Trade Deficit Causes and its Management

Trade Deficit Causes and its Management

Nepal is the underdeveloped country boarder with China on the North and India on South, East and West. It is located between latitude 26 degree 22 minutes North to 30 degree 27 minutes North and longitude 80 degree 4 minutes East to 88 degree 12 minutes East. Nepal became a member of the World Trade Organization (WTO) on April 23, 2004. Nepal is depended on export and maximum products are exported in Nepal. Petroleum products, raw material for iron and steel products, machinery products, rice, vehicle, spare parts, cement, chemical fertilizers are the most imported products in Nepal. Meanwhile, iron and steel, ginger, pashmina, tea, instant noodles, medical herbs, cardamom, handicraft products, and handicraft products are the most exported products from Nepal.

Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports. A trade deficit means an outflow of domestic currency to foreign markets. Nepal is import oriented country as each and every products are exported from other country so trade deficit is regular in our nation.
Following are the causes of widening trade deficit.
a) Increase in the import of vehicle (Bike, Car), petroleum products, chemical fertilizers and rice from abroad
b) Increase in the import of pipe and steel raw material, readymade garments, telecommunication equipment parts and gold from abroad
c) Widening trade gap with China and India
d) Decrease of Nepalese readymade garment exports
e) Political instability
f) Energy and power crisis
g) Poor packaging of export products
h) Unfair trade treaty with India
Managing trade deficit
a) Nepal should focus on promoting products and services
b) The government should identify exportable items and products
c) The government should cancel the unfair trade treaty with India as soon as possible
d) Nepal should focus on export of agricultural products including ginger, tea, herbs, handicrafts and leather
e) Government should provide cash incentive to Exporters so that other people other encourage to do
f) Government should encourage Nepalese to use Nepali product ( Like Mustang Car)

g) Government should discourage illegal remittance of money such as hundi.

By: Munankarmip