As the festive season in Nepal approaches, marked by the Rakshya Bandhan festival, merchants and traders are grappling with an unprecedented economic downturn. Historically, this period has been a beacon of prosperity, with the festivities not only rejuvenating the spirits of the Nepali people but also igniting a shopping frenzy. However, this year paints a different picture.
Traditionally, the festive season has been a time of economic boom for Nepal. Celebrations would lead to bustling markets, skyrocketing sales, and a happy populace. Economic experts have noted that a staggering 50 to 60 percent of annual sales occur during the Dashain, Tihar, and Chhath festivals. This surge in consumer activity benefits everyone in the economic chain, from manufacturers and suppliers to retailers and the government, which sees a spike in tax collections.
Sagar KC, the owner of KC Brothers and Sons Fancy Store on New Road, reminisces about the pre-Covid era when his phone would be inundated with calls from wholesalers placing orders for the upcoming Teej and Dashain festivals. This year, however, the scene at his store is starkly different. Instead of attending to customers, KC finds himself swatting flies, a testament to the drastic drop in footfall.
He laments, “In the years leading up to 2019, I would record daily sales of up to Rs50,000. Now, I struggle to make sales worth Rs5,000 a day.” This represents a staggering 90 percent decline in his business.
This sentiment is echoed by many traders on New Road, Nepal's prominent wholesale market. They are grappling with increasing overheads, from rising rents to escalating costs of goods and customs duties. A neighboring women's wear store, stocked with designer kurtas and sarees imported from India for the Teej festival, faces a similar plight with a noticeable absence of customers.
Several factors are contributing to this economic slump:
- Youth Exodus: A significant portion of Nepal's youth, who are primary spenders during the festive season, have migrated abroad. Estimates suggest that nearly a million Nepalis left the country in the last fiscal year.
- Economic Recession: Nepal experienced its first recession in 60 years during the initial quarters of the previous fiscal year. This was exacerbated by political instability and persistent inflation. The National Statistics Office reported a mere 1.86 percent growth in the fiscal year 2022-23, the lowest since the devastating earthquakes of 2015-16.
- Consumer Confidence: The general sentiment regarding the economy remains bleak. Naresh Katwal, a former president of the Nepal National Traders Federation, highlights the reluctance of traders to import goods due to low demand, despite the festive season looming.
- Inflation: The Nepal Rastra Bank reported a year-on-year inflation of 6.83 percent in the first 11 months of the last fiscal year.
Economist Pushkar Bajracharya points to high taxation as a significant deterrent to consumer spending. He argues, “The government attributes rising inflation to the Russia-Ukraine conflict. However, the real issue is the exorbitant taxes that make consumers think twice before spending.”
The government's financial woes are evident. Contractors recently staged a protest demanding the settlement of unpaid bills amounting to Rs50 billion. The central bank's measures to curb inflation, such as increasing interest rates, have inadvertently reduced people's purchasing power, leading to reduced market activity.
Despite these challenges, Finance Minister Prakash Sharan Mahat remains optimistic, emphasizing the ample liquidity in the market. He urges the public and private sectors to remain positive and dispel rumors of an economic crisis.
However, for the festive spirit to truly return to the streets of Nepal, a concerted effort from all stakeholders is essential. The current economic challenges require innovative solutions, collaboration, and most importantly, hope for a brighter future.