Wednesday, March 16, 2011

The Himalayan Times : Bihar´s economic boom and its Impact on Nepal

Until the mid-twentieth century, Nepal had a closed economy. The cottage and small industries owned by the private sector, particularly the households of Newars, Gurungs, Rais and Sherpas, were confined to the production of handloom cloths to meet the demands of the local people. Import was rare/limited from India in order to meet the demand of refined cloth and other luxurious goods for the elites. People in general were confined to using home-produced goods. Almost all the goods used in every day life were produced and consumed locally. However, with the changing times, the requirements of the people are being met through imported goods from India as well as China.

There are, however, a few industries that have been established in the Terai belt of Nepal to produce sophisticated goods with a view to chase the growing demands of the people of Nepal. The goods produced by these industries have a wide market, even covering the North-East part of India along with the entire market of Nepal. In the past, tt had been because of the presence of depressing environment to establish industries in Bihar, a northern most populous state of India. This had also encouraged Indian entrepreneurs to invest their capital in the development of industrial sector of Nepal with a view to catering goods and services required by the people of both Bihar and Nepal. As a result, industrial establishments were mushrooming in the Tarai earlier. But, today things are entirely different. Bihar is converting into a lovely place, with greater optimism. Indian entrepreneurs have started to invest in Bihar. Parallel industrial enterprises have begun to operate in recent years with greater capability. The result has been that the Nepalese industries are in for dire straits.

It may be worthwhile to refer to a relevant THT article (March 2, 2011) that had analyzed the adverse impact of high economic growth rate of Bihar on the employment and production in the Nepalese industrial sector. It has reported that some of the industries located in Sunsari-Morang industrial corridor (SMIC) have been facing a shortage of industrial labor as their workers prefer to work across the border.

In my earlier article some time back, I had dwelt on the rapid economic development of Bihar. The article had highlighted the miraculous development of Bihar which has been achieved in a short span of time, but not associated with the implications of Bihar’s economic boom on the Nepalese economy.

The southern Terai plain, adjoining Bihar, is the place where almost all industrial enterprises are concentrated. Since the past few years, Bihar has been posting a high economic growth rate. It facilitates all the economic sectors to grow and develop. This has significant implications on the production and employment in the Nepalese economy.

The products of Nepal would be of lower quality in comparison with the goods produced in Bihar. Similar is the case of per unit cost of production. There is a significant difference between the earnings of laborers in Nepal and Bihar with those in the latter earning significantly more than in the former. That is to say, the wages of industrial labor within a distance of less than 100 kilometer from Nepal differ significantly. The probable impact of this on the industrial output will be extraordinary by all means.

The production of selected five industries has been declining as a result of labor shortage. It is obvious that they are not operating to full capacity because of human resources crunch. It has been reported that the said industries are facing a shortage on an average of above 60 persons per day as the laborers are migrating to Bihar. That does not augur well for the industries in the country. The average daily production has declined from more than 24 tonnes in 2007/08 to 13 tonnes in 2010/11. According to Morang Industry Association data, SMIC has 50,000 working there, but it requires further 30,000 additional workers to be able to run to full capacity. The 450 industries in operation, are seeing their production drop to half of what it was a few years back.

Actually, this pushes us towards more dependence in terms of products we are consuming, and employment. It is not a new thing for us as we are witness to around a thousand Nepali people going abroad in search of employment—most of them are destined to be workers in foreign countries. Moreover, most of what we consume are also imported.

The historical trend of the labor movement and goods consumed has the same story. It is because the livelihood of the Nepalese has been dependent on employment in India. Only a small segment of our labor force earns its livelihood from industrial activities at home. The recent trend indicates that this segment of our labor force has also started to move towards Bihar because of better opportunity cost. If this trend continues, the industries which are still operating in the Terai might be compelled to suspend their activities.

In such a situation, the government needs to check migration of industrial workers to Bihar, by offering attractive plans and programs.


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