When many economic indicators, from service sectors to government spending, were below average, some saw the bright side in the agricultural sector.
But it’s official now that he also suffered.
Nepal’s paddy crop is expected to fall to its lowest level in five years at 5.13 million tonnes this fiscal year due to unusual October rains and experts say this could put further upward pressure on the market. inflation and downward pressure on the economy.
Paddy is Nepal’s most lucrative agricultural commodity, with tens of thousands of farmers depending on its income.
As the government strives to provide chemical fertilizers for winter crops and upcoming summer crops due to the cost factor (prices have risen sharply globally), the agricultural sector is faced with a serious crisis.
A preliminary paddy exit report released by the Ministry of Agriculture and Livestock Development on Sunday, shows paddy production could fall 8.74% year-on-year in this fiscal year, ending in mid-July 2022.
According to the ministry, paddy productivity or yield fell 9.09% year-on-year.
Fshipowners harvested 5.62 million tonnes of paddy, a historically high production in the previous year, due to good monsoon rains and an abundant supply of farm workers.
Against this backdrop, experts say, Nepal could face more downward economic pressure in 2022 than in 2021.
This fiscal year, everything was favorable. There were timely and above normal monsoon rains, no shortage of chemical fertilizers and farm workers. Based on the indicators, the Ministry of Agriculture predicted a record paddy harvest of nearly 6 million tonnes.
“The heavy downpour in October shattered all hopes,” Ram Krishna Regmi, the ministry’s chief statistician, told The Post. “The only reason for the reduction in production was the unusual rainfall,” he said.
âThe October rains reduced the income of farmers across the country. ”
Out of seven provinces, only Gandaki experienced positive harvest growth.
Heavy rainfall is unusual in Nepal in October, which is traditionally outside the monsoon season.
The rains started on October 17 in the western part of Nepal, then moved to the eastern part on October 19, killing people, damaging roads, bridges and other physical infrastructure in various districts.
The economic well-being of Nepal is intimately linked to the rainy season. Skywater is the cornerstone of Nepal’s 4.26 trillion rupee economy, which depends on agriculture as nearly two-thirds of agricultural land is supplied by rain.
But the unusual rains in October were catastrophic.
Paddy is transplanted throughout most of Nepal in June and harvested in October.
And the destruction of the paddy is a major setback for the Nepalese economy. Rice alone contributes about 7 percent of the national gross domestic product and is the main source of income for more than half of the population.
Economist Jagdish Chandra Pokhrel said that a near double-digit drop in paddy production could slightly affect economic growth rates, but its fallout would trickle down to farmers’ incomes.
âFarmers have lost income. Now, low production will lead to increased imports, âPokhrel said. âUnexpected fluctuations in food prices in the domestic market remain a possibility, so it is crucial that the country is prepared to deal with dangerous increases in food prices when and if they occur. “
During the last fiscal year which ended in mid-July, grain imports increased by 22.71 billion rupees, topping 79 billion rupees. Out of total cereal imports, rice and paddy imports amounted to Rs 27.62 billion and Rs 20.54 billion respectively.
âThe country will not suffer from food shortage, but food inflation may rise as Nepal has to fill the deficit through imports this year,â Regmi said.
According to the Ministry of Agriculture, the most damage was recorded in Sudurpaschim province with paddy production down 31.49 percent.
âMost of the farmers in Sudurpaschim are unable to sell their paddy because of the quality. Paddy was overwhelmed for days, âRegmi said.
The poor quality of rice in Nepal will allow the volume of imports to increase, meeting the growing demand for fine rice, according to Pokhrel.
Imports are expected to skyrocket, both in quantity and value.
Trade experts say imports could reach 1,000 billion rupees for the first time in the first half of this fiscal year.
During the first five months of the current financial year, imports increased by 60% to 838.40 billion rupees, according to statistics from the Customs Department.
âItâs alarming. The government should intervene immediately. The first thing is to stop the growth of imports at such alarming levels, âPokhrel said.
The Nepalese economy was recovering from the 2.1% contraction induced by the Covid-19 pandemic in 2019-2020, despite an upsurge in infections that led to strict containment measures in May and June 2021 in most of the districts, including the Kathmandu Valley.
According to the Asian Development Bank, Nepal’s growth was estimated at 2.3% in the last fiscal year 2020-2021, ending July 15, 2021, below previous forecast of 3.1%.
The Asian Development Bank has reduced its forecast for Nepal’s economic growth in the current fiscal year 2021-2022 to 4.1%, up from 5.1% earlier, largely due to infections and high risks of Covid-19, although reduced now, and the slowdown in growth in tourism and services.
Experts see more downgrades due to poor performance in the agricultural sector and capital spending. Capital spending as of January 1, almost six months after the start of the fiscal year, remained at just 8.3%.
The Agriculture Ministry said the government has guaranteed Rs 28 billion to import chemical fertilizers for this fiscal year, but no one knows whether Nepal will be able to deliver vital agricultural inputs on time at a time when developed countries find it difficult to acquire them.
Nepal’s fertilizer suppliers – the farm inputs company and the salt trading company – have already seen dozens of tenders canceled by suppliers due to price increases. The ministry said the purchase price of urea has already increased by more than 260% and the purchase price of DAP has increased by more than 202%.
But the government seems the least concerned with fixing the problems amid an economy facing severe crisis.
Minister of Finance Janardan Sharma has been busy giving several speeches this 7% economic growth rate is “easily achievable” in this fiscal year.
But economists are not convinced.
âNow is not the time for micromanagement. This government is taking a reactive approach, âsaid Pokhrel. âLet the market play, not the speeches. “