4. Macro-Economic and Agricultural Policy Context

Ninth Development Plan (1997-2002)
The Ninth Development Plan aims to substantially reduce poverty within 20 years, with a view to empowering people economically and socially by integrating them into the mainstream of the development process. The Government puts emphasis on significantly increased economic growth (agriculture led) - Nepal has become a net importer in terms of food -, better service provision and improved access to basic services by the most vulnerable. The goal is to reduce poverty incidence from 42 % to 32 % by the end of the Plan period.

Several aspects of the Ninth Plan (1997-2002) attempt to remove constraints related to policy, institutions and processes:

• policies to promote macro-economic stability;
• initiatives to equip and empower the local bodies making them the focal point of rural development through decentralisation;
• increasing GDP by an annual average rate of 6 % during the Plan period, mainly through growth in agriculture, agro-based industries, small-scale industries, tourism and construction;
• employment generation, lowering unemployment and underemployment rates to 4% and 35% respectively.

Agriculture Perspective Plan (1997 - 2016)
According to the APP, the necessary preconditions now exist in Nepal to trigger sustainable high growth. Priorities include:

• increasing agricultural production;
• irrigation: well-controlled, year-round water supply;
• fertiliser: meeting the demand for fertiliser and accelerating its use over time, by creating a favourable policy environment and developing institutional structures in the private sector;
• increased specialisation: need for low transaction costs, for which both improved rural transport systems and technology are crucial;
• research and extension services: need to focus on efficiency in use of fertiliser and irrigation, commodity programmes specific to a limited number of lead and target commodities, animal nutrition and veterinary services, and marketing and processing;
• improved access to rural areas and their electrification

The APP priority sectors include livestock, mainly dairy animals; high value crops; agri-business; and forestry. While the APP sets clear priorities for rural development there is no effective strategy to implement these. However, the APP does support subsistence farming and food production by prioritising the four main staple food crops: rice, wheat, maize and potato, relating to the terai, low and mid-hills, and high hills for technology generation and dissemination.

Development Priorities in the Hills
The need for a commodity focus differentiates the APP's hill-and-mountain strategy from that for the terai. In the terai, the strategy mainly consists of bringing together previously separate elements of infrastructure and research that already existed. The APP strategy acknowledges that much of the flight from the countryside to Kathmandu is a result of the lack of income generation opportunities, plus a skewed distribution of that income in the hills and mountains. The hill and mountain growth strategy is based on a limited number of priorities designed to maximise economic productivity. These include:

• more focused agricultural research and extension with increased funding from government and groups of donors;
• co-ordinated construction of roads, irrigation, and hydroelectric investments around strategically selected geographic growth nodes;
• processing and marketing (e.g. in India to take advantage of high pre-season prices) of six leading crop commodities and one leading livestock commodity through partnerships with the private sector;
• co-ordination of government, people's, and private institutions to support these priorities;
• develop improved earning potential on farms of all sizes;
• attracting those who will decide to move out of agriculture to expanded commercial centres in the hills - not just Kathmandu.

The common objectives of all these components of the APP include:

• output growth and export promotion;
• income generation for better distribution of income and well-being;
• diversification of commercial centres;
• income and food security;
• the conservation of ecological resources.

Land Reform
Land reform has been significant in defining agricultural production in the hills. The 1964 Land Act enforced a ceiling of 2.5 ha in Kathmandu, 4.07 ha in the hills and mountains and 16.93 in the terai for cultivated land. The Act recognised the rights of tenants and fixed rents at 50 % of the main crop grown in one year. The fourth amendment of the Act abolished the dual system of ownership throughout the country and during the current Ninth Plan period, ownership has to be provided to all tenants.

However, the current Agriculture Perspective Plan relies too much on growth as the engine for addressing poverty, with few direct poverty reduction measures being taken, and has proved difficult to implement.