of these two is in existence. This definition is based upon the assumption of no intervention of government in economic activities of people and business organization but we find in every country more or less governmental intervention.

b. neo-classical or welfare definition (Alfred Marshall )-1890 A.D
In 1890, Alfred Marshall, a famous neo-classical economist and a great contributor to micro economics defined economics as the science of material welfare. Here, the material welfare means the quantities of physical goods consumed by people. if the people are consuming large quantities of goods, they are said to have high level of welfare into two types

1.material welfare

2.immaterial welfare

According to him, only the material welfare is the subject matter of economics. He assumes every person is rational and s/he uses the resources in his/her possession very properly so as to maximize their own welfare. Economics is therefore the science that studies the rational behavior revealed by the people. Major propositions of Marshall’s welfare definition are:-

Economics is science of material welfare
Economics is social science i.e. science of mankind
Economics is the study of rational behavior of people revealed for maximization of material welfare.

Criticisms:-
This definition of economics a science of material welfare was assumed correct until the arrival of Lionel Robbins. He criticized the definition under the following aspects:-

Classificatory activities of Marshall into material non material welfare, economics and non economic goods is only classificatory not analytical because single human cannot be material as well as non material according to the nature and purpose of work.
Non material activities like feeling of social service, human desire also satisfy human needs. This idea has not been prioritized
Non welfare consumption like harmful drugs, tobacco, and alcohol don’t promote social welfare but still are in the study of economics
Economics should study about total human beings but wealth definition doesn’t study about isolated people like saints, nuns, monks etc.

c. modern or scarcity and choice definition (Lionel Robbins)-1932 A.D
According to Lionel Robbins, economics is the science of scarcity of the resources and the choice of best alternative for their utilization. The resources are limited in supply. Each resource is usable for different purposes. The wants or need of people are unlimited. The wants differ in importance. They differ from place to place, from time to time and from person to person. Some wants are more important whereas some are not. All wants cannot be fulfilled because of insufficiency of resources. Therefore, we have to go on utilizing the resources in such a way, so that, our more wants can be fulfilled leaving no one in most important wants unfulfilled. For it, we must select best ways for the utilization of the resources. We should have the complete information of resources available, needs of the country and their importance and ways for the utilization of resources. This definition is given in 1930 A.D after WWI. During third decade of the twentieth century, the European countries were badly in need of large quantities of resources for rehabilitation, construction of infrastructures, renovation etc. they were destructed in war. This definition is both normative and positive in nature. The major propositions are:-

there is unlimited human needs or wants
there is scarce means of resources
there are alternative use of resources
there is need of choice

Criticisms:

The definition is criticized in the following ways:-

economic problems arises not only due to scarcity but due to under, miss or over utilization of resources
economic problems arises due to inequality too
there is political consideration
needs and resources may vary

Superiority of Robbins definition over Marshall’s definition:-

the definition is scientific
the definition is universally accepted
the definition has wide scope
the definition has science of choice

Microeconomics:-
The term microeconomics is derived from the word micro economy and science. The term micro is also derived from the Greek word micros which means small or tiny. Microeconomics is defined as the science of small or tiny part of the economy. It provides us the detail information of microeconomics units. The units are single consumer or consumer of a firm or an industry. A single firm or firms belonging to an industry is called worm’s eye view of an economy. In microeconomics we study about the relationships between microeconomic variables like utility, cost of purchasing, demand, supply, price, cost of production, and revenue from sale, profit or loss and so on, it is the study of behavior of consumers and firms.

Scope of microeconomics:-
The scope of microeconomics means its subject matter. it means area of application too. The scopes are:-

study of consumers behavior

           -cardinal utility theory

          – ordinal theory

          -revealed preference theory

          -cardinal behavior theory

Study of production and cost function
Mathematically.

