The seemingly watertight border control, however, fails to dissuade lower middleclass Nepali shoppers from making a trip to the neighboring country to buy simple things like vests, soap, toothpastes or leather shoes. Retailers in Raxaul sometimes grumble that business is no more what it used to be before Madhes Uprising, but the rush of ‘foreign’ shoppers into narrow streets of the bazaar even on weekdays belies their grouse.
Shopkeepers may carp about a perceptible fall in the quantity of transaction, but they grudgingly agree that Nepalis are the main buyers of their quality goods. Some admit hesitantly that the turnover may have actually increased over last few years. Despite Nitish Kumar and overnight millionaire beneficiaries of his highway-building spree, few Biharis spend more than 300 rupees to buy undergarments. Nepali shoppers easily dish out more than the price of a pair of trousers to purchase branded undies.
Stockists in Raxaul often claim that they begin to stock new designs as soon as such products are launched in Indian metros. Belts costing over 1,000 rupees and ties priced higher than the cost of a tailored jacket may be difficult to get in Mujaffarpur—the second biggest city of Bihar—but are easily available in Raxaul. “Only Nepalis buy such goods, except a few of our police officers,” a storekeeper of branded goods along Raxaul’s main street said with a wink, adding admiringly, “You Nepalis may not have lot of money, but you can spend!”
Raxaul, incidentally, is not a favourite shopping destination of the comfortable classes of Nepal—the rich and leisurely elite whose family expenditure exceeds 2.5 million rupees per year according to the Asian Development Bank yardstick. Exceptions apart, this group consists of what legendary investor Warren Buffet calls “members of the lucky sperm club” and have benefited hugely from rise in property prices in Kathmandu. Some of them have since multiplied their inherited fortunes and they are used to buying their essentials in Bangkok, Singapore and Dubai.
Even the upper-middleclass that spends over a million a year per family prefers to buy stuff in Indian metros where they go quite often for business, education of children, and treatment of the elderly or as religious tourists on vacation-cum-pilgrimage. Shopping malls of Kathmandu have been trying to lure them without much success.
It is the lower-middleclass—the motorcycle owning families with annual expenditure in the range of half-a-million to a million rupees—that flock to border bazaars such as Siliguri, Jogbani, Madhubani, Sitamarhi, Raxaul, Nautanwa, Rupaidiha and Gauriphanta to buy things that they think will confer them status among peers. “You like this? Such a saree costs upwards of 5,000 rupees at shopping malls here. I bought it for only 3,000 Indian rupees from Jogbani,” a homemaker can gush at contributory Dar-Khane party prompting another to make that trip to Raxaul on her next maiti visit.
A former finance ministry mandarin was recently quoted as saying that Nepal consumes 93.9 percent of its GDP. Initial findings of Nepal Living Standard Survey (NLSS) 2010 reportedly show that 79 percent of remittance income is used for daily consumption, with only 2.4 percent invested for capital formation. It needs a trained economist to make sense of these indicative figures by putting them into perspective of overall national goals or comparing them with similar statistics from other developing countries. However, one need not be an egghead to recognize that Sumanji—the Nepali equivalent of American Joe and an average working person—spends way too much, saves too little, and invests almost nothing in productive activities.
Increasing remittances is presently keeping the economy afloat and professional do-gooders are delighted that poverty levels have begun to come down. Traders are busy in making hay while the sun shines by procuring chicken from Brazil, bottled water from France and fresh sushi from Japan to feed the growing appetite of the comfy class in Kathmandu. But this picnic cannot last for long unless proceeds from commercial activities propelled by windfall remittances are not directed toward national wealth creation. The economy would have to be pulled up with its bootstrap from the poverty trap if the quagmire of consumption is not to consume the national polity.
Cultivated addiction
Sardar Bhim Bahadur Pande was a mandarin of another era when nobility was in austerity and flamboyance was for the frivolous. His two-volume memoirs Tyas Bakhatko Nepal seems out of tune with the tastes of a generation that has little qualms about living life king-size over remittances of unskilled workers in West Asia or the aid money that comes in the name of the poor, the marginalized and the downtrodden of Nepali society. Sardar Pande blames Chandra Shamsher for introducing the culture of immoral consumption in the country.
