Economics - XI

Industry
Industry: Cottage and small scale industry: Those industries which are labour intensive and related to countrys tradition, art and culture are called cottage industries. These industries mobilize local raw materials and skills. Likewise, the industries having fixed investment up to 10 million except cottage industries are called small scale industries. Importance of Cottage and Small scale industries: The cottage and small scale industries plays an important role in the process of economic development of developing countries like Nepal. The importance of cottage and small scale industries are as follows: Easy to establish: Cottage and small-scale industries are easy to establish. In the sense that these industries dont require more capital and technical knowledge. Such industries can be established and run by a single households by utilizing their own capital, raw materials and skills. Increase to employment opportunities: The development of cottage and small scale industries create employment opportunities. It helps to reduce the pressure of population on agriculture. It becomes a supplementary resource of income to the farmers. Basis of the development of large industries: Cottage and small scale industries are the foundation of large scale industries. People learn management techniques and skills from small industries. The development of these industries increases the income and purchasing power of people. This helps to develop large scale industries. Use of local resources: Inorder to use the local resources we have to develop cottage and small industries. It can help in the maximum utilization of local resources. Preservation of art and culture: The cottage and small scale industries play an important role in preserving traditional art culture and skills. It has helped to introduce Nepalese art and its tradition and culture in different countries of the world. Source of foreign exchange: It is the major source of foreign exchange. The cottage and small industries products such as ready made garments, handicrafts, woolen carpets, etc. are Nepals major items of exports to third countries.
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Economics - XI

Source of National income: Cottage and small industries play an important role in increasing national income. This industries provide more employment opportunities which leads to increase per capital income of the people.

Problems of cottage and small-scale industries in Nepal: There are various problems of cottage and small-scale industries which are as follows: I. Lack of capital: Majority of Nepalese people are poor. They have low capacity to save and invest. Thus, there is lack of capital for the development of cottage and small-scale industries in Nepal. Lack of raw materials: The raw materials needed for cottage and small-scale industries arent timely and adequately available. The available raw materials are inferior in quality. Thus, these industries are running below their capacity and producing low quality products. Problem of transportation: The transport facilities which are essential for the development of cottage and small-scale industries. But, there is lack of transport and communication facilities in hilly areas of Nepal. Limited market: The size of National market is small. The purchasing power of people is low. Thus, the market for industrial product is limited. Primitive technology: The production techniques of cottage and small scale industries are very primitive. The entrepreneurs of these industries are uneducated, unskilled and untrained. Thus, due to this, the goods produced from these industries are of inferior quality. Lack of protection policy: Every country has to adopt a protection policy for the development of cottage and small scale industries. But there is lack of protection policy in Nepal. Therefore, these industries have to compete with large scale industries.

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Medium and large-scale industries: Those industries which need more capital, labour, machinery, equipments and high technology are called medium and large-scale industries. According to industrial policy 1992, the industries having fixed investment of 10 million to 50 million are called medium industries. Similarly, the industries having fixed investment above 50 million are called large scale industries.
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Economics - XI

Importance of Medium and large scale industries: The medium and large-scale industries can play an important role in the process of economic development. The importance of medium and large-scale industries are as follows: I. Increase in employment opportunities: The development of medium and large-scale industries helps to generate employment opportunities. Thus, it helps to reduce the problem of unemployment and disguised (unseen) unemployment in the country. Modernization of agriculture sector: We need modern tools, fertilizers, technology, etc. to modernize agriculture sector. Thus, the establishment of agro-based medium and large-scale industries helps in the production of these things within the country which helps to develop agriculture sector. Utilization of Natural resources: Medium and large-scale industries are necessary for the scientific utilization of available natural resources. For Eg: Forest resource, water resource, mineral resource and human resource. This will help to increase Gross Domestic Product. Source of government revenue: The government can receive revenue in the form of sales tx, exercise duty, export duty, income tax, VAT, etc. with the establishment and development of medium and large-scale industries. Thus, government revenue increases with the growth of these industries. Development of basic infrastructures: Basic infrastructures like transport, communication, electricity, etc. are the prerequisites for the development of large scale industries. The investment in these basic infrastructures increases the development of industries. Capital formation: Medium and large scale industries help to accelerate the process of capital formation within the country. Establishment of these industries expand capital market by providing investment opportunities to the people which is the basis of economic development.