               Q=output (quantity)

               C=cost of production

               K=capital

Q=f (K and other inputs)

C=f (Q)

      Therefore, C ∞ input

Study of price and output determination Profit=revenue-cost

Markets = monopoly, duopoly, oligopoly, monopolistic competition and perfect competition

Study of microeconomic distribution
Factors of production-land, labor, capital and organization

Factor wages-rent, wage, interest, profit

Macroeconomics
Macroeconomics is derived from the word macro, economy and science. The term “macro” is also derived from Greek word “macros” which means large or big. Therefore, macroeconomics can be defined as the science of large segment of the economy or economy as a whole. It provides bird’s eye view of the economy. It gives general features of the economy. It is study of features of economic problems, causes and remedies of the problems in different sectors. The sectors are divided into household sectors, government sector, foreign trade sector, business sector. In macroeconomics we study about the relationship between macro economic variables, the variables are:

a) Aggregate consumption

b) Aggregate income

c) Aggregate saving

d) Aggregate investment

e) Aggregate demand

f) Aggregate supply

g) Price level

In macroeconomics we study about the causes and remedies of trade and payment, price instability, Inequality etc

Scope or subject matter of macroeconomics:
Scope means the subject matter. It means the area of application…

1. Study of wage level and employment level

The macroeconomics deals with wage level and employment level. The level of employment depends upon demand for labor and supply of labor. Both of these factors depend upon wage level. There are different theories of employment like classical theory, Keynesian theory, Kaltorian theory and other modern theory

2. The study of price level and output level

Macroeconomics is concerned with determination of equilibrium price level and output level. The price level means average of the prices of goods and services bought and sold in the country in a year. The level of output depends upon aggregate demand and price level. There are different theories of determination of price level and output level. Among them, Keynesian theory of effective demand is very popular. The theories are the subject matter of macroeconomics.

3. The study of trade cycle
Macroeconomics is concerned with trade cycle too. It explains how the economics ups and downsoccur, what are their causes, how the country can overcome fluctuation. There are different theories of trade cycle. Some of them are Schumpeter theory, Hessian theory, Calder’s theory etc.

4) Study of macroeconomic distribution
The macroeconomics is the study of distribution of income, wealth or resources in the country among the people. It is the study of different theories, laws and principles of distribution of income in the form of wage, interest, profit and rent. It gives us knowledge of effects of high inequality in the distribution of income and wealth. It gives us remedies of unequal distribution and the economic problems due to the inequality.

Normative or positive economics
Economics is both positive and normative science. It is the study of facts as well as ideal theories and principles too. It can be explained as following:
a) Positive economics

Economics is positive science. It is the study of facts or things in reality or existence. In economics the large number of economic problems or questions like what are produced, how goods are priced and distributed, how much profit is earned by firms, what different type of resources are available, hoe the resources are utilized, who are performing different economic activities, why the economic problems are occurring, why is the country suffering from unemployment, price instability, economic instability, import dependency and so on are put and answered. There are different theories laws and principles based upon facts we study in economics. That’s why economics is called positive science

b) Normative economics

Economics is normative science. It is the study of things ought to be. In economics, we study different ideal theories and principles. They are concerned with different economic problems. They give us ideas for overcoming of different economic problems. They are helpful to formulate proper policies and plans. They are helpful to solve the problems of unemployment, import dependency, improper allocation of resources, price and economic instability, unequal distribution of income and wealth and so on. Economics helps us to decide how much goods should be produced, hoe much they should be priced, hoe the government should control money supply, interest rate, public debt, government expenditure etc , how the consumer should allocate the money to get maximum satisfaction from the expenditure, how the firms should combine the inputs to earn maximum profit and so on. This all have ethical importance. That’s why economics is call normative science.

Economics is a science or an art

Economics is both art and science. It is called a science because it is the scientific study of relationships between economic variables, behavior of consumers and firms, nature of market and economy, effect of change in one or more economic variables on the others and so on. The different theories, laws and principles are studied in economics. All of them are generalized and simplified on the basis of facts so as to make them easily understandable. Therefore, economics is said to be science.

Economics is an art. The different theories, laws are explained with the help of graphs, figures, tables, charts, equations etc simplifying and generalizing them. Simplification is to make them easily understandable and generalization is to make them applicable to all economies. In order to explain theories, laws and relationships between economic variables we make some assumptions. The assumptions define the conditions for the application of theories, laws and the relationships. That’s why economics is an art.

