Vedanta High School Economics Book 9 Final (2077)

CLASSIFICATION OF HOUSEHOLD RESOURCES

According to home management, the resources can be classified into two groups: human

resources and material resources.

1. Human Resources: Human resources describes the sum total of a person’s abilities,
knowledge, and skills. It refers to the skill, knowledge, attitude, expertize and capability
inherent in a person. It includes the following:

a. Ability and Skill: The capacity to perform any task skillfully and efficiently is termed
as ability and skills.

b. Attitude: The attitude of a home manager is very much related to bring peace and
prosperity in home. This quality can be achieved through sincerity, experience and
practice.

c. Knowledge: It helps in analyzing family needs and priorities and in making proper
utilization of scarce resources.

d. Energy: Energy is also a very important human resource. We can use it while performing
our day to day household activities.

e. Education Attainment: Education is an asset. It brings in rationality which helps in the
betterment of the family.

f. Expertize: Expertize in performing and managing household activities is a vital factor
for family well-being.

B. Material Resources: Material resources refer to the tangible resources which are at the
disposal of the household or are in its possession. It includes the following:

a. Land: Land is a material resources. It helps in growing crops and vegetables to meet
the needs of the family.

b. Capital: By capital is meant the productive asset which helps in further production of
goods required by the family.

c. Property: It encompasses material assets like gold, silver, house, etc. a household has
in its possession.

d. Money: Money is a material resource, which can be accumulated by people through
income, savings. It helps in purchase of goods and services.

e. Technology: It includes household equipments and technology like grindstone, water
mill, plough etc.

f. Community Facilities: Community facilities are libraries, parks, clubs, play grounds,
roads, etc.which a household can use.

MANAGEMENT OF HOUSEHOLD RESOURCES

Household resource management is the process of making decisions about how to
maximize the use of resources, human resources and material resources for the well being
of the family. The areas which are needed to be considered for the proper utilization of
household resources are:

1. Supply of Resources can be Increased: Material resources are generally scarce. The
scarcity of material resources can be compensated with the increased use of the human
resources like intellectual power, physical power, etc. to solve problems. By dint of it, with
a little material resources, the family requirements can be fulfilled.

2. The Utility of Resources can be Enhanced: Resources can be utilized in different ways.
For example, by adding a shelf with the reading table, books can be kept. Training can be
provided to expand knowledge and skills of the family members.

201 Vedanta High School Economics - Book 9

3. Alternative uses of Resources: Resources are scarce and have alternative uses. If there is a
shortage of time in completing any task, the task may be completed in other ways within
time by using additional physical power.

4. Balanced Utilization of Resources: The resources, human resources and material resources
should be used in a balanced way. Sometimes material resources may be required more
than the human resources. Money along with human resources like intelligence, judgment,
memory and innovation etc. can be used so that a balanced utilization can be made.

5. Maximization of Satisfaction: The resources should be Key Terms
used in proper ways so that satisfaction can maximized.
For example, food enriched with protein is needed for Human resources: workforce
the growing children and if it is included in the food Expertize: Knowledge in a partic-
menu of children, more satisfaction will be achieved. ular field
Innovation: a new method, idea,
Stages in Household Resources Management

Management of household resources involves the following stages:

1. Planning: The first stage in management of household resources is planning. Planning has
to be done with regard to both material and non material resources and their utilization.
Planning needs to be done about mobilization of resources and use of resources in various
household works.

2. Organization: The next step is to organize household activities. Household work has to be
divided and assigned to different members as per their capacity. Accordingly, resources
have to be allocated for the work.

3. Control: After planning is done and resources are mobilized and allocated, the next step
is control and monitoring of the work. This is necessary to ensure that the work is done as
per the plan and resources are optimally utilized.

4. Evaluation: After the household activities are completed, evaluation of the work needs to
be done. It is made in order to ensure whether funds are spent in conformity as per the
plan or not.

• Household resources includes both tangible and intangible resources atKeynote
disposal with a household

• Utilization of family resources according to the requirements is household
resource management

9.3 FAMILY BUDGET

A family budget is a statement which shows how family income is spent on various items
of expenditure on necessaries, comforts, luxuries, and other cultural wants. It shows the
distribution of the family income over the various items of expenditure.

Each family, for its survival, keeps some money or properties. But this resource is very
much limited and within this limited resources, a family maintains all its expenses.
However, to spend the limited resources properly, a proper planning is required. To make
an appropriate planning, the source of income and its amount as well as the areas of
expenditure are needed to be well specified.

A family budget is a plan of spending money for the family based on the income and
expenditure of the family. It is a tentative estimate of a family’s income and expenditure
over a definite period like a week, a month
or a year. Thus, a family budget is a written Viewpoint What makes a good house man-
plan for using the income of the family ager? How is one able to anticipate
which reflects the family needs, time and needs and solve household problems
areas of expenditure. quickly?

Vedanta High School Economics - Book 9 202

IMPORTANCE OF FAMILY BUDGET

The importance of family budget may be examined under the following hedings:

1. Creates Awareness: Budget helps to increase awareness regarding income and expenditure
of a family. After preparing a budget, if the expenditure is made, it will make an individual
aware of the source and amount of income as well as the areas of expenditure.

2. Balancing Income and Expenditure: A balance can be made regarding income and
expenditure. If there is a budget, it will help to reduce or extend expenditure depending
on the family income. It helps in the proper distribution of family income for satisfactory
living.
A family budget en-
3. Cut on Unnecessary Expenses: In preparing a budget, expenses to be sures that the scarce
made are properly analyzed. This helps to identify the unnecessary resources are allocat-
and extravagant expenditure.
ed rationally to maxi-
4. Helps Create Savings: As savings is an integral part of a budget, a mize satisfaction
budget encourages savings whether the income is more or less.

5. Saving of Time: A budget helps the members of the family to spend money within the
time and thus it helps to save time and energy.

6. Fulfils Family Needs: It helps to meet the important demands of a family. In a budget, the
important areas of expenditure are specified and so there remains nothing to be unfulfilled.
For this reason, the family does not suffer in paying house rent, income tax, electricity bill,
etc. in due time.

7. Solvency of the Family: The satisfaction and solvency of the family grows with budget.
By calculating the demands of the family members, the budget is usually made so that
everybody remains satisfied. It helps to live within one’s own income.

Rules For Preparing a Family Budget Solvency of the family helps

There are some rules which are needed to be KEY to meet long-term financial
considered while preparing a budget for the family. IDEA obligations easily
These are:

1. Knowing the probable monthly income of the family.

2. Knowing the number of family members and their special needs.

3. Identifying the main sectors of the family expenditure e.g. food, clothing, housing, medical,
education, recreation and savings etc.

4. Deciding how much money should be spent on each of the sectors of expenditure.

5. Deciding the expenditure based on the sectors and their sub-sector.

6. The budget is to be flexible by allowing the scope of changes and readjustment from one
sector to another.

Types of Family Budget

A household budget may be divided into three types:

1. Balanced Budget: If the anticipated revenue is equal to planned expenditure in a budget
it is called balanced budget.

2. Surplus Budget: If the income is greater than the planned expenditure in a budget it is
called surplus budget.

3. Deficit Budget: If the income is less than planned expenditure in a budget it is called
deficit budget.

203 Vedanta High School Economics - Book 9

FORMAT OF A FAMILY BUDGET

Suppose a family has a monthly income of Rs. 38000. There are four members-husband,
wife, a 9-year old child and a servant. A hypothetical monthly budget of a family is
prepared as:
KEYNOTE

Income Expenditure • In the

S.N Income Headings Amount S.N Expenses Headings Amount budget, the
1 Salary Income (in Rs.) Food (in Rs.) total income
is Rs. 38000
30000 1 9300 out of which

2 Tutorials 5000 2 Pulses , Vegetables 3000 the expendi-

3 Others 3000 3 Milk 1000 ture made is
4 Laundry 500 Rs. 33000.
• It is a wise

5 House rent 8000 thing for a

6 Electricity bills 1200 household
7 Fuel cost 3000 budget to be
a surplus
8 Educational expenses 4500
budget

9 Medical care 500 • A amount
in a budget
10 Recreation 2000 are only the
estimates not
Total 38000 Total 33000 actual figures

Note: Since the expenditure of Rs. 33000 in the budget is less than income
of Rs. 38000, the budget is a surplus budget.

9.4 ACTIVITIES CONDUCTED AT HOME

Economic activities are those steps related to the consumption of goods and services and
activities in which money is exchanged for a product or service. Economic activities are
performed for the purpose of making money, gaining wealth, and creating and producing
items that can be offered to the public for sale. There are various types of activities which
are conducted at home. They are:

1. Farming and livestock (such as food crop, cash crop and cattle raising)

2. Cultivation of fruits (such as mango, cherry, banana) or vegetables (such as tomato,
cassava, pepper, fresh herbs) for consumption

3. Minding of fowl (chicken, ducks and geese) for consumption and sale.

4. Taking care of children and aged members of the family.

5. Production of goods (food, garments, crafts, incense sticks, candles etc.)

6. Sale of commodities (self-prepared food, groceries, snack and drinks, clothes, agricultural
products)

7. Sale of services (hairdressing/barbering, repair of electrical appliances, childcare, teaching)

8. Biscuits and confectioneries (sweet making, homemade biscuits and cakes)

9. Kitchen works, laundry and cleaning of the house. Pause for Thought
10. Cosmetics sales through networking and parties. A family budget ensures
11. Data entry and desktop works. that the scarce resources are
12 Making greetings cards and gift items allocated rationally to maxi-
13. Knitting, alteration and sewing services mize satisfaction. Justify it.

Vedanta High School Economics - Book 9 204

9.5 HOUSEHOLD TECHNOLOGY

The technology which is traditionally used to perform various types of household works
is called household technology. The household technologies which are used in Nepal are
as follows:

1. Plough: A plough is a farming tool that works with the power of ox, bull or buffalo. It
helps to dig the soil in fields so that seeds can be planted. It is pulled by bull or ox or
buffalo, and the spur at the bottom of the plough makes the furrow across the field.

2. Watermill: Watermill is an engine that works under the principle of transformation
of kinetic energy to mechanical energy. It uses a water wheel or turbine to operate a
mechanical process such as flour or lumber production, metal shaping etc. The flowing
water is passed down in force directly to the turbine connected with the mill. The grains
in feeder container fall down uniformly to the hole in rotating disc automatically with the
vibration caused because of motion.

3. Oilseed crushing device (Kol): O ilseed crushing device is a traditional technology of
Nepal that is used to crush the oilseeds like mustard, sesame, etc. It is known as "Kol" and
"Ghani" in Nepal. It consists of three parts:

First part: The first part is a wooden mortar fixed on the ground. It has a scooped circular
pit at its centre and an outlet to exit the oil after crushing.

Second part: The second part is a wooden pestle whose curved end is inscribed in the
circular pit of mortar and another end is fixed to an angular rotator which can freely move
around the mortar.

. Third part: The third part is the angular rotator itself, one end of which carries a Y-shaped
structure to move around the mortar and the other is fixed to the upper end of the pestle.

4. Silauto and Lohoro: Silauto and Lohoro are pair of grinder commonly used to make
tomato pickles and other mixtures. The Lohoro is a smooth rectangular or circular stone
bar used to crush the items over the flat tray like Silauto. Usually, this is used for crushing
and grinding spices like mustard seeds, ginger-garlic or making chutneys.

5. Jaato: Jaato is a circular grinder made up of stone and a wood handle at the top to make it
easier to roll it. It is mostly used to grind pulses. It consists of two round stones of which
the bottom part is attached to the ground or the floor in the house and has a big nail or
wood in the centre to keep the top stone in place while grinding. The top part however
has two holes in it, one in the middle to insert grains and the other on the side to place a
handle for grinding.

6 Dhiki: Dhiki is a traditional grinder made up of wood. It is similar to the seesaw, in which
applying force on one side will lift the other side and vice versa. One side of Dhikih is
a short but strong pole attached to it at the bottom to apply pressure to the item being
ground. Another side is plain and usually pressure is applied from that side with human
legs. The surface where it is to be ground is also made up of wood and usually the Dhiki
is placed on the earthen floor. It is used to grind rice grains.

7. Theki: Theki is locally made by people from wood and is usually used to store milk fat,
make butter out of it. The "Theki" is only a vessel, where as the "Madani" is like a thick
stick with turbines at one end. The "Madani" is then kept inside the "Theki" with milk fat
in it. As the Madani is rotated, the turbines present in it works like a mixer grinder and
separates the fat and the whey.
Lumber: Timber sawed or split into planks
Glossary
Pestle: A tool with a rounded end, used for crushing and grinding substances

Mortar: A cup-shaped receptacle made of hard material, in which ingredients are

crushed or ground

205 Vedanta High School Economics - Book 9

9.6 FAMILY WELL-BEING

The literal meaning of the term, "well-being" is the state of being happy, healthy or
prosperous. Well-being includes the presence of positive emotions and moods (e.g.,
contentment, happiness), the absence of negative emotions (e.g., depression, anxiety),
satisfaction with life, fulfillment and positive functioning. In simple terms, well-being
can be described as judging life positively and feeling good.

