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Economic activities are mainly linked with Agriculture, Industry, and Trade. There is an inseparable and mutually supporting relationship among them. Nepal is still an agricultural country. The majority of people are engaged in agriculture for their livelihood. It is not only an occupation or a source of income but a way of life too for many of us.
Trade is exchange or buying and selling of goods and services between the individuals or nations. Goods and services produced in one place are transported to different places and sold to the wholesalers and retailers, and who, in turn, sell them to consumers. It is an important indicator of economic development of a country. It brings money and makes a nation rich, prosperous and strong.
Types of Trade
According to the nature and scope of the trade, it can be divided into two categories: Internal or Domestic trade and International or Foreign Trade.
The supply, distribution, buying and selling of goods and services within a country is called internal trade. In this trade, goods and services produced in a place within the country or already imported such goods and services are transported to different places in the country and are sold and bought.
The supply or buying and selling of goods and services from one country to another country are called an international or foreign trade. The goods and services required from other countries are imported and the surplus domestic goods and services are exported to other countries. Such a trade is conducted in convertible hard currencies: US dollar, Euro etc.
The more a country can export more will it earn foreign currency and will have a surplus of trade or favourable trade. It will be opposite of it or trade deficit if more is imported than exported. Generally, a developing country like ours exports raw, unfinished materials and handicrafts, which don’t fetch much money. What the developed countries do is just opposite of it. There has to be at least balance of trade or payment: the balance between import and export to have a favourable trade.
International trade is becoming more and more competitive. Many countries export quality goods at the lower rate to increase their share in the international trade. Nepal lacks skill, resources, technologies and support bases to compete in the international markets. Some countries do have the even policy of protecting their own industries and products and give subsidies on their products.
For International or foreign trade, we must be involved in money exchange.
Importance of Foreign Trade for Nepal
Foreign trade plays an important role in the development of a developing country like Nepal. Its importances are:
- Helps to expand and develop industries
- Earns foreign currencies, and a place in international market
- Spreads our goods and services to other countries
- Creates employment opportunities
- Promotes international relationship
- Enables the country to import appropriate technologies
- Supplies goods not produced in own country
Nepal, being a landlocked country, has no seaports. She has to travel through India to be able to use Indian ports. Quite often do come unexpected transit problems. Transportation cost, demurrage charge, and insurance charge make the goods more expansive. It takes longer time as well.
Nepal imports more than it exports both in terms of items and value. Most of the things exported are agricultural products, handicrafts, and raw materials, which don’t earn much. It imports a lot of goods of daily uses and also expansive luxurious items. This has caused tremendous trade imbalance.
Nepal doesn’t have yet well-developed industrial base. Its products are generally of low quality. At the same time, due to various reasons, the cost of production is also high. This makes Nepali products unable to compete in international markets.
Economic Planning in Nepal
Nepal Must have economic Plan. Nepal has economic plan. Economic Planning is defined as conceiving, initiating, regulating and controlling economic activity by the state according to set priorities with a view to achieving well-defined objectives within a given time. If we have to define economic planning in simple words, then we can define it as the branch of planning in which nation decides in advance what to be done. It is making major economic decisions by a determinate authority on the basis of a comprehensive survey of the economy as a whole. Such decisions include what and how much to produce; how, when and where it is to be produced; and to whom it is to be allocated.
In reference to underdeveloped countries, it is defined as a conscious effort on the part of any government to follow a definite pattern of economic development in order to promote rapid and fundamental change in the economy and society. Such an economic planning was first introduced by the USSR in 1928 AD. These days, almost every developing country has its own economic plans. There are diverse areas that need to be developed simultaneously: education, health, transport, communication, energy, human resource, industry, agriculture and so on. Hence, economic planning is important for the full and effective utilization of national resources for the benefits of general people, economic development and stability of the country.
The history of economic planning is not very long in Nepal. There were some attempts made to introduce economic planning during the time of Rana Prime Ministers: Juddha Shumsher and Mohan Shumsher, but all in vain. After 2007 BS, Matrika Prasad Koirala government established a Ministry of Planned Development, but it too couldn’t function as expected. Finally, in 2013 BS 1956AD), the Planning Commission was established and the First Five Year Plan launched.
Forex also depends on the economy planning and it’s steps of the country.
Nepal Rastra Bank is the central bank of Nepal.