Importance of microeconomics:

Important to the consumers

Microeconomics provides the ways for proper allocation of money on different goods and services so that they can get maximum utility. There are different theories of consumers behavior, the theories explain how the consumers should spend the limited money they have to maximize their satisfaction

Important to the firms or businessmen

The firms or businessmen use the microeconomic theories of consumer behavior, production, cost, market, revenue and so on to make proper economic decisions. The microeconomics helps them to know the purchasing power of ability to pay, proper combination of inputs to maximize cost or maximize profit, effects of change in tax rates, subsidies and so on

Important to the government

Government can determine taxes, subsidies, wage level, allowances etc on the basis of effects of change in these factors on the demand for goods and services. Some goods are levied while some are subsidized. The salaries and allowances are adjusted on the basis of relationship between these variables and demand. Interest rate, exchange rate and money supply too are changed with the help of microeconomic theories.

Important for the study of other economic science.

Microeconomics helps us to study of other economic sciences like macro economics, public finance, monetary economics, labor economics, and international trade economics and so on. The theories and laws of these economic sciences are based upon micro economics theories and laws.

Importance of macroeconomics

To know the relationship between macro economics variables:

The macroeconomics helps us in the study of relationship between large numbers of macro economics variables. The variables are Aggregate consumption, Aggregate income, aggregate saving, Aggregate investment, Aggregate demand, Aggregate supply, Price level.

To know the functioning of economy

Macroeconomics helps us to know how the economy functions, how it is regulated, For it macro economics provides us the knowledge of product market, labor market, capital market, land market, international trade market etc. it in forms us the country can achieve equilibrium only if all of the markets are in equilibrium.

To correct unfavorable balance of trade and payment

Macroeconomics provides us different theories of international trade. It provides us different remedies of import dependency and greater outflow of money from the country. The government or country may adjust custom duty, exchange rate, transaction of gold etc to promote export and to reduce import.

To achieve high economic growth and employment level

With the help of theories and models of economic growth and employment we can induce investment increase in income and employment opportunities

Thus, these are the importance of micro and macro economics.

Importance of Tourism Industry

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Sources of foreign exchange earnings

Tourism industry is the main influential type of industry in the world. Nepal has also taken tourism industry as its major sector of income in the fiscal year 2009/11.

2. Employment Opportunities

Tourism industry is also one of the influential sectors. It generates employment opportunities. It provides employment to unskilled, semi-skilled and skilled manpower. Guide, load man etc are the personal or labour required in Tourism industry.

3. Sources of public as well as private income

Tourism industry is the source of income for both public also well as private sector government charges tax, sales tax, service tax etc. which is known as government revenue is the income of public. And handicraft, arts etc are the things that attract tourist and most of them buy them and the seller makers some profit which is called private income.

4. Cultural Exchange

Tourism industry facilities cultural exchange tourist carry over various cultural concepts of other countries where they visit. Local people can learn their language, art, skill, culture etc and vice versa.

5. Publicity of nation

Nepal is a small country, difficult to be located in the world map. Tourism helps to publicize the country in different parts in the world. It helps to publicize. Nepalese art, skills tradition, cultural beauty and hospitality to the world.

Role of cottage and small scale industries

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Employment opportunities

Cottage and small industries provide employment to every sort to skilled people (skilled, semi-skilled and unskilled). It provides alternative job opportunities.

2. Utilization of local resources

Cottage and small scale industries are established in rural area by some local people. So, this type of industry uses the local resource available in that area.

3. Source of foreign currency

Cottage and small scale industry produce handicrafts, painting etc which attracts tourist. About 37% of total export is enveloped by the product of these industries. So, it is the source of foreign currency.

4. Government revenue

Since, 37% of total export is enveloped by cottage and small scale industries, government can even revenue through scales tax, income tax, export tax, vat etc. So, there is the ultimate increase in Government revenue.

5. Living standard

Cottage and small scale industries are simple and are operated with limited capital but also increases/upgrades living standard people can earn sufficient amount to sustain their life and fulfillment of their needs.

Addition as suggested by Abishek

Small Scale Industry:
In the small scale industry the male members of the family along with hired labour work together. In small industries, electric power and improved machines are mostly used in subcontinental the firm employing less than 10 persons are classified as small. In subcontinental Carpet industry, poultry farming, beekeeping, tailoring and furniture making is included in the cottage and small industry.

Importance: There is a shortage of capital and technical skill in subcontinental. It is not possible to establish the heavy industries. While it is very easy to increase the number of small scale industries. The examples of Japan, Hong Kong and Taiwan are before us.