Family well-being includes the safety, health, and Family well-being refers to
financial stability of all family members. Safe, healthy,
and financially secure families are more likely to reach KEY a “sense of well-being of the
the goals they set for themselves and their children. IDEA family, collectively and sub-
Families who are able to make informed decisions, jectively

manage their basic needs, and tackle pressing human and community issues are better
equipped to lead happy, healthy lives.

Each individual and family defines what constitutes economic well-being and an adequate
standard of living for them. Economic well-being in a family is the desire for protection
against the economic risks people face in their daily lives (loss of employment, illness,
bankruptcy, poverty, destitution in old age).

Researchers have examined different aspects of family well-being that include the
following.

1. Physical well-being.

2. Economic well-being.

3. Social well-being.

4. Development and activity.

5. Emotional well-being.

6. Psychological well-being.

7. Life satisfaction.

8. Engaging activities and work.

Determinants of Family Wellbeing

The main factors which determines the wellbeing
of a family are as follows:

1. Emotional Traits: The traits associated with mothers’ and fathers’ emotions play a key role
in family wellbeing. The ‘climate’ created by mothers within the family affect not only the
parent-child relationship but also the couple relationship.

2. Personality Traits: Personality traits namely psychological ‘independence’ and
‘interdependence’ play an important role within the family. These two constructs seem
to work in tandem, independence enhancing individual autonomy and self-esteem,
interdependence encouraging greater sensitivity to the needs and a closer involvement in
the lives of family members.

3. Parent's Relationship: The quality of relationships between husband and wife are closely
intertwined, and these elements have a combined influence on overall family wellbeing.

4. Cross Generation Effect: Children whose grandparents are separated tend to have higher
levels of psychological disturbance and lower levels of life satisfaction.

5. Socio-economic Effect: Higher income is associated with lower levels of psychological
disturbance among children. Feeling financially secure boosts the psychological well-being
of both parents. Social, cultural and economic context has a pervasive influence on family
well-being via influence of conflict resolution , unresolved problems in relationships and
personality attributes.

Vedanta High School Economics - Book 9 206

9.7 STANDARD OF LIVING

A standard of living is the level of wealth, comfort, material goods, and necessities available
to a person. Standard of living is often equated with quality of life, but it is not the same
thing. Standard of living and quality of life are similar in that they utilize some of the same
data, but standard of living represents a more physical aspect of life while quality of life
represents the more intangible aspects of life.
Standard of living is the ne-
An individual or family's standard of living is an
actual measure of the goods and services affordable cessities, comforts, and luxu-
by and available to them. It is most commonly KEY ries enjoyed or aspired to by
IDEA

assessed in terms of annual household income levels, an individual or group

and to a lesser extent, wealth, community assistance,
family contributions, special family needs, distribution of income within the family or
household, and geographic location.

Standards of living can be affected by job shortages, divorce and re-marriages, reduced or
sporadic earnings, loss of a spouse to name just a few of life's challenges.

DETERMINANTS OF THE STANDARD OF LIVING OF A FAMILY

The following are the main factors on which the standard of living of an individual or a
family depends:

1. Income: The most important factor on which the standard of Standard of living’ refers
living of a family depends is the family income. The amount of to the necessaries, com-
necessaries, comforts and luxuries which one enjoys are very forts and luxu­ries which
largely governed by family income. In this monetized world,
it is the purchasing power or earning power of a person which a person is accustomed to
determines his standard of living. enjoy.

2. Size of the Family: If a man has a large family, the family income will be thinly spread over
the family and the standard of living will be lowered. Other things being equal, the smaller
the size of the family, the higher is likely to be the standard of living. This underlines the
importance of family planning.

3. Family Tradition: A person inherits a certain standard of living from his parents. In
most cases, such a standard of living will be maintained somehow. Departure from the
traditional standard of the family is not easy.

4. Education, Tastes and Temperament: A person’s standard of living is also affected by his
education, personal tastes and temperament. These factors would modify the standard
that a person may have inherited from his family. He makes every effort to maintain it or
improve upon it.

5. Social Customs and Conventions: A person lives in a society and normally follow the
norms and practices in it. For reasons of his own and his family honour, he does not like
to lag behind in observing norms and conventions in social ceremonies like marriages.

6. General Price Level: For determining a person’s or a family’s standard of living, it is not
enough to take into account only his money income, but what the income is capable of
buying in terms of goods and services. This depends largely on the price level, particularly
that of the goods and services which are of routine consumption.

Keynote • A family budget helps to balance income and expenditure of a family
• Family well-being implies the presence of positive emotions
• Standard of living refers to the material basis of well-being, which is reflect-
ed in a person’s consumption level

207 Vedanta High School Economics - Book 9

9.8 LIFE SATISFACTION AND FAMILY

Life satisfaction is a bit more complex than it seems; the term is sometimes used
interchangeably with happiness, but they are indeed two separate concepts. Life
satisfaction is the evaluation of one’s life as a whole, not simply one’s current level of
happiness. Happiness is an immediate, in-the-moment experience; although enjoyable,
it is ultimately fleeting. Life satisfaction is not only more stable and long-lived than
happiness, it is also broader in scope.

Ed Diener’s: “An overall assessment of feelings and attitudes about one’s life at a particular
point in time ranging from negative to positive”

Life satisfaction refers to an individual's personal judgement of wellbeing and quality
of life based on his or her own chosen criteria. It is measured in relation to economic
standing, amount of education, experiences, and residence, as well as many other topics.

Family satisfaction is defined as the degree to which family members feel happy and
fulfilled with each other. Life satisfaction measures how people evaluate their life as a
whole rather than their current feelings. It refers to perceptions of family quality such as
solidarity, happiness, and overall relational well-being.

Family satisfaction depends on the following factors:

1. The degree of closeness between family members.

2. Family’s ability to cope with stress.

3. Family’s ability to be flexible.

4. Family’s ability to share positive experiences.

5. The quality of communication between
family members.

6. Family’s ability to resolve conflicts.

7. The amount of time spend together as a
family.

8. The way problems are discussed.

9. The fairness of criticism in the family.

10. Family members concern for each other.

CONCEPTS FOR REVIEW

Home Economics Home Management Household Manager

Household Resources Family Budget Family Wellbeing

Standard of Living Household Technology Human resources

Economic Activities Happiness Family Satisfaction

Vedanta High School Economics - Book 9 208

EYE ON THE PAST
HOME ECONOMICS- Origin

Although principles of domesticity were being taught as early
as the mid 19th century, the term “home economics” was not
applied to this area of study until the early 20th century. At
this time, the application of scientific theories and techniques
modernized activities associated with home economics, such as
cooking, laundry, sewing, housecleaning, care of the sick, and
sanitation.

Home economics emerged at the turn of the twentieth century as a movement to train women to be
more efficient household managers. At the same moment, American families began to consume many
more goods and services than they produced. Household economics covers the economic analysis of all
decisions made by households. The microeconomic foundations of household economics were pioneered by
the founders of the New Home Economics (NHE), Gary Becker and Jacob Mincer.

GLANCING THE UNIT

Household Economics: Household economics Household resources: Resources which are at the
deals with the economics and management of the disposal of the household.
home and community.
Household resources are divided into two
Household Management: Household management categories:
is the systematic management of household and
it encompasses the actions necessary to take care A. Human resources
of the household. B. Material resources

Qualities of a good household manager: Stages in Household Resources Management
1. Planning
1. Intelligence 2. Organization
2. Enthusiasm 3. Control
3. Sympathetic 4. Evaluation
4. Judgement Family Budget; Estimate of income and
5. Perseverance expenditureof a family over a period of time.
6. Adaptability
7. Self control Household Technology: The traditional
8. Abilityto communicate technologies which are used at home.
Responsibilities of a household manager
1. Maintain good relation among the members Family Wellbeing: Well-being can be described as
2. Equal sharing among the family members judging life positively and feeling good.
3. Proper distribution of household work
4. Balance between income and expenditure Standard of Living: An individual or family’s
5. Ensure peace and security of the family standard of living is an actual measure of the
6. Social responsibilities and duties goods and services affordable by and available to
them.

Life Satisfaction: Family satisfaction is defined as
the degree to which family members feel happy
and fulfilled with each other.

209 Vedanta High School Economics - Book 9

QUESTIONS FOR REVIEW
Very Short Answer Type Questions
1. Define home economics.
2. What is meant by household management
3. What are household resources?
4. Who is a household manager?
5. What is meant by household resources management?
6. What is a family budget?
7. What is meant by household technology?
8. What is meant by family wellbeing?
9. What determines the standard of living of a family?
10. What is meant by life satisfaction?

Short Answer Type Questions
1. What are the qualities of a good household manager?
2. What are the duties and responsibilities of a household manager?
3. List down the types of household resources.
4. What things are to be considered for the management of household resources?
5. What are the stages in the management of household resources?
6. Write the importance of a family budget.
7. Prepare a balanced budget of a family with a monthly income of Rs. 45000.
8. What are the general rules for preparing a family budget?
9. List down the activities conducted at home.
10. Discuss any five household technologies.
11. What are the determinants of family wellbeing?
12. What are the determinants of the standard of living of a family?
13. What are the factors on which life satisfaction of a family depends?

Vedanta High School Economics - Book 9 210

10UNIT CONTEMPORARY ECONOMIC ISSUES

Learning Objectives Weight:24 Lecture Hours

On Completion of this unit the student will be

able to:

• Understand the concept of poverty and

unemployment

• Explain the characteristics of the poor

• Point out the causes of poverty in Nepal and

suggest remedial measures

• Explain the types of unemployment

• Explain the causes of unemployment in Nepal

• and suggest remedial measures you begin

BeforeExpalin the concept of economic inequality
and its measurement Globalization (or globalisation) is the

• Explain the concept of foreign employment, process of international integration aris-
• its importance and problems privatization, ing from the interchange of world views,
Explain the concept of products, ideas and other aspects of
culture.
liberalization and globalization
Liberalisation is any process whereby a

• Explain the benefits of privatization, state lifts restrictions on some private
individual activities.
liberalization and globalization

Very Short Type Short Type Long Answer Type Total Marks

1 1 1 16

211 Vedanta High School Economics - Book 9

10.1 POVERTY

In simple terms, poverty is not having enough money or access to resources to enjoy a
decent standard of living. It is is a condition of having insufficient income to meet basic
needs such as fooding, clothing, housing, clean drinking water and health services.

According to the World Bank “Poverty is pronounced deprivation in well-being, and
comprises many dimensions. It includes low incomes and the inability to acquire the
basic goods and services necessary for survival with dignity.”

Thus, Poverty is a state or condition in which a person or community lacks the financial
resources and essentials for a minimum standard of living and well-being that’s considered
acceptable in society.

ABSOLUTE POVERTY AND RELATIVE POVERTY

1. Absolute Poverty: The situation in which the household income is below a certain level,
which makes it impossible for the person or family to meet basic needs of life including
food, shelter, safe drinking water, education, healthcare, etc. is called absolute poverty. It is
a condition characterized by severe deprivation of basic human needs, including food, safe
drinking water, sanitation facilities, health, shelter, education and information.

This concept of poverty is strongly linked to destitution and can be applied to all countries or
societies. A person who is considered poor under this criterion is classified in the same way
throughout the world.

2. Relative Poverty: Relative Poverty refers to the state in which a person lacks the least amount
of income required to maintain the normal standard of living, in the society to which they
belong. It refers to a situation in which a person has enough income to sustain life but is lower
compared to rest of the community. In other words, relative poverty is the condition of having
less income than others within a society or a country.

Relative poverty is sometimes described as “relative deprivation” because the people falling
under this category are not living in total poverty, but they are not enjoying the same standard
of life as everyone else in the country. It is closely linked to the notion of inequality.

Difference between Absolute Poverty and Relative Poverty

The difference between absolute and relative poverty can be drawn clearly on the below-
given grounds:
1. Absolute poverty is one in which the income of the family or household is below the
defined level, and so they cannot afford basic subsistence. On the other hand, relative
poverty refers to the person’s way of life, which is comparatively below than the mini-
mum acceptable standard of living in the society or region.
2. Absolute poverty represents poverty with respect to the minimum level of income
needed to meet the basic needs. Conversely, relative poverty indicates the economic
status of a person in comparison to others in society.
3. Absolute poverty remains consistent over time. As against, relative poverty, changes
over time, with the increase in income and standard of living.
4. Absolute poverty can be measured with the help of the poverty line. In contrast, rela-
tive poverty can be measured through the Gini Coefficient and Lorenz Curve.
5. Eradication of relative poverty is possible, but it is not in case of absolute poverty.
6. Absolute poverty is a common issue in developing countries. As opposed to relative
poverty, is mainly found in a developed country.

