Analysis of agricultural growth and its determinant factors in Nepal

Abstract

This paper critically analyzes the trajectory of agricultural growth and its determinants in Nepal. Agricultural growth is vital for stimulating overall economic growth. The World Bank research shows strong statistical link between agricultural and overall economic growth in less developed countries. Economic growth and agricultural growth in Nepal also show strong correlation (r = 0.7501^***). Agricultural transformation is characterized by declining share of agriculture in national employment and GDP, and increasing share of secondary sectors like industry, service and manufacturing. However, this structural shift seems unplanned and ungoverned in case of Nepal. The contribution of agriculture to GDP is continuously declining, but, the growth of secondary sectors likes industry and manufacturing still looks stagnant. At this incipient stage of agricultural transformation, productivity growth in agriculture is both a necessary as well as sufficient condition for the development of economy as a whole. Agricultural growth depends on institutional (agricultural credit and land holdings), infrastructural (irrigated area, farm mechanization, electricity, storage, transportation, agricultural market), technological (high yielding varieties or improved seed, fertilizers and pesticides) and socioeconomic factors (population, poverty and literacy). Policies strengthening these determinants can help Nepal in achieving targeted sustained economic growth.