Assignment I

Submitted by:
Avinash Hada
MBA FALL 2015

Submitted to:
Mr. Gokarna Awasthi
24th June, 2017
Q. In your opinion what would be the possible impact of these provisions of budget in business?

-Structure

-Agriculture

- Industry

- Energy

- Local Government

- National Pride Project

- Taxation

Answer:

Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara unveiled the budget of
Rs. 1278.99 billion for 2017/18 at the Legislature Parliament on May 29, 2017 Monday. Finance
Minister Mahara expected that the GDP growth rate would be 7.2 per cent coming year, which
would be the highest in recent years. Similarly, agriculture sector would reach 5.3 per cent, the
Industrial sector would grow by 11 per cent, service sector would usher by 6 per cent in the
coming fiscal year. Minister Mahara also projected that the inflation rate would remain at 7 per
cent in the coming fiscal year. The budget was engrossed with lots of developmental
expectations from various sectors.

Structure

The government has proposed to spend Rs 1,279 billion in the next fiscal year to meet various
expenses and achieve economic growth target of 7.2 percent. This budget would be covered by
Rs. 730.05 billion from revenue, Rs. 72.17 billion from foreign grant and Rs. 102.73 from cash
reserve of last fiscal year. The remaining Rs. 214.03 billion is expected to be covered by foreign
loan. Likewise Rs. 804 billion is expected to be spent in recurrent expenditure, Rs 335 billion in
capital expenditure and Rs 140 billion in financing provision for the coming fiscal year.
 Particulars Fiscal Year
2074/74 2073/74
Current Expenditure 803.53 617.16
Capital Expenditure 335.17 311.94
Budget for financial 140.29 119.81
management
Budget Allocated 1278.99 1048.92

Expenditures (in Billion)

SOURCES FOR EXPENDITURES:

The sources of the funds required to meet the budgeted expenditures are as under:

Sources Fiscal Year

2074/74 2073/74
Revenue 730.05 565.89
Repayment of Debt Principal 15 10
Foreign Grant 72.17 110.89
Foreign loan 214.04 195.72
Internal loan 145 111
Cash reserve 102.73 55.42
Total 1278.99 1048.92

Agriculture

For agriculture and livestock sector programs Rs. 30.40 billion has been allocated. The provision
of 5 percent subsidy in the interest of agriculture and livestock loan has continued. Similarly,
continuity to all the subsidies and facilities including the fertilizer and improved seeds has also
been continued. All sorts of subsidies provided to agriculture will be managed through farmers'
own bank account.

I believe that qualitative economic reform cannot be attained without the commercialization and
modernization of agriculture which contributes about 30 percent in the GDP of Nepal and is the
major profession of two third of Nepalese population. This provision will ensure technical,
financial and monetary incentives including timely supply of all sorts of agro-equipment to the
farmers. Also the provision for discouraging middle man will ensure the fair price.
Commercializing agriculture and livestock will attract more youths for such business which will
be very beneficial. Provision of agricultural insurance services will encourage farmers.
Establishing advance breeding center in potential places will create new job opportunities.

Industry
For industry, commerce and supply sector programs Rs. 10.96 billion has been allocated. The
major highlights are:

1. Grant will be provided to selected industries promoted by young entrepreneur for the
necessary technological and market promotion. Youth entrepreneurship program will be
continued.
2. Special Economic Zone will be brought into operation. Studies will be conducted to
establish additional industrial zones.
3. Bhagat Sarbajit Dalit Development will be continued with enhanced effectiveness.
4. Environment friendly industries will be further promoted.

I believe this industrial provision of budget will create favorable environment for investors and
will make Nepal an investment friendly destination. This will promote youth engagement in the
industrial sector which is a major boost for developing country like Nepal. The provision will
ensure industries to minimize waste and be more environments friendly. Mine based industries
will have major impact as investments in such industries will create new job opportunities and
create new sources of energy. The provision will empower women and encourage increased
women participation for skill building. Promotion of technology, easy access to loan with
subsidize interest rates will promote mainly cottage and small scale industries. The government
always talks about boosting trade but does nothing substantial to enhance the trade sector in the
real sense. Our cost of production is higher because of which Nepali products are losing
competitiveness in the global market. Thus, the government should first make efforts to reduce
the cost of production of domestic products if it wants to boost the countrys industry.