Vedanta High School Economics - Book 9 212

CHARACTERISTICS OF THE POOR- Rural and Urban

The poor possesses characteristics which are given below:

1. Low Level of Income: The level of income of the poor is very low. The major source of income
of poor is unskilled labour that they are compelled to sell at a low wage rate. Due to low level
of income poor people are illiterate, malnourished and unhealthy. As per the National Living
Standard Survey III the average household income is NRs. 41,659.

2. Occupation: The rural poor are engaged in agriculture occupation and urban poor are engaged
in different activities as a labour. Majority of the poor people in rural areas do not have their
own land and are engaged as agricultural labourers. While in urban areas, they are engaged as
general labourers. Their income is always insufficient for their subsistence.

3. Housing Condition: The housing condition of the majority Key Term some-
of the poor is very bad. Due to the large family size, there is a ne-
always overcrowding in the household. All family members Deprivation: the lack of
have to live in a limited space
thing considered to be

cessity

4. Lack of Assets: There is lack of assets with poor both in rural as well as urban areas. In rural
areas, they have small size of unproductive land without irrigation facilities. Due to this, they
have low level of income.

5. Lower Education Status: Majority of poor both in rural and urban areas are illiterate. About 34
percent of the population is illiterate. High illiteracy rate is either due to ignorance or poverty
or both. Poorer couples have significantly lower levels of education and lower employment
rates than married couples with adequate income.

6. Marriage and Family: Poor couples get married just as often as people who have more income;
however, their marriages are not as secure. The first births for poor newly weds are likely to
happen earlier as compared to upper middle class married couples. As such, poor people are
generally found to have a large family.

7. Expenditure Pattern: The poor spend nearly all their incomes on food. They spend nearly 70
percent of their income on food in order to survive. Sometimes, they consume more than what
their income is. In such a situation, expenditure is more than income. So, instead of saving,
loan is required for consumption.

8. Deprived from Government Facility: The poor are generally deprived from the facilities
provided by the government like telephone, school, health etc. due to their inability to pay
even the minimum required fees or for other reasons.

9. Weak Physical and Mental Condition: The poor in Nepal are unable to get a balanced diet and
health facilities. They are illiterate and they don’t know the importance of nutritional diet for
strong and metal & physical condition. Hence, they are physically and mentally weak. Poor
people are more concerned about surviving and sustenance.

10. Status in the Society: The poor have a low status in the society. They are often disregarded
in a society. They have less access to publicly provided goods and services and face social
exclusion.

Glossary Poverty line: The minimum level of income deemed adequate for a particular country

Lorenz Curve: A statistical tool to measure inequality
Eradication: Removal
Aseet: Property or a valuable thing owned by a person

213 Vedanta High School Economics - Book 9

POVERTY IN NEPAL

Poverty is a matter of widespread concern in Nepal. Despite some progress in poverty
reduction in recent years, Nepal remains one of the poorest countries in the world, with a
Human Development Index of 0.579 ranking it 147 out of 189. (UNDP Human Development
Report 2019)z

The poverty line shows the threshold of poverty. According to the Third Nepal Living
Standard Survey 2010-11 an individual in Nepal is considered poor if his/her per-capita
total annual consumption is below Rs. 19,261. As per the World Bank, a poor is defined as
a person earning less than USD 1.90 a day.

Region Poverty Headcount rate POINTS TO NOTE
Urban 15.46
Rural 27.43 The poverty thresh-
Eastern 21.44 old, poverty limit or
Central 21.69 poverty line is the min-
Western 22.25 imum level of income
Mid Western 31.68 deemed adequate in
Far Western 45.61 a particular country.
Mountain 42.27 Poverty line is usually
Hills 24.32 calculated by finding
Terai 23.44 the total cost of all the
Nepal 25.16 essential resources
that an average hu-
Source: Nepal Living Standard Survey-III, CBS, GON man adult consumes
in one year

The table shows the incidence of poverty being highest in the rural area with the headcount
index of 27.43. Zone wise, poverty rate has been observed highest in the Far Western
Region with the headcount rate of 45.61. Ecologically, poverty is observed highest in the
mountain region with a poverty headcount score of 42.27.

A comparative study of poverty in Nepal as indicated by the three National Living

Standard Surveys (NLSS I,II and III) in different years is shown in the table below.
  Pov erty Hea(dincoupnetrIcnednetx)
The population below
1995/96 2003/04 2009/10 absolute poverty line
41.76 30.85 25.16 in Nepal is estimated
Nepal to have been 18.7
percent
Urban Area 21.55 9.55 15.46
Rural Area 43.27 34.62 27.43

Source: Nepal Living Standard Survey III, CBS,GON

The first NLSS conducted in 1995/96 shows poverty at 41.76. It declined to 30.85 in the
second NLSS conducted in 2003/04 and to 25.16 in the third NLSS in 2009/10.

As per Economic Survey 2018/19, the number of people living below poverty line
has dropped to 18.5 percent in 2017/18 from 42 percent in 1995. According to the
measurement of Multi-dimensional Poverty Index, 28.6 percent Nepalese have been multi-
dimensionally poor. Among the seven Provinces, Karnali Province has the highest level of
multidimensional poverty(33.6%) whereas the lowest level is in Province No 3.(12.2 %)

Vedanta High School Economics - Book 9 214

CONCEPT OF POVERTY LINE

Poverty line refers to the income below which a person or a family is officially considered
to be very poor and in need of help.It is a minimum income level used as an official
standard to measure the proportion of population living in poverty. According to the CBN
approach (Cost of Basic Needs), the poverty line can be defined as the expenditure value
(in local currency) required by an individual to fulfill his/her basic needs in terms of both
food and non food items. The poverty line for Nepal, in average 2010-11 prices, has been
estimated at Rs. 19,261.

As per Nepal Living Standards Survey of 2011, based Disposable income refers to

on consumption, a poor was defined as a person KEY the income left with an indi-
whose per capita calorie consumption is less than IDEA vidual after payment of taxes

2,220 per day and annual disposable income of Rs.

19,261. The World Bank threshold for International

Poverty Line has been set at an individual income of less than 1.90 US dollar a day.

CAUSES OF POVERTY IN NEPAL

Poverty is a serious problem in Nepal and is a threat to country’s prosperity. As Ragnar
Nurske observed, “A man is poor because he is poor”. The main causes responsible for
mass poverty in Nepal are as follows:

1. High Population Growth Rate: There is high population growth rate in Nepal (1.35% per
annum) as compared to the economic growth rate (5.9% per annum). High growth rate
of population and sluggish economic growth rate slow down capital formation and affect
economic development. As a result, poverty is increasing in Nepal.

2. Inequality in Income and Wealth Distribution: The unequal distribution of income and
wealth is another cause of poverty in Nepal. This inequality in income distribution has
severely perpetuated the gap between the haves and have-nots. This is reflected by the
high Gini index of 32.8 as per the UNDP Human Development Report 2018. High income
and wealth inequality mean that the poor lacks resources to carry out economic endeavour.

3. Land Tenure System: Feudalistic land system of Nepal has also played a major role in
aggravating the poverty in Nepal. Only a few percentage of people hold large size of
land in Nepal, but large size of people hold small size of land. Worst of all, 24.4% of
households do not own any land in Nepal. The land fragmentation is a rapid phenomenon
and exploitation of the workers is also intense.

4. Slow Pace of Industrial Development: Nepal lacks even the most basic industries and
depends largely on products imported. Due to low industrial development, there is lack of
employment opportunities in non-agricultural sector. Majority of the people have to remain
unemployed and underemployed. This has also ontributed to poverty perpetuation.

5. Corrupt Bureaucracy: Corruption is another problem that has crippled the economy of
Nepal. Every new idea that comes up in Nepal is phased out due to corruption. There are
different layers of corruption in every sector, and this kind of corruption has not still been
eliminated despite the continued efforts of organizations like Transparency International.

6. Low Rural Development: Nepal is a rural based economy but there is less development of
rural infrastructures like transport, communication, electricity, irrigation, etc. Therefore,
there is low rural development in Nepal. Due to lack of development in rural areas,
employment opportunities are limited and the rural poor remain in poverty.

215 Vedanta High School Economics - Book 9

7. Under Utilization of Resources: Various types of resources are available in Nepal but all

of these resources are underutilized due to lack of capital, skill and technology. One one

hand resources are idle in nature and on the other hand, unemployment is increasing. As

a result,the potentiality of increasing income is thus reduced and poverty exists in the

society. Key Term

8. Unemployment and Underemployment: There is lack of Subsistence agriculture: agri-
employment opportunities outside agriculture. Agriculture
provides only seasonal employment. There is wide- cultural cultivation done pri-
spread problem of disguised unemployment. The surplus
marily for own domestic needs

manpower from agriculture cannot be absorbed in no n agriculture sector .This causes

poverty to persist in Nepal.

9. Subsistence Agriculture: In Nepal, about 62.2% of the population is engaged in agriculture.
Due to lack of irrigation facilities, use of primitive techniques and traditional farming, the
production and productivity of agriculture is very low. Nepalese agriculture is subsistence
in nature and lacks commercialization. This affects agricultural development and cause
poverty to perpetuate in rural areas.

10. Political Instability: Nepal has undergone several political changes in the past decades.Keynote
There is lack of political stability in Nepal. Frequent changes in governments, their plans,
policies and programs are very common in Nepal. The poverty alleviation programs of
earlier governments are not given continuity by the successive governments. Due to
this poverty alleviation programs have been less effective. This has caused poverty to
perpetuate.
• The poverty line for Nepal, in average 2010-11 prices, has been estimated

at Rs. 19,261.

• Recent survey shows that 24.4% of households do not own any land in Nepal

MEASURES OF POVERTY REDUCTION IN NEPAL

The following remedial measures can be taken to reduce poverty in Nepal.

1. Increase in Employment Opportunities: The best remedial measure for the reduction of
poverty is to increase employment opportunities. Development of the industrial sector
provide more employment opportunities. Labour intensive industrial expansion can
increase employment and therefore increase the income of the people. This helps to
reduce poverty.

2. Investment in Human Capital: Adequate investment in human capital also plays a key role
in poverty reduction. Therefore, investment should be made in different social services
like education, health, sanitation, nutrition and so on. Investment in such human capital
increases productivity and income of the poor.

3. Accelerating Economic Growth Rate: Due to slow economic growth, poverty is increasing
in Nepal. Therefore, for reduction of poverty in a country, high economic growth rate
should be maintained. The benefits of economic growth will trickle down to the poor in
the form of more employment opportunities, greater productivity and higher wages.

4. Development of Rural Infrastructures: The development of rural infrastructures increases
the productivity of the rural people. Adequate transport, communication, electricity, etc.
should be developed in rural areas. This helps to increase economic opportunities and
reduce poverty in the long run.

5. Utilization of Natural Resources: The utilization of natural resources is also one of the
main measures to reduce poverty. Nepal is rich in natural resources. Proper utilization of

Vedanta High School Economics - Book 9 216

natural resources increases income, output and employment in the economy. Therefore,
the existing poverty can be reduced through the optimum utilization of the natural
resources available in the country.
6. Women Empowerment: Special emphasis should be given for women education, health,
and employment. If women are educated, there will be control in population growth.
Economic and social transformation is possible through women empowerment which
helps to reduce the poverty level.
7. Modernization in Agriculture: Nepal is an agricultural country. About 62.2% of the
population is engaged in agriculture. Modernization of agriculture increases agricultural
productivity and helps in agricultural development. This improves the economic
condition of the rural people and also develops industrial sector through linkage effect.
Thus, modernization in agriculture is required for the reduction of poverty in Nepal.
8. Land Reform: With no land or little land the poor cannot engage themselves in self-
employment activit­ ies for earning adequate income to meet their basic needs. Redistribution
of land through effective redistribution, implementation of tenancy reforms so as to ensure
security of tenure and fixation of fair rent would be an important measure of reducing
rural poverty.
9. Targeted Programs: Integrated rural development, public work program, subsidy and
transfer program, rural credit program etc. are some of the targeted programs. Such
targeted programs should be implemented for the marginalized groups which have not
been able to enter into the main stream of development. This helps to reduce poverty.
10. Economic Development: The pace of economic development should be increased to
reduce poverty. Economic development leads to development of the overall sectors of the
economy.This helps to create employment opportunities and increase the income of the
people.

