A Study to Investigate the Impact of Imports on Agricultural Food Products in Nepal

Abstract

Nepal is a south Asian agricultural country that is topographically isolated between mountains, hills, and the terai, and from them, 35% of the total area is covered by mountains and 42% is by hills and 23% is covered by mountains. It is arranged as a trapezoidal shape 870 km in length and 130 km in width. The total area covered by Nepal is 147181 sq. km. Two third of the total population i.e. 66% (Based on a 2021 economic survey) of the total population is engaged in agriculture as their main source of income and contributes 21.32% (Based on a 2021 economic survey) of the gross domestic product. But still, Nepal is facing a huge loss in agricultural business each year which has a very big impact on the overall economy of Nepal. To minimize the trade loss there is a need for maximum utilization of available resources in Nepal by increasing the productivity for the improvement of the export side and decreasing the importing side in Nepal. Nepal Rastra Bank which is also known as the Bank of the Bank in Nepal has categorized Paddy, Maize, Wheat, Millet, and Barley as agricultural food products. The five products are also known as cereal food products. In Nepali they are known as अनाज खाद्य पदार्थ. In Nepal, the natural impact of ecological diseases and natural disasters has hugely affected the production of agricultural food production. Most of the studies in the literature are concerned with the issues of gender, climate, international relation, and social issues but there, have been no studies on the impact of imports on the development of the nation and what trend Nepal's International trade is going and the impact of that trend in the future on the development of the nation. The researcher has not focused to find the main reason for increasing imports each year and the impact of increased imports on the economic condition of Nepal. If those problems vi are identified that there the government has to take immediate action and have to find an alternative solution for the increment of trade loss each year. If those problems will timely be resolved then the international trade balance will contribute to the development of the economic condition of Nepal. The data on production, productivity, cultivated land, fertilizer used, Government outstanding, and foreign currency reserves are collected from Nepal Rastra Bank which is also known as a central bank authorized by Nepal Government. First, a geographical representation of data spanning 40 years is employed to determine the trend of Nepalese agricultural food product production status. The fundamental parameters of output, productivity, and cultivated land were described using descriptive statistics. The variable that was important and had an impact on those variables were then compared using correlation analysis. The study noted that both the import and export are in an increasing trend but the increment of imports is higher than the increment of export. The trends also show the productivity for growing Nepali agricultural food products (Paddy, Maize, Millet, Wheat, and Barley) Paddy has a high productivity rate followed by Maize, Wheat, Barley, and Millet respectively. Barley has the lowest production rate but consumed more than ten times the cultivated land which also creates a problem in the productivity of overall agricultural food productivity in Nepal. Nepal is currently facing huge trade losses due to imports and in the future Nepal willfully of depending the need for demand so, the timely implementation of the solution will reduce trade loss in Nepal. Nepal's agricultural food production has an important role in foreign trade and to control the trade loss in Nepal. Agricultural production has contributed 26% of the total GDP and 66% of the total population depends on this sector. The production has a direct relation to the government's outstanding and foreign currency reserves. This study also has made an effort to investigate the determinants of the production of agricultural food products in Nepal taking electricity generation, annual mean temperature, foreign exchange rate, and imports of agricultural food products as the independent variable by the use of the Auto Regressive Distributed Lag Model. The data analysis from 1990 to 2019 showed that electricity generation and foreign exchange rate have a positive impact on cereal production whereas, cultivated area and vii the annual mean temperature have a negative impact and will hurt agricultural food products in Nepal. Production of agricultural food products has been forecasted till 2060 based on the four scenarios developed based on production growth rate. Climate change has a huge impact on the production of agricultural food products in Nepal. Due to the excess use of fertilizer, the problem like misfortune of soli richness, a reserve of nutrients has been depletion, loss of fertilizer land, loss of crops, loss of wild plants and animals, loss of the capacity of the natural resources, development of the new diseases are wisely seen due the issue of the fertilizer consumption in Nepal. The production of agricultural food products has played an important role in the trade balance in Nepal. Although the trend of importing is not in the favor of the economy of Nepal and needs to correct on time. The import has a direct relation with the government outstanding because the increment in the Import has increased the government outstanding of Nepal which has also impacted the reserve of the foreign currency of Nepal. There is a need to search the alternative and substitute products in Nepal which will help to maintain the trade balance in Nepal. I will recommend to the policy maker to focus on paddy production in Nepal which will provide great benefits to reducing trade loss and will benefit the economic development of the nation.