The worldwide uncertainty created by COVID infection is ongoing after it started from wuhan, China. In some country second wave is already started whereas third wave is being experienced by some. Currently second wave of COVID disaster is hitting Indian territory and economy badly. The impact seen in India can be counted automatically in lives and economy of Nepal since both of them share open border policy. The restrictive orders from district offices is being given in Nepal whereas partly lockdown situation seen in India firstly. This is to harm economy less.
International monetary fund anticipated 3.5 % contractionary world economy in 2020 due to pandemic. Big population of world that is depending on marginal revenue is badly influenced. In 2020 alone 100 million of world population is pushed in absolute poverty, the per capita income of 150 countries will be less than PCIs they had in 2019. This speaks a lot. Many countries that are racing for their PCI to equal with PCIs of advanced countries are pushed many years back as explained by IMF.
If there was no this COVID disaster, fast growing economies would reach at a wonderful level, in comparison of which from 2020 to 2022 the PCI shrink by 22% according to IMF. According to NRB survey conducted on Ashadh end of 2077 BS, 23% of labour engaged in formal sector lost their job. This comes around 17 lakhs as 72 lakh labour are engaged in formal sector in Nepal, as of today. People having marginal revenue lost their job whereas green signal observed in share and real estate market, some people became rich making more unequal income distribution of income throughout world.
In one study where five major pandemic of 21st century are included, the economic plight after pandemic, of most affected country is offered. In five year the Gini-coefficient increased by 1.25% showing big income inequalities. In pandemic tourism and sector directly or indirectly linked with tourism like: transportation and business badly affected where people experience no customer to whom they can offer a service.
Even though, hotel and restaurants sector only contribute 2% approx. gross domestic product in Nepal, sector like wholesale and retail linked with tourism contribute 15% and transportation sector contributes 5% in GDP on the top. This takes time to normalize this one-fourth part of economy after pandemic ended, till then some harm in economy is surely done.
When the COVID-19 hit the world the main concerns of countries is how to protect the impacted economic sectors from it. On 2019, Nepal observed 12 lakh tourist inflows as shown by record but due to COVID-19 forward integration and backward integration are badly influenced. With lost in employment in these sectors the risk of additional inequality emerged.
Some solutions offered below:
a) Government fiscal and monetary policy
The roles of state increased in this time and governments are solely responsible to normalize the economic cycle. Through fiscal and monetary policies governments in world are working hard to bring back economy to ease. In Nepal too due to non-traditional practice of monetary policy economy is catching up track. ( As of now, if niseadhagya, restrictive order, goes beyond two weeks government will find more harder to catch up.)
If this non-traditional practice of monetary policy expected to go for ling in market, it could ruin trend and freedom of the market. State and market by keeping communities in center after pandemic situation should provide opportunity to get back in competitive setup. Keeping communities in center means state and private sector should in same spot concerning unequal income and poverty.
b) Role of technology
The use of technology after COVID-19 not only created "Digital Dividend" but countries fear that it may create "Digital Divide". In this case country like Nepal having low income should transform use of technology to social justice with economy.
c) Small and Medium enterprises
In this circumstance prof. Alfred Marshal said, peace mind and kind heart is needed in formulation of economic policy. All three level governments should focus on the marketization guarantee of agricultural product and production from small and medium enterprises. If the institutes related with all three levels became able to bridge production and market the revenue affected by COVID of SME can be guaranteed. For this, to connect SME with technology is equally important.
d) Relief to labours
The identification of sector is necessary so labour force of tourism related sector who lost job can be directly or indirectly engaged. If the government can speed up infrastructural sector related project, the loss from tourism sector can be compensated up to big extent.
e) Provisions in Share market
After COVID started worldwide, the share market started to observe as important determiner of income inequality. When the real sector of most countries is struggling hard, "bullish" trend of share market is found. From august 2020 to mid-march 2021 Tokyo and Mumbai stock exchange extended by 30% whereas 18% seen in American dow jones. In comparison to world share market the growth of Nepalese share market is unexpected. From Ashadh end to Falgun end 100% growth in Nepalese share market is seen.
At this time if government was able to provisioned capital tax on the basis of time duration of capital share retention, it could have helped in income redistribution. Person supplying labour for a year have to pay up to 36% of income tax but in capital market for income earned in short-term only have to pay 7.5% on income gained. This will disappoint entrepreneurship and financial means that have to be mobilized in redistribution of production sector have risk of centralization.
f) Sustainable development goals
The pandemic has set us back in many ways and including on reaching the sustainable development goals. For the first time in 20 years, global poverty significantly increased. Nepal need to work hard on no-poverty and reduced inequalities goal included in SDGs. For this government must ensure employment and income generation to those who are vulnerable to COVID disaster.
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