CHECKPOINT 1. Distinguish between absolute poverty and relative poverty

2. What are the main characteristics of the poor in Nepal?

3. What are the main causes of poverty in Nepal in Nepal

4. Suggest some measures to solve the problems of poverty in Nepal

10.2 UNEMPLOYMENT

Unemployment is a term referring to individuals who are employable and seeking a job
but are unable to find a job. Furthermore, it is those people in the workforce or pool
of people who are available for work that does not have an appropriate job. It is a serious
economic issue that affects almost all countries and all people either directly or indirectly. 

Unemployment, also referred to as joblessness, occurs when people are without work and
are actively seeking employment. The measure of unemployment is the unemployment
rate which is measured as the percentage of unemployed labour force relative to the total
labour force. The unemployment rate is calculated using the formula given below:

Unemployment rate = Total unemployed labour × 100%
Unemployment
Total labour force occurs

TYPES OF UNEMPLOYMENT KEY when a person who is actively
IDEA searching for employment is

The following are the types of unemployment: unable to find work

1. Frictional Unemployment: It is also known as search unemployment. This frictional
unemployment is referred to as the time lag between the jobs when a person is searching
for a new job or is switching between the jobs. It is the time period between jobs when a

217 Vedanta High School Economics - Book 9

worker is searching for or transitioning from one job to another.

2. Structural Unemployment: This type unemployment is associated with economic structure
of the country. It results due to mismatch in the skills that workers in the economy can
offer and the skills needed of workers by employers when there is structural changes in
the economy. For example, when agricultural sector gets modernized, the farm workers
skills become obsolete and they remain unemployed.

3. Cyclical Unemployment: It is the unemployment which results if the overall demand for
goods and services in an economy can’t support full employment. It takes place during
periods of economic contraction or during the time of slow economic growth. When there
is a downturn in an economy, the aggregate demand for goods and services decreases
and demand for labour decreases. At the time of recession, unskilled and surplus labours
become unemployed.

4. Seasonal Unemployment: A type of unemployment that occurs due to the seasonal nature
of the job is known as seasonal unemployment. Seasonal unemployment exists because
certain industries only produce or distribute their products at certain times of the year.
Industries where seasonal unemployment is common include farming, tourism, and
construction.

5. Voluntary Unemployment: Voluntary unemployment is defined as a situation when
workers choose not to work at the current equilibrium wage rate. For one reason or another,
workers may elect not to participate in the labour market. Voluntary unemployment is
likely to occur when the equilibrium wage rate is below the wage necessary to encourage
individuals to supply their labour.

6. Disguised Unemployment: It is a situation in which a person appears to be employed,
but enough work is not available. Too many workers are engaged in doing in a job. The
marginal productivity of such unemployed person is zero. Such unemployment is found
in agriculture sector.

7. Educated Unemployment: When a person who is educated/trained and skilled, fails
to obtain a suitable job suited to his qualifications, he is called educated unemployed.
Educated unemployment occurs with the rapid expansion of educational facilities.

8. Under Employment: It is a situation which a person is employed, but his capacity is not
utilized to the full extent. His wages are not in accordance with his capacity. A country
having this type of unemployment fails to exploit the efficiency of its human resources.

UNEMPLOYMENT IN NEPAL

Unemployment is a serious problem in Nepal. According to the latest Nepal Labour Force
Survey 2017/18, average unemployment rate of Nepal is 11.4 percent and labour force
participation rate is 38.5 percent. Females reported a higher unemployment rate of 13.1
percent, which is 2.8 percentage points higher compared to males.

Key Labour Market Indicators (in percent)

Province Province Province Gandaki Province Karnali S u d u r

123 5 Paschim

Labour Force 37.8 39.7 47.1 35.7 37.3 27.5 27.3
Participation Rate

Unemployment 10.2 20.1 7.0 9.0 11.2 9.7 11.5
Rate

As reflected in the table, the highest unemployment rate was observed in Province 2 at 20.1

Vedanta High School Economics - Book 9 218

percent, followed by Sudurpashchim with 11.5 percent. The lowest unemployment rate

was observed in Province 3, at 7 percent. The survey also shows that the unemployment

rate is highest among the young people, aged 15-24 years and declines with increasing

age. The 15th Plan has the target of reducing unemployment to 6 percent by 2023/24.

Glossary Time lag: Time gap

Full employment: A situation when the available resources in an economy are fully

employed

Rece4ssion: A period of decline in economic activity

CAUSES OF UNEMPLOYMENT IN NEPAL

The major causes which have been responsible for the wide spread unemployment can be
spelt out as under.

1. Rapid Population Growth: It is the leading cause of unemployment in Nepal. Firstly, the
growth of population directly cause unemployment by making large addition to labour
force. Secondly; the rapid population growth indirectly affect the unemployment situation
by reducing the resources for capital formation.

2. Use of Capital Intensive Techniques: An important factor responsible for slow growth
of employment has been the use of capital-intensive techniques of production, even in
consumer goods indpstries where alternative labour-intensive techniques are available.

3. Inequitable Distribution of Land: Nepal’s population is increasing rapidly, land is not
sufficient for the growing population. Many agricultural households have no adequate
access to land which is an important asset for agricultural production and employment.
As a result, there is heavy pressure on land.

4. Seasonal Agriculture: Agriculture in Nepal is basically a Due to seasonal nature
seasonal affair. It provides employment facilities to the rural of agriculture people en-
people only in a particular season of the year and the period gaged in agriculture re-
between the post harvest and before the next sowing, they main unemployed during
remain unemployed. It has adversely affected their standard of off season
living.

5. Neglect of the Role of Agriculture in Employment Generation: An important factor
responsible for slow growth of employment opportunities is the neglect of agriculture for
generating employment opportunities. Agriculture though containing surplus labour can
generate employment opportunities if proper strategy for its development is adopted.

6. Fragmentation of Land: In Nepal, due to heavy pressure on land fragmentation of land
takes place. As land is fragmented, agricultural work get affected, people who depend on
agriculture remain unemployed. This has an adverse effect on the employment situation.
It also leads to poverty.

7. Lack of Industrial Development: There is lack of industrial development in Nepal. The
surplus manpower from agriculture cannot be absorbed. The industrial growth rate which
hovers between 1.35 percent to 1.8 percent is unsatisfactory and cannot create adequate
employment opportunities.

8. LackofInfrastructure:Afactorresponsibleforhugeunemploymentprevailingindeveloping
countries like Nepal is lack of infrastructure such as roads, power, telecommunications,
highways, irrigation facilities in agriculture. Inadequate availability of infrastructure is a
great obstacle for the generation of opportunities for productive employment.

9. Decline of Cottage Industries: In rural areas village or cottage industries are the only means
of employment particularly of the landless people. But, now-a-days, these are adversely
affected by the industrialization process. As a result, the village industries suffer a serious
loss and are gradually closing down. Owing to this, people who work in these industries
remain unemployed.

219 Vedanta High School Economics - Book 9

10. Defective Education: The present day Viewpoint “Lack of effective policy implementa-
education is defective and is not job
oriented. It is more general than vocational. tion coupled with underdevelopment

It fails to equip people with the necessary is a major cause of unemployment in

Nepal” Do you agree?

skill and expertise needed for a work. It
leads to unemployment as well as underemployment.

MEASURES TO SOLVE UNEMPLOYMENT PROBLEM IN NEPAL

The following measures may be adopted to solve the unemployment problem in Nepal:

1. Creation of More Job Opportunities: The workforce of any country usually makes up a large
part of its population. In order to cater to the needs of its people, Nepal should ensure that it
creates many job opportunities so that all the people who are eager to work, get the chance to
do so.

2. Control in Population Growth: An effective solution for unemployment is to control the
rising population. Government should motivate people to have small families.

3. Speedy Development of Infrastructure: Speedy development of infrastructure helps to
generate employment opportunities for the poor and to raise their productivity. Since private
sector is not attracted to make adequate investment in infrastructure, public investment needs
to be stepped up for its development.

4. Employment Opportunities in Rural Areas: The government should create employment
opportunities in rural areas through intensive farming, greater irrigation facilities, extension
of community projects, and organization of co-operative farming.

5. Planned Development: The government should focus on planned development of all the
regions. Development of the rural areas will stop the migration of the rural people to the
urban cities and this will not put more pressure on the urban city jobs. This helps to create
employment opportunities in the country and solve unemployment problem.

6. Development of Small Scale and Village Industries: Development of small-scale and village
industries can increase the rate of employment. Government should encourage and develop
the agriculture based industries in rural areas so that the rural people don’t migrate to urban
areas. More employment should be generated in rural areas for the seasonal unemployment
people.

7. Self-employment Schemes: Self employment schemes According to Labor Force

for the unemployed youth have to be launched to KEY Survey 2017, the present un-
enable them to start their own business or small-scale IDEA employment rate in Nepal is

firm, which can also generate employment for many 11.4 percent.

others.

8. Reform in Education System: The present education system needs a thorough overall
check to meet the changing pattern of demand not only through re-orientation but also by
diversifying the courses in the field of commerce, trade, banking, insurance, technical and
managerial personnel so that the adjustments of demand and labour in various occupations
become easy.

Vedanta High School Economics - Book 9 220

CONCEPTS FOR REVIEW

Absolute poverty Relative poverty Poverty line
Season unemployment
Subsistence agriculture Structural unemployment Human capital
Self employment
Disguised unemployment Frictional unemployment

Underemployment Voluntary unemployment

QUESTIONS FOR REVIEW

Very Short Answer Type Questions

1. What is poverty?
2. Define absolute poverty.
3. What do you understand by relative poverty?
4. What is poverty line?
5. Mention any two economic causes of poverty in Nepal.
6. How many percent people are poor in Nepal?
8. Define unemployment.
9. What is disguised unemployment?
10. Define educated unemployment.
11. What is under employment?
12. Give any two reasons of unemployment in Nepal.
13. Suggest any four measures to remove underemployment in Nepal.
14. Which age group people are economically active?
15. What is meant by seasonal unemployment?
16. What is the cause of increase in educated unemployment in Nepal?

Short Answer Type Questions

1. Distinguish between absolute poverty and relative poverty.
2. Suggest the remedial measures to problems of poverty in Nepal.
3. Explain the main causes of poverty in Nepal.
4. What is poverty line? Explain the poverty situation in Nepal.
5. What are the characteristics of poverty? Explain.
6. Define unemployment. Point out the causes of unemployment in Nepal.
7. Explain the various types of unemployment.
8. Suggest measures to solve the problem of unemployment in Nepal.
10. Explain in brief the current state of unemployment in Nepal.

Long Answer Type Questions

1. What are the main causes of poverty in Nepal? What measures would you suggest to solve the problems
of poverty in Nepal?

2. What are the main causes of unemployment in Nepal? What measures would you suggest to solve the
problems of unemployment in Nepal?

221 Vedanta High School Economics - Book 9

10.3 FOREIGN EMPLOYMENT

Going from one country to another country for job and to earn money is called foreign
employment. It is an employment opportunity with certain wage under certain terms
and conditions grabbed beyond ones national political or geographical boundary.

Due to rapid growth of population, lack of employment opportunities, Nepalese are forced
to go for foreign employment. In the age of globalization, the mobility of the people from
one country to another country has become a vital factor for foreign employment in the
recent years.

FOREIGN EMPLOYMENT IN NEPAL – An overview

In the history of foreign employment of Nepal, the outflow of Nepalese for foreign
employment started with the seasonal movement of Nepalese workers into India and
inception into the British Army in the past. Institutionally, Nepal Government has
opened 110 countries for foreign employment but, on individual basis, Nepali workers
have been migrated to 172 countries for foreign employment from labour approval.
The main destinations of Nepalese workers are Malaysia, Qatar, Kuwait, Bahrain, Saudi
Arabia and United Arab Emirates. Besides, new employment opportunities have opened
up in Lebanon, Afghanistan,Japan, Israel, Japan, South Korea etc. The trend of foreign
employment in Nepal is shown in the table below.

Year 2003/04 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
No. of Migrants 105703 384665 453543 527814 512887 418713 383493 361941
Source:Economic Survey 2018/19 GON

The table below shows the number of Nepalese workers who have migrated for employment
in different countries till 2017/18.

Details of Labour in Foreign Employment with Work Permit (Number)

Country Total • About 43, 65,415 youths have
Qatar 1196168 been migrated for foreign em-
ployment
Malaysia 1313658
• Institutionally, 110 countries

Saudi Arabia 880951 have been opened up for for-
UAE 572470 eign employment. However,
more than 167 countries have

Kuwait 141764 Keynote been opened up for foreign em-
Bahrain 51897 ployment on individual basis

Oman 35171 • Remittance has occupied a large share in
South Korea 42901 national economy for the last 10 years
Lebanon 12763
Israel 6759 • Remittances contributes a 24.9 percent
Afghanistan 12024
Japan 18401 share share of the gross domestic product
Others 80488
(GDP) in 2017/18.
• Remittance income is estimated to re-

main at 26.2 percent of GDP during the
current FY 2018/19.