Following are the main advantages of small scale industry in subcontinental :

1. Increase in Industrial Product :-
There is a shortage of manufactured goods in our area. We spend a lot of foreign exchange on the import of these goods every year. So we should increase the small scale and cottage industry to remove the shortage of these goods.

2. Increase in Employment :-
The rate of unemployment is increasing day by day. To control unemployment it is necessary that we should increase the small scale industries because these are labour-intensive. Our farmer can also easily work in small scale industry. It is not possible to provide Govt. jobs to all the unemployed people. It may also increase the self employment.

3. Increase in Foreign Exchange Earnings :-
The various kinds of goods like carpets and sports sold in the international market. We earn a lot of foreign exchange by exporting these goods.

4. Use of Industrial waste :-
The waste of large scale industries like cotton and steel can be used by the small scale industry. In this way we can save a lot of capital.

5. Provides Employment to Women :-
Our women are engaged in the cottage and small scale industry and increasing the production. Because in our society women can not work with other men in the factories. We should increase the number of cottage industries to make the female sector a real asset of the nation.

6. Increase in The Income :-
Increase in the production of goods on small scale increase the income of the people. The rise in income improves the standard of living. In rural areas there is great need of small scale industry.

7. Cheaper Production :-
The small scale industry is labor-intensive while labor is cheap in subcontinental, so the production of small scale industry is cheaper. Due to low prices people purchase more goods and market expands.

8. Proper Distribution of Wealth :-
The small scale industry increases the income of the people and reduces the gap between rich and poor. We can reduce the poverty by expanding the small scale industry.

9. establishment With Small Capital :-
We can establish these industries with small capital. In subcontinental most of the people are poor, so they can start the production with small capital.

10. Development of Backward Areas
We can develop backward areas by establishing the small scale industry in these areas. It will remove poverty from backward areas.

Prospects of Tourism Industry

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Natural beauty

Nepal is a country full of natural beauty. Fast flowing river, evergreen hills, snow capped mountains etc makes Nepal look attractive and majestic. Yearly thousands of tourists visit Nepal to have glance over her magnificent beauty.

2. Religious places

Nepal is the destiny per Hindus. The greatest and the biggest temple of Hindu, Pashupatinath temple is situated in Kathmandu Nepal. The largest statue of Shiva in the world, 143ft is situated in Bhaktapur (Sanga), Nepal other many famous temples shrines etc are in Nepal such as Swyambhunath, Changunarayan, Budhanikantha etc.

3. Art and architecture

Nepal is renowned for its natural and cultural heritage and is generally reputed for the pagoda style of temple which is rare in the world. Many tourist visit Nepal to know the art and architecture of Nepal.

4. Climate and cultural diversity

Nepal is rich in both climate and cultural sector. Different climate can be found in each topography of Nepal. Extreme cold in Himalayan, mixed climate in Hilly and hot climate in Terai. Due to variety in climate, bio-diversity exists in Nepal.

Moreover, Nepal is rich in cultural aspect. There are more than 60 ethnic groups found in Nepal with 103 language. So, many tourists come to visit Nepal to learn or for research purposes.

5. Less expensive

Nepal is an underdeveloped country with few infrastructures. So, Nepal is less expensive country than others. Tourists can visit Nepal in reasonable price.

Meaning of Government Finance

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

Government finance is the deliberate manipulation of revenues and expenditures of the government. It is the financial plan of the government. The government uses the different types of revenues and expenditures as fiscal tools to achieve different objectives. The main objectives are high economic growth, price stability, favorable balance of trade and payment, equitable distribution of income and wealth, proper allocation of resources, balanced and stable economic growth and so on. The government should avoid inflation and deflation, recession or depression. Improper use of resources, price fluctuation, high inequality and so on. For all these things revenues and expenditures are increased and decreased as per the situation of the country.

Government finance has two sides, they are

Government revenues
Government expenditures

In government revenues, the money received by the government in the form of royalties, taxes, escheats, penalties, fines, cess etc are included. In the government expenditure we include development expenditure, administrative expenditures, diplomatic expenditure, difference expenditure, payments of public debts and interest and miscellaneous expenditure. They are used as fiscal tools to solve different economic problems.

