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Class : 11
Unit : Economics

Explain the main characteristics of Nepalese Economy.

Ans : The main characteristics of developing countries are explained below: i) Low per capita income:- The per capita income of Nepalese economy is very low. The per capita income of Nepal is US dollar 766 which is very low as compare to it’s neighboring countries like India and China. ii) Mass poverty:- There is mass poverty in Nepalese economy. About 22% of total population of Nepal is below poverty line. Mass poverty is due to low per capita income and unequal distribution of income. iii) Excessive dependence on agriculture sector:- Agriculture sector is regarded as the backbone of Nepalese economy. About 66% of total active population of Nepal is engaged in agriculture farming. About 32% of total GDP of Nepal has contributed by agriculture sector. iv) Underutilization of natural resources:- Nepal is very rich in natural resources like water resources, forest resources and mineral resource. There is no proper utilization of these natural resources. Nepal has about 600 rivers which have potentiality of generating 83,000 megawatt of hydroelectricity. Despite of such huge potentiality of hydroelectricity, Nepal has been able to generating only 830 Megawatt hydroelectricity. This data shows that there is underutilization of natural resources. v) High trade deficit:- Trade deficit occurs when the value of countries import is greater than the value of countries export. And in context of Nepal, there is high trade deficit because Nepal imports more and exports less. Therefore, Nepal should produce those goods and services which have comparative and competitive advantage. vi) Dualistic and mixed economic system:- Dualistic economic means both traditional and modern characteristics prevail in the economy. The urban sector is characterized by non-agricultural sector while rural area is characterized by agricultural sector. On the other hand, mixed economic is an economy where there is existence of both capitalism (private sector) and socialism (public sector). In context of Nepal, it has mixed economy system. For example, Nepal electricity authority, Nepal Oil Corporation and controlled by government. vii) Rapid population growth:- There is rapid population growth in Nepal. According to population census, population growth rate of Nepal is 1.4%, this is higher than other developing countries. The main reason for rapid population growth in Nepal is illiteracy, early marriage, polygamy etc. viii) Remittance economy:- There is lack of employment opportunities in Nepal. Therefore, large number of Nepalese youth has migrated to foreign countries in search of job. They have gone specially to Malaysia, Qatar, and Dubai etc. The money earned by this people are sent to Nepal in the form of remittance. Remittance helps to improve the living standard of people and reduce poverty.
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