Total 4365415

Source:Economic Survey 2018/19 GON

Vedanta High School Economics - Book 9 222

A total of 43, 65,415 workers have been migrated for foreign employment by the end of
FY 2017/18. So far, Malaysia has emerged as the first destination of Nepalese workers
followed by Qatar, Saudi Arabia and the United Arab Emirates.

Till mid-March of FY 2018/19, out of total number of workers migrated for foreign
employment, 30.1 percent workers have been migrated to Malaysia, 27.4 percent to Qatar,
20.2 percent to Saudi Arabia, 13.1 percent to United Arab Emirates and 9.2 percent to
other countries.

Nepal has emerged as a remittance economy, shaped by migrants’ cash flows. Remittances
contributed a 10.9 percentage share of the gross domestic product (GDP) in 2003/04
and has increased to 24.9 percent in 2017/18. The remittance flow, therefore, is a major
contributor to development financing in Nepal.

IMPORTANCE OF FOREIGN EMPLOYMENT IN NEPAL

Foreign employment plays a crucial part in the economic development of a country. The
importance of foreign employment may be explained below:

1. Source of Revenue: Remittance has become an important source of revenue for government

through tax and fees. These fees include fees paid by manpower companies, passport fees,

tax and non-tax revenues. Various recruitment agencies, agents, medical institute, hotels,

restaurants etc has been collecting significant amount of revenue.
Nepal is among the top ten
2. Reduction in Poverty: Since workers’ remittance KEY remittance recipient countries
goes to the rural areas and is primarily spent on the IDEA in the world. In 2017/18, a
consumption of the goods and services, it has playing total of Rs. 654000.3 millions

crucial role in reducing rural poverty in Nepal. The was recieved as remittance

remittance contribution is about 24.9 percent of GDP

and, thus, Nepal is among the top ten remittance recipient countries in the world.

3. Solve Unemployment: About 500 thousands workers enter in the Nepalese labour market
annually. Against this backdrop, foreign employment has played important role not only
to solve the problem of unemployment in Nepal, but also the stability of the external
sector of the economy.

4. Source of Foreign Exchange: Foreign employment brings remittance into the country.
Remittance increases foreign currency availability in the domestic market and raises
national savings. Availability of foreign currency, in turn, facilitates financing of essential
import and can avert possible balance of payments (BOP) crisis.

5. Expanding Employment: Transactions in foreign currency increases in the domestic
financial market with increase in foreign employment. Expansion of airlines network and
training institutes are increasing in proportion with increased labour migration. As such,
foreign employment creates direct as well as indirect employment opportunity in the
economy.

6. Familiarization with New Technology: Most of the workers working abroad are employed
in the industrial sector. They work with modern tools and machinery. This helps to
improve their skill familiarize them with new technology.

7. Feeling of Self Esteem: Foreign employment provides a person a chance to grow personally.
It enables the worker to earn and fulfill his requirements and helps him to support his
family. The earnings made are remitted back home. It increases his self esteem.

223 Vedanta High School Economics - Book 9

8. Improvement in Living Standard: The common Nepalese access to basic facilities has

improved over the years. Despite political upheavals and unrest, the average household

income of Nepalese has increased due to increased receipt of remittances. The remittance

thus received is spent on consumption, followed by loan repayment and household

property.

Keynote • About 500 thousands workers enter the Nepalese labour market annually
• According to Labor Force Survey 2017, the present unemployment rate in

Nepal is 11.4 percent

• Of the total foreign employed skilled workers constitute 1.5 percent

PROBLEMS OF FOREIGN EMPLOYMENT IN NEPAL
The problems of foreign employment are as follows:

1. Exploitation: Denials of pay due to their employment are very common. Nepalese workers
continue to face various forms of exploitation from the foreign employers in foreign lands.
Additionally, they get cheated by the manpower agencies in Nepal. Their grievances range
from over charging to compelling them to accept jobs and salaries as opposed to manpower
agencies’ commitment.

2. Unknown Nature of Jobs: Most of the Nepalese workers have been exploited and are not
paid remuneration as mentioned in their agreement papers. They have not been informed
of the nature of their job. As a result, they have to face accident, physical abuse, injuries,
and even unexpected deaths due to unknown nature of their jobs.

3. High Death Rate: Nepal’s workers are cardiovascular. Worryingly, the workers have no
knowledge about the causes that lead to such serious illnesses. Being unable to meet the
financial burden at home they live under undue stress, which ironically induces them to
consume low quality liquor making them the victims of heart disease.

4. Cheap Labour: Foreign employment is not safe, secured and managed well. Skilled and
trained manpower appropriate to the nature and requirement of foreign demand are not
available. So, people go abroad as unskilled or semi-skilled work force. This has compelled
Nepalese workers to sell their labour at a throw away price.

5. Lack of Monitoring: Various foreign employment services are in operation without
government permission. The innocent job seekers are cheated by the brokers. Even those
who have gone through registered agencies and also having required skill, training and
knowledge are not getting good jobs and salary.

6. Sub-agents or Brokers: The majority of problems faced by potential migrants arise due
to involvement of sub-agents or brokers. Sub-agents travel to villages and the potential
candidates are then brought to the recruiting agent. Sub-agents get commission for it.
When an individual pays money directly to a sub-agent or Dalal (broker) they risk being
cheated..

7. Abuse of Contracts: The most common Viewpoint “Foreign employment is an alterna-
complaint of migrant labourers is in regards tive for thousands of Nepali who
to the abuse of their contracts. Some receive can’t find satisfying or any employ-
less salary than was agreed upon; some find ment in the country” Elucidate

that they are not being employed in the job

that was specified, and some have to work more hours than was stipulated.

Vedanta High School Economics - Book 9 224

8. Manipulated Demand Letters: Demand letters may be manipulated to change the number
of workers needed and the salary and perks provided. These alterations are made by
unscrupulous recruitment agents to attract more labourers. There are many cases of
recruitment agencies collecting money in advance from potential labourers and then
disappear.

Glossary Self esteem: Self-respect

Remittance: Income earned by nationals working abroad
Sub-agent: A person appointed by an agent to perform some duty
Unscrupulous: Having or showing no moral principles

REMEDIAL MEASURES OF FOREIGN EMPLOYMENT IN NEPAL

The following are the measures to overcome the challenges seen in the foreign employment:

1. Training: Mostly, the semi-skilled and unskilled manpower go to foreign countries. So,
they should be well trained about the work before going there.

2. Language Skill: Lack of necessary language Of the total foreign employed,

competence poses a problem to Nepalese workers skilled workers are 1.5 percent,

working abroad. The workers should learn the KEY semi-skilled 24.0 percent and
language where they are going so that no difficulties IDEA non-skilled 74.5 percent
can be seen while working.

3. Acquaint Workers with Laws of Destination Country: The companies or agents should
teach the workers about the rules and laws of the country for being aware, otherwise there
will be great possibility of being imprisoned and involved in criminal activities if the rule
is broken.

B Monitoring and Supervision: There is lack of monitoring and supervision on the part of
the government. The government should alert the ambassador to know about the situation
of foreign employment and should supervise time to time.

5. Regulation of Manpower Agencies: Those manpower companies which are illegally
established and are involved in illegal draining out of workers should be punished
according to law made by the government. Those manpower companies which are cheating
the workers as they do not get good job as contracted before should be strictly banned and
punished.

6. Checking Visa Fraud: The manpower agencies lure workers by showing manipulated
demand letters. The concerned authority for foreign employment should provide legal visa
to the workers and punish those who intend to give illegal visa for foreign employment.

7. Worker Friendly Labour Laws: The government should formulate the laws and policies
required for foreign employment to overcome the challenges seen in the foreign employment
and strictly implement it.

8. Rehabilitation: Those people who are mentally and physically tortured as well as sexually
exploited should be rehabilitated. They should be compensated by the concerned authority
of the country they work.

225 Vedanta High School Economics - Book 9

READING BETWEEN THE LINES
FOREIGN EMPLOYMENT- Boon or Bane?

Foreign employment has been instrumental in raising the standard
of living of the common people. The ratio of remittances to GDP was
29.6 percent in fiscal year 2015/16. Along with prosperity, foreign
employment also brings trauma and tragedy for some. Despite its
contribution to individual families, foreign employment may not
always be lucrative job in all the places. Despite many restrictions
and introductions of new laws and regulations, Nepalese laborers
continue to be cheated by manpower agencies putting their lives in
jeopardy. One of the growing concerns of the recent times is the high mortality rate among Nepalese working
in foreign countries. Of late cases of failed relationship in the family are on the rise.

CONCEPTS FOR REVIEW

Foreign Employment Overseas Countries Remittance
Sub agents Self Esteem Manpower
Brokers Demand Letters Contracts

QUESTIONS FOR REVIEW

Very Short Answer Type Questions
1. Define foreign employment.
2. What is brain drain?
3. Which country has been the top destination for foreign employment?
4. What is the contribution of remittance to the GDP of Nepal?
5. Mention two problems of foreign employment in Nepal.

Short Answer Type Questions
1. Explain the benefits of foreign employment
2. Explain the defects of foreign employment.

3. Suggest the remedial measures to the problems of foreign employment.
Long Answer Type Questions

1. What is foreign employment? Write the benefits of foreign employment.

2. What are the problems of foreign employment? What measures would you suggest to solve the problem
of foreign employment in Nepal?

Vedanta High School Economics - Book 9 226

10.4 ECONOMIC INEQUALITY

Economic inequality is the unequal distribution of income and wealth between different
groups in a society. It refers to the gap in the level of income and wealth in the society.
In most countries, there are people with wealth and income differences that result in some
living in abject poverty while others live in extreme luxury.

Todaro and Smith: "Income inequality is the existence of disproportionate distribution of total
national income among households whereby the share going to rich persons in a country is far

greater than going to poorer persons a situation common to most LDCs".


When income inequality occurs there is a large gap between the wealth of one population
segment compared to another. It is a concern in almost all countries around the world and
often people are trapped in poverty with little chance to climb up the social ladder.

The economic inequality in some places is much Kuznets’ inverted-U hypoth-
more drastic than in others. For example, in esis implies that economic
countries where there is lack of social service growth worsens income in-
systems, the disparities may be most obvious. equality first and improves it
While some people are extremely wealthy, later at a higher stage of eco-
others may suffer inhumane situations such as nomic development
starvation and lack of basic necessities.

CAUSES OF ECONOMIC INEQUALITY

The main causes of economic inequalities in Nepal are as follows:

1. Inheritance: Some persons are born landless; others inherit a few acres and still others
thousands of acres. Parents of some persons die penniless or still worse die under debt
passing the burden of debt on to their children, while others leave huge cash balances for
the benefit of their heirs. As such, inequalities are bound to be perpetuated.

2. Differences in Natural Qualities: No two persons have the same natural talent. Some are
more gifted than others. Persons who are endowed by nature with superior intelligence,
better physique and greater capacity for hard work must surpass others in the race of life.
Some inherit a feeble mind in a feeble body, and they naturally lag behind.

3. Imperfect Labour Market: The market mechanism of determination of wage rate is a cause
of economic inequality. In an imperfect labour market, there is lack of dissemination of
information. Opportunities to acquire skill and expertise are unequal in such a market.
Further workers are not paid as per their productivity. This cause income inequality.

4. Gender Discrimination: Least developed countries In developing countries wom-

are characterized by discrimination. Male are paid en are not treated in equal foot-

higher wages for the same work than their female KEY ing with respect to men and are
counterpart. Inequality between social classes is IDEA generally paid less
one of the main causes of economic inequality in

Nepal.

5. Growth Factor: As development proceeds, the incomes of the upper-income and middle-
income groups rise more rapidly than those of the poor. This happens in the early stages
of growth. The capital-intensive nature of modern sector absorbs less labour, wages form
a smaller proportion of total income. On the other hand, the capital-intensive type of
growth leads to concentration of income in those few hands who supply capital.

227 Vedanta High School Economics - Book 9

6. Inadequate Employment Generation: People at the bottom could raise their economic
status if they could get work. Even if they do not possess adequate earning assets, they
could at least earn from their labour. But there too the situation doesn’t become favourable.
For long the increase in employment opportunities remained less than the rise in the
labour force.

7. Asset Ownership: It refers to the ownership of land, physical capital, human capital and
financial resources that generate income for owners. The ultimate cause of the unequal
distribution of personal incomes in most developing countries is the unequal and highly
concentrated patterns of asset ownership in these countries.