Public Enterprise

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

Public Enterprise is an enterprise under government control. More than half of the total share of a public enterprise is owned by the government and effectively managed by the government.

Objective of public enterprises

To improve economic activities.
To provide goods and services to the public at fair prices.
To generate the employment opportunities.
For utilizing foreign aids.
To develop the economic and social infrastructure.
To correct the unfavorable balance of payment.
To earn foreign exchange.
To obtain economic, political and social objectives of the nation by mobilizing available capital and labor resources.

State the present situation of public enterprises in Nepal.

Public enterprises are operating under six broad sectors in Nepal. They are industrial, commercial, service, social, public utility and finance.

There are 36 public enterprises, 7 in industrial sector, 6 in commercial sector, 7 in commercial sector, 5 in social sector, 3 in public utility and 8 in financial sector.

S .N.	Sectors	Total	Capital investment	Gross profit (million)
1.	Industrial	7	23884	-784.3
2.	Commercial	6	54698	3033.1
3.	Service	7	11733.5	1358.0
4.	Social	5	1590.5	-292.5
5.	Public Utility	3	121539.4	5032.4
6.	Finance	8	79930.4	1056.6
	Total	36	222,652.0	10003.3

Source: Ministry of Finance, 2010

The above table shows that only 4 sectors (commercial, service, public utility and finance) have earned profit and rest two (industrial and social) has faced loss during the fiscal year 2008/09, rest of the sector incurred losses. Thus, overall financial status of the public enterprises is very unsatisfactory.

Problems of agriculture in Nepal

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Lack of irrigation

Irrigation is the basic infrastructure for agriculture development. But only 69.48% of total irrigable land has irrigation facility and only 50% of land year round facility. So, farmers entirely depend upon monsoon rain.

2. Lack of technology

Nepal herself is poor. Moreover, her people are also poor. About 205% of total populations live under poverty line. So, neither they can afford for new technology, nor they have proper knowledge about it. So, our agricultural sector is lacking behind.

Problem of cottage and small scale industry

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Lack of rural infrastructure
Nepal’s rural area is sympathies and have no infrastructure life is extremely difficult and hard to earn livelihood. To run an industry, infrastructure is essential but Nepal lacks infrastructure.

2. Lack of skilled manpower

Nepal does not have sufficient manpower basically skilled one Brain drain is the main problem of Nepal. All skilled manpower move abroad which is the major problem.

3. Lack of modern technology

Farmers in our country use traditional method of farming. They do not know about modern technology. They totally depend upon tradition. They depend upon monsoon rain and use low quality seed.

4. Lack of credit facilities

Farmers are poor and there is no proper banking facility in Nepal which lends money in low interest. So, farmers depend upon money- lender, traders etc and charge very high rate interest.

5. Limited market

Due to lack of infrastructure (communication and transportation) farmers do not get opportunity to sell their product in reasonable price.

6. Intermediary Exploitation

Intermediary or middlemen are the price maker of Nepalese economy. They exploit the entire economy. They charge very amount to farmers and sell/supply to market in very huge amount. They are the profit maker and exploiter.

Features of agriculture

Economics 11 Notes — Sun, 08 Apr 2012 05:41:42 +0000

1. Sustenance farming

Nepal carries out sustenance farming rather than commercial. In the Nepali Market, demand of food is equal to its supply. In last 3-4 decades Nepal use to export wheat to Bangladesh but now its vice versa. The production of agro-products makes just equal to its demand.

2. Monsoon based agriculture

Due to lack of irrigation facilities, almost all the farmers depend upon monsoon rain. Nepal’s government has not made any irrigation plant till today. Only few places are reaching to irrigation facilities. Only 69.48% of land has irrigation facilities where only 50% of land or cultivable lands have year round facilities.

3. Predominance of food crops

Food crops are the type of crops that are basically used as primary source of food. Such as paddy, maize, etc. From centuries back in Nepal has been continuously growing more amounts of food crops and today also it shares around 48.9% of total food which is nearly half.

4. Traditional technology
Nepal is practicing traditional method of farming since past. To plough the field, we never use improved seed and pesticides. GON also does not have any attention towards it.

5. Low productivity

It’s obvious to have low productivity because farmers entirely depend upon monsoon rain which is uncertain. No proper irrigation facilities and traditional method of farming causes low production.