Economic enviroment Of Nepalese Business Environment

1. ECONOMIC ENVIRONMENT OF
BUSINESS IN NEPAL
Prayash Neupane

2. INTRODUCTION
 Economic enviroment refers to all economic
surroundings that influence business.
 It affects business decisions relating to resource
allocation, costs, profits and expansion.
 Important components of economic enviroment of
business in Nepal consist of :
I. Economic System
II. Economic Structure
III. Economic Reforms
IV. Economic Policies
V. Economic Cycle

3. Economic System
 Economic system determines the role of market
forces and the scope of private sector
participation in an economy.
 It can be free market economic system or can be
centrally planned economic system.
Nepal has mixed economic system.
 The role of private sector in Nepalese economy
has been increasing.

4. Economic Structure
 It refers how the structure of particular sector
operate in an economy which generates National
Income.
 The important sector of Nepalese economy are
given below:-
I. Agricultural sector:- Consists of Food crops,
Cash crops, Other crops, Livestock, Forestry,
Fishing etc.
II. Industry sector:- Manufacturing and mining
represent industry sector.
III. Service sector:- Consists of Trade, Transport
and communication, Business, Construction,
Education and health, Tourism, Electricity etc.

5. Economic Sector in Nepal
( % of GDP at Current Prices)
Service
Industry
Agriculture
60
50
40
30
20
10
0
2001/01
2005/06
2008/09
Agriculture
Industry
Service

6. Economic Policies
 Economic policies are guidelines for business
decision making.
 They are concern with aspects of growth, stability,
employment, and balance of payments in the
economy.
 The importance economic policies in Nepal are
Industrial Policy, Trade Policy, Labour Policy,
Fiscal Policy, Monetary Policy, Tourism Policy etc.

7. Some Important Economic
Policies
 Industrial Policy:- Goal of industrial policy is to
minimize poverty through sustainable industrial
development based on public-private cooperative
partnership.
 Trade Policy:- Main objective of trade policy is to
enhance the contribution of trade sector in the
national economy.
 Fiscal Policy:- Concern with taxation, public
expenditure and public debt of government.
Monetary Policy:- Concern with demand and
supply of money, cost and availability of credit,
inflation, foreign exchange and level of aggregate
demand.

8. Economic Reforms
 Economic reforms are aimed at liberalization of
economy.
 It can be internal through deregulation,
relicensing, abolition of subsidies, administered
prices and encouragement to private sector.
 It can be external through liberalization of trade
and globalization of the economy.
 Economic reforms in Nepal consists of Capital
Market Reforms, Financial Sector Reforms and
Fiscal and Monetary Reforms.

9. Economic Reforms in Nepal
 Capital Market Reforms:- Consists of Securities
Board of Nepal (ie, SEBON) and Nepal Stock
Exchange (ie, NEPSE)
 Financial Sector Reforms:- Consists of
Commercial Bank, Development Bank, Finance
Companies, Insurance Companies, Microfinance
NGO etc.
 Fiscal and Monetary Reforms:- Fiscal reforms are
introduce by government through annual budgets.
Monetary reforms are introduce by Nepal Rastra
Bank through monetary policy.

10. Economic Cycle
 Economic cycle is recurring, fairly
predictable, general pattern of
periodic fluctuations in national economies.
 The economic cycle is the upward and downward
movements of levels of GDP (gross domestic
product).
 It consists of four stages called Expansion, Crisis,
Recession and Recovery.

11. Stages of Economic Cycle
 Expansion:- Increase in production and prices,
low interest-rates.
 Crisis:- Stock exchanges crash and multiple
bankruptcies of firms occur.
 Recession:- Drops in prices and in output, high
interest-rates.
Recovery:- Stocks recover because of the fall in
prices and incomes.

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