8. Lack of Educational Opportunities: Illiteracy is one of the single factor that has kept people
idle and ignorant for centuries. Illiterate people have less chance of getting employment.
So, such people have not been able to earn just sufficient livelihood for themselves. As a
result, there is perpetuation of poverty thereby increasing economic inequality.

9. Tax Policy: The tax regime of any country can be progressive or regressive. A regressive
Progressive tax system implies
tax system increases income inequality, while
that tax rate increases with the in-
progressive taxes imposes more burden on
the rich. A progressive tax system can move KEY crease in income, while in case of
society in the right direction and help prevent IDEA regressive tax the tax rate decreases
with the increase in income
inequality passing from one generation to the

next.

10. Technological Change. Technological change has also played a central role in causing
economic inequality. This is because technological changes has disproportionately raised
the demand for capital and skilled labour over low-skilled and unskilled labour. The
demand for skilled labour creates an increase in the relative wages of the skilled compared
to the unskilled workers. Hence, the income gap among workers also has widened.

Glossary Inheritance: Practice of passing assets by an individual to his successor after him

Inhumane: Lacking human qualities of compassion and mercy
Something really bad
Abject: The act of spreading widely something, especially information

Dissemination:

MEASUREMENT OF ECONOMIC INEQUALITY

The main measures of income inequalities are:

1. Gini-coefficient of Inequality: This is the most commonly used measure of inequality.
The coefficient varies between 0, which reflects complete equality and 1, which indicates
complete inequality. The more nearly equal a country’s income distribution, the lower its
Gini index. Graphically, the Gini coefficient can be easily represented by the area between
the Lorenz curve and the line of equality. If income is distributed equally, then the Lorenz
curve and the line of total equality are merged and the Gini coefficient is zero.

2. Lorenz Curve: The Lorenz curve is a graphical representation of income inequality
developed by American economist Max Lorenz in 1905. The graph plots percentiles of
the population on the horizontal axis according to income or wealth. The Lorenz curve is
often accompanied by a straight diagonal line with a slope of 1, which represents perfect
equality in income or wealth distribution; the Lorenz curve lies beneath it, showing the
actual distribution. The area between the straight line and the curved line, expressed
as a ratio of the area under the straight line, is the Gini coefficient, a measurement of
inequality. The farther away the curve is from the baseline, represented by the straight
diagonal line, the higher the level of inequality.

Vedanta High School Economics - Book 9 228

Keynote3. Theil-Index: While less commonly used than the Gini coefficient, the Theil-index of
inequality has the advantage of being additive across different subgroups or regions in the
country. The Theil index, however, does not have a straight forward representation and
lacks the appealing interpretation of the Gini coefficient. The Theil index is part of a larger
family of measures referred to as the General Entropy class.

4. Decile Dispersion Ratio: Also sometimes used is the decile dispersion ratio, which
presents the ratio of the average consumption or income of the richest 10 percent of the
population divided by the average income of the bottom 10 percent. This ratio is readily
interpretable, by expressing the income of the rich as multiples of that of the poor.

5. Share of Income/Consumption of the Poorest: A disadvantage of both the Gini coefficients
and the Theil indices is that they vary when the distribution varies. If a society is most
concerned about the share of income of the people at the bottom, a better indicator may
be a direct measure, such as the share of income that goes to the poorest 10 or 20 percent.
Such a measure would not vary.
• Economic inequality refers to the gap in the level of income and wealth in
the society
• Progressive taxes are those which falls more heavily on the rich than on the

poor

REMEDIES MEASURES TO REDUCE ECONOMIC INEQUALITY

The remedial measures for reducing economic inequality are explained below:

1. Fixing Minimum Wage: One step that can be taken in the direction of more egalitarian
society is to guarrantee each citizen a minimum wage consistent with a minimum standard
of living. This can help to increase the income of the poor and level up the incomes from
below.

2. Asset Redistribution: Physical capital and financial resources are highly concentrated in
the hand of the top rung income group. The ultimate cause of the unequal distribution of
personal incomes in most developing countries is the unequal and highly concentrated
patterns of asset ownership (wealth) in these countries. It follows that the concentrated
control of assets and its re-distribution help to reduce economic inequality.

3. Redistribution Policies: Policies should be geared to reduce income inequality and
expanding economic opportunities in order to promote development. Progressive taxes can
be imposed and the revenue so raised can be spent on uplifting the economic conditions
of the poor.

4. Land Reform: It refers to the deliberate attempt to re-organize and transform existing
agrarian systems with the intention of improving the distribution of agricultural incomes.
Unequal distribution of land has also been a cause of economic inequality in Nepal.
Re-distribution of land to the landless and granting ownership can help to increase the
income of the majority poor and thus reduce economic inequalities.

5. Wider Access to Education: Public policy should promote wider access to educational
opportunities. The mere provision of greater access to additional education is no guarantee
that the poor will be better off unless complementary policies like the provision of more
productive employment opportunities for the educated are adopted.

6. Moderating the Size Distribution: It relates to increasing the income of the poor through
public expenditures out of tax revenues. The income of the of the poor can be increased
either directly by conditional or unconditional cash transfers or indirectly through public

229 Vedanta High School Economics - Book 9

employment creation. Such public policies raise the income of the poor and reduce
economic inequality.
7. Rural Credit Facility: Poor people do not have fund for investment in self employment
programs. The government should manage credit facilities to poor people who are
interested to run some self employment programs. This helps to reduce income inequality.
8. Integrated Rural Development: The government should launch an integrated rural
development program. The development of rural areas helps to increase employment
opportunities in rural areas. This helps in increasing the incomes of the rural poor and
reduces economic inequality.
9. Investment in Human Capital: Adequate investment in human capital also plays a key
role in reducing economic inequalities. Therefore, investment should be made in different
social services like education, health, sanitation, nutrition and so on. Investment in such
human capital increases productivity and income of the poor.
10. Social Security: Another important measure is the introduction of a comprehensive
social security scheme guaranteeing to each individual a minimum standard of economic
welfare. Substantial benefits can be assured to persons whose incomes are low. Such
benefits of course have a money value. This will be another step towards leveling up
incomes.

EXTRA READINGS - LORENZ CURVE
Lorenz Curve is a curve that graphs the cumulative per-
centage of income (or wealth) against the cumulative per-
centage of households. A Lorenz curve graphs the cumula-
tive percentage of income (or wealth) on the y-axis against
the cumulative percentage of households on the x-axis.
The closer the Lorenz curve is to the line of equality, the
more equal is the distribution. If income and wealth were
distributed equally, the Lorenz curve would lie along the
straight line labeled “Line of equality.”

QUESTIONS FOR REVIEW

Very Short Answer Type Questions

1. Define economic inequality.
2. What is Gini Co-efficient?
3. How is perfect inequality represented by Gini Co-efficient?
4. What is Lorenz curve?
5. What is Theil Index?

Short Answer Type Questions

1. Explain the causes of economic inequality in developing countries like Nepal.
2. Explain the measures of economic inequality..
3. Suggest measures to redduce economic inequality in Nepal.

Vedanta High School Economics - Book 9 230

10.5 PRIVATIZATION

Privatization has a very broad meaning in economics. It is the process of transferring
property, from public ownership to private ownership or transferring the management
of a service or activity from the government sector to the private sector. It includes variety
of ways for changing the relationship between government and the private sector like
selling government assets, deregulation, or remove restricting rules and introducing
competition in governmental monopolies and contracting out of producing goods and
services to the private sector.

The Privatization Act 2050 B.S :"Privatization" means involving private sector in the management of
the, or to sell or lease it , or to transfer government ownership into public ownership, or an act to infuse

participation by any means, either wholly or partly, of private sector or of the employees or workers, or

of all desirous groups”

Privatization was adopted worldwide in the 1980’s covering rich and poor; developed and
developing; large and small nations alike. In Nepal privatization started after the political
change in 1990 AD.

PRIVATIZATION PROGRAMME IN NEPAL

After the failure of several attempts to reform public enterprises in decade of eighties,
Nepal launched initial privatization program in mid eighties. The programs were
designed to liberalize the economy, improve public sector efficiency, and encourage
private sector involvement in agriculture, forestry, trade and industry, reducing the scope
for state intervention.

The democratic movement of 1990 brought a fundamental transformation in the political
system through its economic policy. During that period, the Nepalese government
introduced a white paper, ‘A Policy Paper on the Privatization of Public Enterprises 1991’ to
provide a balanced approach and access to the private sector.

It initiated the privatization process with the During the Panchayat period,
following objectives: some attempts were made to en-
courage the process of privatiza-
a. To improve the efficiency of public tion. “Nepal Cehuri Ghee Plant”
resource management and “Chandeshwori Textile Fac-
tory” were privatized during the
b. To encourage and raise private sector Sixth Plan period
investment

c. To ensure a self sustained and viable economic development through re-focussing
government functions and re-allocation of resources in the most instrumental sectors
of the economy

Phases of Privatization in Nepal

The first phase of privatization started in 1992 A.D which saw three Public Sector
Enterprises privatized. Bhrikuti Paper Factory, Harsiddhi Bricks and Tile Factory and
Bansbari Leather and Shoes Factory were privatized in 1992 A.D.

The second phase of privatization followed the Privatization Act 1994. While 14 enterprises
were proposed for privatization only five were privatized and two were liquidated.

The third phase of privatization from March 1996 to August 1997, saw 6 Public Sector

231 Vedanta High School Economics - Book 9

Enterprises privatized through various modes.

By the end of 2008, the Nepalese government has privatized 30 SOEs. However, the
privatization process get halted due to political instability and pre occupation with
constituent Assembly following People’s Movement-II. The table below shows the list of
30 privatized state owned enterprises.

No Name of privatized PEs Methods Year
1992
1 Bhrikuti Paper Factory Ltd. Assets and Business Sale 1992
1992
2 Harisiddhi Bricks and Tile Factory Ltd. Assets and Business Sale 1993
1993
3. Bansbari Leather and Shoes Factory Ltd. Assets and Business Sale 1993
1993
4. Nepal Film Industry Ltd. Share Sale 1994
1994
5. Balaju Textile Industry Share Sale 1994
1996
6. Raw Hide Collection and Processing Co. Ltd. Share Sale 1996
1997
7. Nepal Jute Development Co. Ltd Liquidation 2001
2000
8 Nepal Bitumen and Barrel Industry Ltd. Share Sale 2002
2002
9. Nepal Lube Oil Ltd. Share Sale 2002
2002
10 Tobacco Dev. Co. Liquidation 2002
2002
11 Nepal Foundry Factory Ltd. Share Sale 2003
2003
12. Ragupati Jute Mills Co. Ltd. Share Sale 2003
2004
13. Nepal Bank Ltd. Share Sale 2006
2006
14. Agriculture Project Service Center Ltd. Liquidation 2006
2006
15. Nepal Tea Development Corporation Share Sale 2008

16. Biratnagar Jute Mills Co. Ltd Management Contract

17. Himal Cement Industry Ltd. Liquidation

18 Cottage Handicraft Sales Emporium Ltd Liquidation

19 Nepal Power Ltd Liquidation

20 Hetauda Textile Ind. Ltd Liquidation

21. Nepal Transport Corporation Liquidation

22. Butwal Power Co. Share Sale

23 Birjung Sugar Factory Liquidation

24 Agriculture Tool Factory Liquidation

25 Bhaktapur Brick Factory Asset Sale and Rent

26 Lumbini Sugar Factory Asset Sale and Rent

27 Nepal Resin and Turpentine Ltd. Asset Sale and Rent

28 Agricultural Mine Industry Ltd Liquidation

29 Nepal Drilling Company Liquidation

30. Nepal Telecommunication Ltd. Share Sale

Source: Economic Survey, Fiscal Year 2007/8 Ministry of Finance, HMG/N

Vedanta High School Economics - Book 9 232

ARGUMENTS FOR PRIVATIZATION - Benefits of Privatization

The following arguments are put forward in favour of privatization.

1. Efficiency Gains. When firms are privately owned, there is a greater profit incentive to
increase efficiency. The managers are accountable to shareholders, who will want a good
return on their investment so it is more likely to cut costs and be efficient. This eventually
improves efficiency and leads to higher profitability.

2. No Political Interference: It is argued that governments make poor economic managers.
They are motivated by political pressures rather than sound economic and business sense.
For example, a state enterprise may employ surplus workers which are inefficient. The state
owned enterprises often employ too many workers, thereby increasing inefficiency.

3. Economic Development: Privatization helps the state to trim the Privatization attracts
size of the administrative machinery. It enables the government to more resources from
concentrate more on the essential state functions. Privatization helps the private sector for
accelerate the pace of economic development as it attracts more development
resources from the private sector for development.