Energy

For energy programs Rs. 62.47 billion has been allocated. The major highlights are:

1. The government has launched the theme Nepal ko Pani Janata ko Lagani to eradicate
load shedding from the nation and planned to generate 17,000 megawatts electricity.
2. Construction of all Reservoir and peaking projects including Nalsingh Gad, Veri-1,
Jagdulla, Utterganga, Noumure, Sunkoshi-2and 3, Dudhkoshi, tamor will be expedited
simultaneously.
3. The budget has allocated Rs 10 billion for Budi Gandaki Hydro Project and projected that
the Chameliya and Kulekhani III would be completed next year.

The development of the hydropower sector means more employment opportunities, lights to
households and it could also slash the trade deficit of the country by reducing consumption of
petroleum products. The energy generated should benefit small and micro businesses while
improving the standard of living and the health of local people. It should contribute to the
protection of forested areas and, by being fed into the national grid, should bring new revenue to
the region. I believe dependency over petroleum product will be reduced if the necessary
production and distribution of electricity to meet the demand of household and industrial sector,
replacing cooking gas, and using electric transport is executed effectively.

Local Government

The government has decided to provide a grant to Rural Municipalities, Municipalities, and
Metropolis from the Central Government. Rural Municipality would get a minimum grant of Rs
100 million to a maximum grant of Rs 390 million, Municipality would get minimum grant of Rs
150 million to a maximum grant of Rs 430 million. Similarly, Metropolitan cities would get the
minimum grants of Rs 400 million to a maximum grant of Rs 640 million.

National Pride Projects

The government has provisioned adequate resources for the on-going national pride projects. A
separate legal and procedural framework will be made in order to facilitate the implementation of
the projects. The major highlights are:

1. Rs. 10.14 billion has been allocated for Kathmandu-Terai fast track.
2. Rs. 4.27 billion for 518 km road construction of Hulaki raj marga.
3. The budget has allocated Rs. 2.3 billion for three sections of the North South Public Road
including Karnali, Kali Gandaki and Koshi.
4. The budget has allocated has Rs. 300 million in order to connect Humla district HQ and
Dolpa district HQ.
5. The budget has allocated Rs. 6.57 billion for Melamchi drinking water project and Rs.
1.92 billion in order to implement activities related to comprehensive Master Plan of
President Chure Protection Program.
6. The budget has allocated Rs. 13.72 billion for three airports: Nijgadh Second
International Airport, Gautam Buddha Regional International Airport and Pokhara
Regional International Airport.

National pride projects have a major impact on the business environment of Nepal. At present
RA is facing many issues and has only limited destinations. Similarly the only international
airport is very improperly managed and is unable to handle large inflow of guests. So, the
completion of 3 international airports should be expedited. This will have positive impact on the
business environment especially on the tourism business of Nepal. The cost of travelling to
Nepal will also decrease which will increase number of tourists inflow to country and Nepal
will get increased sources of revenue. Similarly completion of Kathmandu-Terai fast track
should be given major priority as well as this will make it easy to trade goods from terai to
Kathmandu and vice versa reducing the price of the product.
 Taxation

No such rates of tax have been changed by this budget announcement. The previous tax rates
have been continued. However, the mechanism of collection of tax shall be systematized &
maximum economic activities are aimed to be brought under the tax brackets. Separate Tax
Identification Number shall be generated as to include both Income Tax & Custom Duty. E-
payment & Banking system shall be deployed for the collection of tax. The Tax administration
shall be reformed & evasion shall be deterred. There are no changes in the existing Value Added
Tax rate of 13 percent for the fiscal year 2074/75.

Particulars Fiscal Year 2074/75

Assessed as Individual
Rs Tax rate
First tax slab 350000 1%
Next 100000 15%
Balance exceeding 450000 25%

Particulars Fiscal Year 2074/75

Assessed as couple
Rs Tax rate
First tax slab 400000 1%
Next 100000 15%
Balance exceeding 500000 25%

There has been complaint from the taxpayers for a long time about the increased business cost
due to tax related cases not settled on time and the deposit amount required for the review. While
formulating this budget, the government must think of constituting a permanent instrument to
settle tax issue, review tax rates and reduce number of tax exempt goods. For 2074/75, there
have been no changes in the tax rates except minimum increment in the excise duty in alcohol-
based and tobacco-based goods affecting general health. The process of double taxation
avoidance agreement should be expedited with those countries having much more transactions
and having potentials of investment and technology export with Nepal.