The year was 1920 and in recognition of loyal assistance to war efforts, Nepal was to receive an unconditional annual present of a million Indian rupees from the British Government to be paid in perpetuity. (After more help to Allied Forces in the Second World War, the payment was doubled and the exact state of this annual present remains unclear, but that’s another story). The country had also been granted a onetime compensation of 2.1 million Indian rupees, which probably went to the coffers of Chandra, as there was no difference between the national treasury and the personal fortune of the ruler during Ranacracy.
Chandra’s windfall profits from the blood money of mercenaries apart, about 200,000 soldiers that had gone to fight for the British brought with them approximately 130 million rupees. Sardar Pande estimated that the sum was worth about 13 billion in early 1980s; its value must be humongous in the present context. Perhaps wily advisors of the Rana ruler realized that the knowledge that Gurkhas had gained through exposure to the world was dangerous enough, if these returnees also had the capital to invest and create wealth, power equation in Nepali society would irrevocably change. Ergo, the government began to encourage trade in superfluous goods by importing trinkets from Japan and printed clothes from India, often with family members of Ranas as sponsoring partners, and the craze of conspicuous consumption began to spread into the hinterland.
The decision transformed market towns not only of hills and mountains but also in the plains where some of the returnees had began to settle. Rana families benefited from the remittance boom in two ways—sponsoring partners of importers got part of the loot while the ruler grew rich from the proceeds of import duties. Foundations of culture of compulsive consumption have been laid.
Sardar Pande was a scion of old Gorkha family and cannot help himself from blaming Marwari traders who he believed ‘sucked Nepali economy like leeches’, but whether it is an immigrant or an indigenous person, the first duty of a businessperson is to maximize profits. The phrase Corporate Social Responsibility (CSR) has a nice ring to it, but that is secondary to the main function of a commercial enterprise, which is to multiply returns on its investments in whatever way that can be made to look legitimate. It is the duty of the government to regulate businesses and insure that at least part of the proceeds is directed toward productive investments. The moment a government begins to wallow in taxes from consumptive tendencies, economy is mired in the mechanism of manipulation and corruption.
Addiction to import duties destroyed the resilience of Nepali economy as the country became dependent upon wealth that it had no role in producing. With Sardar Pande as one of the implementers, attempts were made to establish some processing industries during Judha’s rule, but the country has remained dependent upon imports for most of its needs ever since. The main source of government revenue continues to be imports and consumption rather than production and exports.
Buy, buy, buy
The scene at Tribhuvan International Airport would have been heart-rending if only the ruling class in Nepal had any heart. Most departing passengers come to the airport clutching the ticket and passport in one hand and a rundown bag in another. In their shirt pockets or in the purse, there is usually a list of goods to be brought back for the family, along with the account of creditors to be paid from future earnings. The queue at Rupaidiha or Gaddachauki border posts are even more depressing where ill-clothed workers headed for India are seen clutching their citizenship card apprehensively as SSB jawans intimidate them with dour looks. They would remit home part of their earnings, which the government would then use to finance vehicle imports among other things.
A four-wheel SUV plays no role in increasing competitiveness of Nepali businesses, enhancing their efficiency or improving traffic safety. Its carbon footprints per passenger are higher than even the most polluting public bus and it contributes heavily to fuel import bills. Nepal does not produce any car accessories; spare parts or components for vehicles; and even the contraption needed to fix a punctured tyre have to be procured abroad. The government benefits by collecting taxes at every stage, without realizing that the net loss to the country in terms of squandered opportunity is beyond arithmetic calculations. It is insane to demand that government reduce duty on private vehicles to increase its sales but then sensitivity for the economy and ecology is not the major concern of the profit sector anywhere in the world.
The feeling of prosperity bought with blood money depends upon the ability to buy things and the concept of deferred gratification is alien in the culture of dependency that has been assiduously cultivated in Nepal. The Philippines has received massive influx of remittances over many decades. The Malaysians tried a different route by government-initiated investments in infrastructure and industries. The difference is for all to see.
Consumptive culture needs convenient transportation of goods. Many Madhesis rue that other than national highways, no district has even 50 kilometres of roads. Few realize that the length of irrigation canals in a region dependent upon agriculture is not even one-tenth of that figure in most districts. As remittance inflows grow in Tarai-Madhes, probably public resources would be directed to create market for imported products. But as long as the government does not correct the road taken by Chandra Shamsher in 1920s, Nepal would probably continue to remain a basket-case selling poverty of the masses to overseas philanthropists for the prosperity of the select few and their bankers, suppliers and battalions of domestic help.
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