4. Accountability Raises Efficiency: PrivatiZation will usher in an improvement in efficiency
and as improved performance is concerned with ‘profit-oriented’ decision-making strategy,
Accountability is strictly ensured in a private sector enterprises as they are held responsible
for any failure. Accountability and responsibility will definitely tone up the efficiency and
greater output of the private sector.

5. Increased Competition: Often privatization of state owned monopolies occurs alongside
de-regulation i.e. policies to allow more firms to enter the industry and increase the
competitiveness of the market. It is this increase in competition that can be the greatest
incentive for improvement in efficiency.
Dividend refers to the
6. Revenue for the Government. Privatization is a way to sell state- distributed profit by
owned assets and generate a windfall for the government. In theory, an organization to
this could be used to finance long-term investment. Though as a stakeholders
drawback, the government will lose annual profit dividends.

7. Innovation: Private firms may also be more innovative, using different approaches to
providing a service. Private firms may also use earnings to finance research or to purchase
capital equipment relating directly to the service. Innovation increases profitability and also
leads to improvement in techniques of production.

8. Flexibility: Private firms generally have more flexibility than governmental agencies to use
part-timers to meet peak loads, to fire unsatisfactory workers, and to allocate workers across
a variety of tasks. Moreover, in contrast to its private sector counterparts, governments tend
not to reward individual initiative or punish aberrant behaviour. This contributes to lower
productivity.

9. Increased Capital: It is claimed by supporters of privatization, that privately held
companies can easily raise capital in the financial markets than public owned ones. In a
capital deficient country like Nepal, privatization makes possible investment in projects
which require large investment.

10. Development of Social and Economic Infrastructures: Government resources for keeping
up PSEs may be utilised for the purposes of social sector development as this sector is
starved of financial resources. Modern governments should spend more on this sector as
well as economic infrastructures as these are the two essential pillars of growth.
Deregulation: The process of removing or reducing state regulations
Glossary
Monopoly: A single firm

Enterprises: Firm or organization

Viable: Feasible

233 Vedanta High School Economics - Book 9

ARGUMENTS AGAINST PRIVATIZATION - Defects of Privatization

The following arguments are put forward in favour of privatization.

1. Peripheral Social Responsibility: Private sector is completely guided by the profit motive.
This sector will invest in those areas that yield quick return the low priority industries.
Above all, social responsibility or welfare objective of business is sidelined by the private
industrialists.
2. Concentration of Wealth: Profits from successful Privatization has in-
enterprises end up in private pockets instead of being creased economic inequal-
available for the common good. The wealthy capitalists KEY ity. The wealthy capitalists
get richer while the workers are not much benefitted IDEA get richer while the workers
if the process of privatization and its implementation are not much benefitted

is flawed. This increases income inequality. Privatization would just create a private
monopoly which might seek to set higher prices and exploit consumers.

3. Abuse of Public Interest: There are many industries which perform an important public
service, e.g health care, education and public transport. In these industries, the profit
motive shouldn’t be the primary objective of firms and the industry. For example, in the
case of health care, it is feared that privatizing health care would mean greater priority
given to profit rather than patient care.

4. Government Loses out on Potential Dividends: Studies in western countries have shown
that many of the privatized companies are “Privatization was initiated in
Viewpoint
quite profitable. This means the government Nepal to increase effeciency and
misses out on their dividends. The dividends
which could have accrued to the government competiveness after the political

go to wealthy shareholders. change in 1991” Is it justified?

5. Problem of Regulating Private Monopolies: Privatization creates private monopolies.
Such companies have to be regulated to prevent abuse of monopoly power. Therefore,
there is still need for government regulation, similar to under state ownership.

6. Downsizing: In cases where public services or utilities are privatized, this can create a
conflict of interest between profit and maintaining a sufficient service. A private company
may be tempted to cut back on maintenance or staff training etc, to maximize profits.

7. Short term Tendency of Firms: Private firms may be motivated in short term investment to
earn short term profits and avoid long term risks. To please shareholders they may seek to
increase short term profits and avoid investing in long term projects. In such a situation,
the privatized companies try to make use of existing plants rather than invest in new ones.

8. The Loss of Economies of Scale: One of the major advantages of nationalised industries
is that their sheer size allows them to take advantage of economies of scale. Privatisation
normally involves the break-up of a large entity into many smaller ones. This cause loss of
economies of scale.
Key Terms
9. Insecurity: Nationalized industries are usually Downsizing: permanent reduc-
guaranteed against bankruptcy by the state. They can
therefore borrow money at a lower interest rate to reflect tion of a company’s labor force
the lower risk of loan default to the lender. This does not Peripheral: relating to or situated
apply to private industries. on the edge of something

10. Danger of Employment Loss: Employment loss seems to be another argument against
privatisation In the name of more and more profit, private industrialists adopt ‘hire and
fire’ policy of employment as well as labour-saving technologies.



Vedanta High School Economics - Book 9 234

10.6 ECONOMIC LIBERALIZATION

Economic liberalization is the lessening of government regulations and restrictions in
an economy in exchange for greater participation by private entities. The meaning of
liberalization is to liberate the economy form the clutch of the government and provide
the platform, for the enhanced role of the private sector in economic activities. It is the
process of liberating the economy from various regulatory and control mechanisms of the
state and of giving greater freedom to private enterprise.

World Bank: “Economic liberalization means freeing of prices, trade and entry to

markets from state control while stabilizing the economy”

Liberalization involves progressive elimination of government control over economic
activities. It refers to the opposite of economic regulation by the state and includes
deregulation of markets, deregulation of prices, privatization of PEs, delicensing and
removal of quota system in foreign trade.

Main Features of Liberalization Liberalization:

The following are main features of liberalization: . ` The term liberalization
1. Lessened government control and freedom to means liberating the econ-
enterprises. private

omy from all unnecessary

2. Capital markets opened for private entrepreneurs restrictions like licences ,

3. Simplification of licensing policy permits , quotas etc. it im-
4. Opportunity to purchase foreign exchange at market plies reduction in the role of
government and increase in
prices the role of market forces.

5. Right to take Independent decisions regarding the market

6. Better opportunity for completion

7. Widened liberty in the realm of business and trade

ADVANTAGES OF ECONOMIC LIBERALIZATION

Liberalization creates opportunities for nations because the international market is open
for them. The benefits of liberalization may be pointed as:

1. Cheaper and Varied Goods: Liberalization is favoured because it benefits consumers
with cheaper and more varied goods and services. The removal of tariff barriers and
international competition between producers can lead to lower prices for consumers.

2. Removes Barriers to International Investment: Barriers to entry such as tax laws,
foreign investment restrictions, legal issues and accounting regulations, make it difficult
or impossible to gain access to the country. Economic liberalization process begins by
relaxing these barriers and relinquishing some control over the direction of the economy
to the private sector.

2. Specialization and Comparative Advantage: Liberalization leads to free trade by removing
obstacles such as tariffs and subsidies. Consequently, countries learn to specialize in what
they can do best and yield maximum returns. Local industries focus on optimal use of
land, labour, and capital. The total domestic production of goods and services is thus
boosted this. Since it opens markets to international players, exporters are able to access
expansive markets for their products.

3. Free Flow of Capital: Liberalization has improved flow of capital into the country which
makes it inexpensive for the companies to access capital from investors. Lower cost of
capital helps to undertake lucrative projects which they may not have been possible with
a higher cost of capital before-liberalization. This helps to accelerate economic growth.

235 Vedanta High School Economics - Book 9

4. Increased Competition. Liberalisation means firms will face greater competition from
abroad. This helps to increase efficiency, cut costs and act as an incentive for an economy
to shift resources into new industries where competitive advantage can be maintained.

5. Economies of scale: Trade liberalisation enables greater specialisation. Economies
concentrate on producing particular goods. This can enable big efficiency savings from
economies of scale.
Key Term
6. Increase in Efficiency of Domestic Firms: Liberalization
opens up the economy to the world. The goods produced Economies of scale: the cost ad-
by domestic producers face competition from producers vantages that enterprises obtain
of other countries as well. Increased competition leads due to their scale of operation

to increase in efficiency and reduction in costs.

7. Lower prices.: The removal of tariff barriers can lead to lower prices for consumers. e.g.
removing food tariffs help reduce the price of agricultural commodities. This would be
particularly a benefit for countries who are importers of food.

8. Diversification for Investors: In a liberalized economy, investors gets benefit by being
able to diversify their portfolio in different sectors.Diversification of portfolio reduces risk
of investment and ensures maximum returns on investment.

9. Political Risks Reduced: Liberalization policies in Liberalisation befalls
the country lessens political risks to investors. The
government can attract more foreign investment KEY when something which
through liberalization of economic policies. A strong IDEA was forbidden is no longer
legal foundation to settle disputes, fair and enforceable forbidden or when govern-
contract laws, property laws should be in place if the ment laws are loosened

government wants to continue to attract more foreign investment.

10. Inward Investment: If a country liberalizes its trade, it will make the country more
attractive for inward investment. Free flow of capital makes it affordable for businesses
to take a profitable project. Inward investment leads to capital inflows and also helps the
economy through diffusion of more technology, management techniques and knowledge

Glossary. Clutch: Grasp
Tariff: A tax or duty to be paid on a particular class of imports or exports
Diffusion: Spread
Viable: Feasible

DISADVANTAGES OF ECONOMIC LIBERALIZATION

The policy of liberalization has not been much promising in LDCs. The negative effects,
so far felt by the LDCs include:

1. Adverse Effects of International Events: Removal of trade barriers often subjects the
domestic economy to the effects of international events. For instance, economic recession
in one trading partner’s economy can spiral into another’s economy. This can hurt
employees and consumers of affected economies.
Dumping by developed
2. Adverse Effects on Local Industries: International competition countries can have a se-
may hurt local industries, especially when importers are able rious effect on local indus-
to find cheaper alternatives from abroad and dump them in tries
domestic markets. Global corporations tend to capture domestic
markets and kill domestic industries.

3. Failure to Solve Unemployment Problem: Liberalization has aggravated the problem of
unemployment by introducing the scheme of large scale retrenchment of workers through
the introduction of its exit policy without making any adequate provision for alternative
scope of employment.

Vedanta High School Economics - Book 9 236

4. Dangerous Consumption Trend: The liberalization policy has been encouraging a
dangerous trend of consumerism by encouraging the production of luxuries and items of
elitist consumption.
liberalization leads to loss
5. Economic Depedency: Economic liberalization has increased of sovereignty of the coun-
the dependence of the country on foreign assistance and has try and makes it economi-
multiplied the volume of external debts. It leads to the loss of cally dependent on others
economic sovereignty of the country by allowing the sale of
equities of domestic companies to foreign investors.

6. Neglects Social Sector: The liberalization policy has been providing too much stress on
privatization neglecting the commitment to the society for the improvement of social
sector.

7. Structural Unemployment: Liberalization often leads to a shift in the balance of an
economy. Some industries grow, some decline. Therefore, there may often be structural
unemployment from certain industries closing. Liberalization can often be painful in the
short run, as some industries and some workers suffer from the closure of uncompetitive
firms. Though net economic welfare improves, it can be difficult to compensate those
workers who lose out to international competition.

8. Environmental costs: Economic liberalization could lead to greater exploitation of the
environment, e.g. greater production of raw materials, trading toxic waste to countries
with lower environmental laws.

9. Threat from Multinationals: Liberalisation increases competition for domestic firms.
Multinationals are quite big and operate in
several countries. They pose a threat to local Viewpoint “Liberalization is less beneficial to
firms. For example, the advent of Nepal Lever developing countries than devel-
Limited has killed most of the soap industries oped countries” Elaborate it?

in Nepal.

10. Less Beneficial to Developing Countries: An important issue for trade liberalisation is
that it often benefits developed countries more than developing economies. There are
strong reasons to allow some tariff protectionism if developing economies are seeking to
diversify out of low-income growth agricultural industries.

CHECKPOINT 1. What are the arguments in favour of privatization?

2. What are the arguments in favour of liberalization?

3. What are the disadvantages of privatization in Nepal?

4. “The threat of Multinationals looms large in developing countries due to liberalization”. Comment

237 Vedanta High School Economics - Book 9

10.7 GLOBALIZATION

Globalization is the gradual process by which societies around the world become
integrated commercially, culturally, and politically. Broadly speaking, the term
‘globalization’ means integration of economies and societies through cross country flows
of information, ideas, technologies, goods, services, capital, finance and people.

Todaro: "Globalization is the increasing integration of national economies into global market"
Qureshi: "Globalization is the growing integration of market for goods, services and capital"
Globalization is a “process” of integration with the world economy; liberalization is the

“means” of such a process and growth is the “end” of both liberalization and globalization.
Economic globalization is a process rather than an event. The essence of globalization is the
increasing degree of openness in respect of international trade, international investment
and international finance. Economic liberalization and privatization are the supportive
policies for globalization.