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VII. National Independence and security: Development of medium and large scale industries means large scale production of consumer goods and capital goods. It makes people self-dependent. Further more, development of these industries help national security by providing different materials and weapons necessary for the countries security. Problems of Medium and large-scale industries in Nepal:
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Economics - XI

There are various problems for the development of Medium and large-scale industries which are as follows: I. Lack of Capital: Development of medium and large-scale industry needs large amount of capital investment. But there is lack of capital in Nepal because Nepal is a poor country. The per capita income of Nepalese people is very low. Lack of infrastructures: Infrastructures like transport, communication and electricity are the most important factor of the development of large scale industries but there is lack of such infrastructures in Nepal. Scarcity of raw materials: Nepal has to depend on foreign capital, imported raw materials, chemicals and intermediate products for most of the industries. Thus, there is shortage of raw materials for the development of large-scale industries. Limited Market: The domestic market for Nepalese industrial product is limited due to low purchasing power of people. The nearest potential market for Nepalese product is India but Indian attitude towards is not favorable. Land-locked position: Nepal is a land-locked country. The land-locked position of the country is also hindering industrial development. Nepal has to cross 2000 KM Indian land to get entry into International market. Defective government policy: A sound government policy is pre-condition for creating sound industrial environment but the government policy of Nepal is neither sound nor consistent. There are repeated changes and revision in Industrial policies in Nepal.

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VII. Lack of entrepreneurship and managerial skills: There is lack of entrepreneurship and managerial skills for the development of medium and large-scale industries in Nepal. Tourism Industry: The business which provides different kinds of facilities to the tourists is called tourism industry. Tourism industry includes those business activities which provide facilities to the tourist such as hotel, lodge, travel agency, trekking agencies, etc. The tourism industry is established to provide various services to the tourist so it is classified as service industry. Importance of tourism industry:

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Economics - XI

Nepal is a tourism centre due to its natural beauty, unique culture and cultural heritage. Thus, tourism industry occupies central position in Nepalese economy. This industry helps to earn foreign currency and also provides employment opportunities. The importance of tourism industry in economic development are as follows: I. Source of foreign exchange earning: Tourism industry is regarded as one of the major source of foreign exchange earning. This sector contributes about 10% of total foreign currency earning. Employment generation: Tourism helps to create employment opportunities. It provides direct as well as indirect employment opportunities to Nepalese people. Development of handicraft industries: The development of tourism industry helps to develop handicraft industries in the country because the tourist like to buy the handicrafts goods like idol, Nepali cap, woolen carpet, ornaments, etc. Publicity of nation: Tourism helps to publicize the country in different parts of the world. It helps to publicize Nepalese art, skills, culture, tradition, etc. to the world. Source of government revenue: Tourism is also a source of government revenue. The government earns revenue in the form of taxes, visa fee, airport tax, royalty, etc. from tourism industry. Cultural exchange: Tourism industry facilitates cultural exchange. People get opportunity to learn each others art, culture, custom and language. This cultural exchange helps to change the lifestyle of the people.

