IMPACT OF REMITTANCE ON INFLATION
Though a number of factors are responsible causing inflation in Nepal, this chapter is devoted to analyzing the impact of political instability, remittance and growing population on the Nepalese inflation. The next chapter reveals the role of Nepalese money supply and Indian inflation on price level in the economy of Nepal.
5.1 Political Instability
Over the past several decades Nepal has witnessed significant political instability. Since the restoration of multi-party democracy in 1990 alone, more than eighteen different governments have been formed and numerous cabinet reshuffles and no-confidence motions have occurred. A Maoist insurgency launched in earnest in 1996 has resulted in more than 15,000 deaths and considerable damage has been inflicted upon both public and private infrastructure and assets. Since 1990, a number of strikes and other political activities have caused the country’s economy close to…show more content… Even if some policies are formulated, such formulated policies could not have been implemented effectively when government changed within very short period. After it as new government was formed, same problems were experienced. This political instability in Nepal has slowed the pace of industrialization. New investors could not have been attracted to invest in industries including hydropower. Nepal has been able to generate hydropower less than one percent of its total potential. Inadequate electricity, poor road infrastructure and slow pace of industrialization are mainly due to the political instability in Nepal. In the absence of these factors, Nepal is compelled to depend upon imports from India and other countries. If commodities are imported, instead of producing them in own country, the price level automatically rises. Same has occurred in Nepal also and double digit inflation is being experienced for last eight