BENEFITS OF GLOBALIZATION

The benefits of globalization may be pointed as:
1. Employment Opportunities: Globalization has led to the generation of numerous

employment opportunities. Companies from developed countries move towards the
developing countries to acquire labour force. This obviously caters to employment and
income generation to the people in the host country. Also, the migration of people, which
has become easier has led to better jobs opportunities.
2. Competition: Competition is a healthy way of doing business. Without it, companies
would not pioneer some innovations in cross-border trade. It is the main reason why the
quality of goods and services improve as well as why the prices drop.
3. Trade Competitiveness and Transfer of Technology: Developing countries are generally
characterized by technological backwardness. Transfer of technology from the developed
to LDC is a necessary measure to speed up the pace of the economic development.
4. Free Flow of Foreign Capital: Globalization has encouraged free flow of capital which has
improved the economy of developing countries to some extent. It has increased the capital
formation which helps in the economic development of the country.
5. Increase in Productive Efficiency: Globalisation paves the way for removing inefficiency
in production system. Prolonged protective scenario in the absence of globalisation makes
the production system careless about cost effectiveness which can be attained by following
the policy of globalisation.
6. Transmission of Cultural Values: Globalization makes it possible to spread cultures that
were previously unknown. It helps to broaden mental outlook and brings the world closer
through integration of culture, value and ethics.
7. Foreign Direct Investment (FDI): One of the major implications of globalization is flow of
foreign direct investment and establishment of multinational corporations (MNCs). Efforts
compatible with globalization have been made to attract foreign investment through
liberal policies that gives a top priority to privatization in Nepal.
8. Improved Standards of Living: For less developed countries, globalization can be a
blessing as it increases standards of living such as health and welfare and safety conditions
in the workplace. Companies from more developed nations tend to have to comply with
regulatory requirements in their home countries and transfer these expectations when
they operate in other parts of the world.

Vedanta High School Economics - Book 9 238

9. Lowered Costs for Goods and Services: Lowered costs help people in both developing
and developed countries live better on less money. Huge cost reductions from inexpensive
manufacturing and logistics have lowered the cost of living for everyone around the world.
The world trade system has also created an unprecedented variety of food at lower costs.

10. Market Diffusion: Globalization helps in expansion of mrket worldwide. With globalization,
the economy flows at a more spontaneous pace, where goods and services can be enjoyed
around the world. Goods can be enjoyed in a short time, anywhere and many times at
reasonable prices.

DEFECTS OF GLOBALIZATION

The defects of globalization may be pointed as:

1. Inequalities Within Countries: Globalization has been linked to rising inequalities
in income and wealth. The policies of Globalization are more beneficial to developed
countries. The countries which have adopted the free trade agenda have become highly
successful.

2. Financial Instability: As a consequence of globalization there is free flow of foreign capital
poured into developing countries. But the economy is subject to constant fluctuations on
account of variations in the flow of foreign capital.

3. Impact on Workers: Globalization has opened up employment opportunities. But there is
no job security for employees. The nature of work has created new pressures on workers.
Workers are not permitted to organize trade unions.

4. Impact on Farmers: Farmers face a lot of threat from global markets. They face serious
competition from powerful agricultural industries quite often cheaply produced agro
products in developed countries are being dumped into the country.

5. Impact on Environment: Globalization has led to 50% rise in the volume of world trade.
Mass movement of goods across the world has resulted in gas emission. Some of the
projects financed by World Bank are potentially devastating to ecological balance.

6. Domination by MNCs: MNCs are the driving force behind globalization. They are in a
position to dictate powers. Multinational companies are emerging as growing corporate
power. They are exploiting the cheap labour and natural resources of the host countries.

7. Threat to National Sovereignty: Globalizations results in shift of economic power from
independent countries to international organizations, like WTO United Nations etc. The
sovereignty of the elected governments are naturally undermined, as the policies are
formulated in favour of globalization. Thus globalization has its own positive and negative
consequences.

8. External Shocks: Globalisation involves interdependence This means if the economy of
one country fails, the economies of others will suffer. Economic depression in one country
can trigger adverse reaction across the globe.

9. Trade Imbalances: Global trade has grown but so too have trade imbalances. Developed
countries run big trade surpluses at the cost of developing countries. Many developing
countries fall victim to export dumping by producers in advanced nations.

10. Loss of Cultural Identity: While globalization has made foreign cultures easier to access,
it has also begun to meld cultures together. The success of certain cultures throughout the
world have caused other countries to emulate these lifestyles and culture. When cultures
begin to lose their distinctive features, we lose our global diversity.

Glossary MNC: Multi national corporations
WTO: World Trade Organization
Sovereignty: Supreme power or authority
Emulate: To copy something achieved by someone else

239 Vedanta High School Economics - Book 9

EYE ON THE ECONOMY

LIBERALIZATION AND NEPAL

Nepal has been following the policy of economic liberalization since the mid-1980s
which was accelerated with the start of 1990s. A key premise of economic liberalization
is to create a situation that will drive economic resources towards more productive uses
leading to a sustained growth. In this context, this paper examines the changes in structure,
employment and productivity in the Nepalese economy for the period of 1991-2011 based
on the World Bank’s sectoral growth decomposition method. Structural transformation that
encourages the movement of labour and other resources from low productive sectors into
high productive economic activities is considered to be successful for high economic growth.
Sectoral productivity and employment pattern of growth have important implications for
inclusive growth and poverty alleviation as well. Despite some structural changes through
economic liberalization process, empirical evidence shows that the Nepalese economy has
remained sluggish in employment generation and the structural changes have not been
growth enhancing. Government should devise the policies of generating employment in high
productive sectors in order to increase both employment and productivity in the economy to
raise per capita income.

GLOBALIZATION AND NEPAL

Globalization is a trend towards the “dissolution of boundaries”. For a landlocked country
such as Nepal, chances of exchange of goods, people, knowledge, and ideas are opportunities
that globalization has brought into Nepal. Unfortunately, like many countries in the world,
Nepal has to pay high price for globalization of trade and business. This globalization process
brings an enormous pressure for change. As a result of increasing interchange of economic
activities at all levels, we are becoming more and more dependent on developments outside
our own borders including the hope of getting international aids as well.

Theories like SWOT, “Strengths-Weaknesses-Opportunities-Threats”, analysis implies that
“threats should be taken as opportunities.” We too should be able to convert the challenges
brought by globalization into opportunities for our own benefit. Although the transition due
to globalization has introduced a free trade regime that can upset the traditionally-molded
business and trade practices of Nepal, it also opens possibilities of gaining huge benefits
that could bring economic prosperity to the country. Although Nepal has almost one decade
to prepare for the entry into the free trade agreement, it would be wise to take immediate
steps towards economic integration. Nepal should also be looking forward to making proper
strategies to deal with future challenges.

CONCEPTS FOR REVIEW

Privatization Liberalization Globalization
Liquidation
Public enterprises Innovation Technology transfer
Corporate
Capital formation Asset sale Economic inequality

Multinationals Foreign Direct Investment

Human resource Land reform

Vedanta High School Economics - Book 9 240

GLANCING THE UNIT

Poverty: Poverty is the condition of having 7. Decline of cottage industry
insufficient income to meet basic needs such as 8. Defective education
fooding, clothing, housing, clean drinking water and 9. Corruption
health services. 10. Inadequate employment training

Types of poverty Measures to solve unemployment problem
1. Planned development
1. Absolute Poverty: The situation in which 2. Employment in rural areas
individuals are unable to attain the basic needs 3. Reform in education system
of life such as food, cloth, shelter, safe drinking 4. Development of small scale industries
water, health facilities, primary education, etc. 5. Self employment schemes
6. Control in population growth
2. Relative poverty: The situation in which a 7. Rural development
person has enough income to sustain life but is 8. Rapid industrialization
lower compared to rest of the community.
Concept of foreign employment
Characteristics of the poor: Rural and urban
1. Low level of income An employment opportunity with certain wage
2. Occupation as menial worker under certain terms and conditions grabbed beyond
3. Lack of assets ones national political or geographical boundary is
4. High illiteracy called foreign employment.
5. Poor housing
6. Less access to public goods and services Importance of foreign employment in Nepal
7. Expenditure mostly on food
8. Deprived of government facilities 1. Foreign exchange availability
9. More concerned about sustenance
10. Large family 2. Reduction in poverty

3. Solve unemployment

Causes of poverty in Nepal: 4. Revenues for Government and Private Sector
1. High population growth rate 5. Employment Opportunities
2. Unequal distribution of income 6. Familiarization with new technology
3. Low industrial development 7. Improvement in living standard
4.. Under utilization of resources 8. Feeling of self esteem
5. Low rural development
6. Unemployment Defects of foreign employment
7. Subsistence agriculture 1. Brain Drain
8. Political instability 2. Problems of Reintegration

Unemployment: The term unemployment can be 3. Dependency
understood as a situation in which no job is available 4. Balance of payments may be jeopardized
for a person to earn means of livelihood. 5. Disrupting the local employment market

Causes of unemployment in Nepal 6. Negative externalities
1. Rapid growth of population
2. Limited land Problems of foreign employment
3. Seasonal agriculture 1. Unknown nature of jobs
4. Fragmentation of land 2. Cheap labour
5. Lack of industrial development 3. Lack of monitoring
6. Subsistence economy 4. Sub-agents or Brokers

241 Vedanta High School Economics - Book 9

5. Abuse of Contracts 4. Problem of regulating private monopolies

6. False Circumstances 5. Downsizing
7. Manipulated Demand Letters 6. Short term tendency of firms
7. Cuts in essential services
Meaning of Economic Inequality 8. Insecurity
9. Concentration of wealth
Economic inequality refers to financial disparity.
It refers to the gap in the level of income and 10. Political repercussions Economic
wealth in the society liberalization
It is the process of liberating the economy from
Causes of economic inequality various regulatory and control mechanisms
of the state and of giving greater freedom to
1. Global influences private enterprise.

2. National Need for liberalization

3. Tax and policy 1. Bring flexibility in the operations of
business organisations.
Remedial measures of economic inequality
2. Paves the way for globalisation
1. Asset redistribution
2. Redistribution 3. Helps companies to compete with other
3. Land reform companies at international level.
4. Wider access to education
5. Moderating the size distribution 4. Saves time, efforts and money of business
6. Rural credit facility enterprises.
7. Integrated rural development
8. Investment in human capital Meaning of Globalization

Meaning of privatization Broadly speaking, the term ‘globalization’
means integration of economies and societies
Privatization is the process of transferring through cross country flows of information,
property, from public ownership to private ideas, technologies, goods, services, capital,
ownership or transferring the management of a finance and people.
service or activity from the government sector
to the private sector. Benefits of globalization:

Arguments for privatization 1. Foreign employment opportunities
2. Foreign Direct Investment (FDI
1. Improved Efficiency 3. Impact on tourism sector
4. Free flow of foreign capital
2. Lack of Political Interference 5. Trade in Goods and Services
3. Accelerate economic development
4. Shareholders pressure 6. Privatization and industrial growth
5. Increased Competition
6. Government revenue Defects of Globalization

7. Innovation 1. Inequalities within countries
8. Flexibility 2. Financial Instability
9. Capital 3. Impact on workers
10. Performance 4. Impact on farmers
5. Impact on Environment
Arguments against privatization 6. Domination by MNCs
1. Natural Monopoly 7. Threat to national sovereignty
8. Increase in inequality
2. Public Interest

3. Government loses out on potential dividends

Vedanta High School Economics - Book 9 242

QUESTIONS FOR REVIEW
Very Short Answer Type Questions
1. Define privatization.
2. Mention four advantages of privatization.
3. Define economic liberalization.
4. What is globalization?
5. What are the types of FDI?
6. Define foreign employment.
7. Define economic inequality.
8. What is meant by Inverted U Hypothesis?
Short Answer Type Questions
1. Explain the challenges of privatization in Nepal?
2. Explain the arguments for privatization.
3. Give an account of economic liberalization in Nepal.
4. Write the implications of liberalization and globalization in Nepal.
5. What are the major implications of globalization in Nepalese economy?
6. What are the advantages of globalization?
7. What are the defects of globalization?
8. What are the problems of foreign employment in Nepal? Explain.

Long Answer Type Questions

1. Define inequality. what are the causes of economic inequality in Nepal?
2. Explain the arguments for and against privatization in Nepal.
3. Define economic liberalization. what are the benefits of economic liberalization in Nepal?
4. What is globalization? What are the major implications of globalization in Nepalese economy?

243 Vedanta High School Economics - Book 9