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VII. Development of human resource: Tourism industry requires more trained and skilled manpower. As tourism industry expands, there is need to produce a large number of trained and skilled manpower. Therefore, the development of tourism industry helps to develop human resource. Prospects of tourism industry: Nepal is called tourists paradise. It is a country of live culture, snow-capped mountains, unique beauty of nature and hospitable people. Nepal is compared with Switzerland of Europe and Kashmir of Asia in terms of natural beauty. Therefore, the prospects of tourism industry are immense in Nepal which are as follows: I. Natural beauty: Nepal is a beautiful country. It has inherent features like geographical diversity, unique nature of beauty, etc. It has pleasant rivers, water falls and lakes. It has a
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Economics - XI

rare wild animals and birds. It has variety of flora and fauna. Therefore, Nepal is a beautiful country. II. Temples and unique arts: Nepal is a country of temples. The important temples like Pashupatinath, Muktinath, Swayambhu, Krishna Mandir, Ram Janaki Mandir, etc. are famous in Nepal. These temples are attractive to the tourist interest in history and culture. Birth place of brave persons: Nepal is a birth place of Gautam Buddha, the light of Asia. Nepal is known as the birth place of brave Gorkhalis. Rich culture: Nepal has special cultural heritage. There is live and diverse culture in Nepal. So, the tourist interested in culture can enjoy in Nepal. Suitable climate: The climate of Nepal is suitable for different types of tourists. The climate here is neither too hot nor too cold. Nepal has different climate in different parts of the country due to difference in altitude. Rare wild animals and birds: Nepal is rich in biodiversity. The tourist can observe rare wild animals and birds in Nepal. These things also provide attraction to the tourist to visit Nepal.

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VII. Hospitable people: Nepalese people are very simple and hospitable. People take tourist as guests and the guests are regarded as the god in Nepalese culture. Problems of tourism development in Nepal: There are various problems of tourism development in Nepal which are as follows: I. Lack of transportation and communication facilities: There is lack of transportation and communication facilities in most of the potential tourist destination. Thus, tourism is limited to few tourist destinations like Kathmandu, Pokhara, Chitwan and Lumbini where there is easy access to transportation and communication. Lack of trained tourism manpower: The trained manpower of different levels are essential to provide quality services to tourists. But such manpower are extremely limited in Nepal. Inadequate publicity: Nepal as an attractive tourist destination has not been well publicized in foreign countries. Due to this, tourism hasnt been properly developed in Nepal.
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Lack of recreational facilities: 50% of the tourist who visit Nepal come for pleasure motives. But recreational arrangements for such tourist are very inadequate. The recreational means like rafing, boating, flying, cable car, etc. are very limited in Nepal. Similarly, the night clubs and health clubs are also limited. Problem of pollution: The problem of pollution is increasing in Nepal due to deforestation, unscientific urbanization and industrialization. The health conscious tourist dont like to visit Nepal due to this problem. Deterioration of art and culture: Nepal is rich in art and culture but there is gradual degradation in Nepalese art and culture. The festivals are disappearing. The idols of gods and goddesses are also disappearing.

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Public enterprises: Those enterprises which are earned by the government are called public enterprises. These enterprises have autonomy in management and legally independent entity. These enterprises are directed and controlled by the government. Public enterprises are also called social industries or government enterprises. In Nepal, these enterprises are called Government Owned Enterprises. According to A.H. Henson, a Public enterprise means state ownership and operations of industrial, agricultural and commercial undertakings (enterprises). Therefore, the enterprises owned, managed and operated by the government with definite objectives are called public enterprises. Features of Public Enterprises: I. It should have government ownership. II. It has autonomy in management. III. It has legally independent entity. IV. It is directed and controlled by the government. V. It is accountable to the people. VI. It has features of commercial enterprise. Current status of public enterprises in Nepal: Nepal is a developing country. It has been adopting mixed economy having coexistence of public and private sectors. Thus, there are some public enterprises established in Nepal. Public enterprises in Nepal are operating under six broad sectors i.e. industrial sectors, commercial sectors, social sector, service sector, public utility sector and financial sector. At present, there are 37 public enterprises in Nepal. Nature of Public Enterprise 1. Industrial sector 2. Trading sector Numbers 11 6

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Economics - XI 3. Service sector 4. Social sector 5. Public utility sector 6. Financial sector Total 6 5 3 6 37

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Economics - XI

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