What is the economic system adopted by Nepal ? Explain any four features. [1+4] OR What is specialization ? Explain any four advantages. [1+4]

Economic System of Nepal

Nepal has adopted a mixed economic system, blending elements of both market economy and planned economy. This system was formally established after the adoption of the new Constitution of Nepal (2015), which guarantees economic freedom while allowing state intervention for public welfare.

Four Key Features of Nepal’s Mixed Economy

1. Role of Private Sector

   • The private sector dominates production, trade, and investment.
   • Businesses operate freely under Company Act 2063 and Industrial Enterprise Act 2075.
   • Example: Tourism, agriculture, and manufacturing are largely private-led.

2. State Regulation & Public Sector Participation

   • The government regulates key sectors (e.g., electricity, banking, and essential commodities) to prevent monopolies.
   • Public enterprises like Nepal Electricity Authority (NEA) and Nepal Oil Corporation (NOC) operate in strategic areas.

3. Five-Year National Planning

   • Economic development follows five-year national plans (e.g., 15th National Plan 2019-2033).
   • Plans prioritize poverty reduction, infrastructure, and sustainable growth with both public and private sector roles.

4. Foreign Investment & Global Integration

   • Nepal encourages Foreign Direct Investment (FDI) in sectors like hydropower, tourism, and IT.
   • Trade agreements (e.g., SAARC, BIMSTEC, and FTA with India & China) promote economic openness.

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Specialization

Specialization refers to the practice where individuals, firms, or countries focus on producing specific goods or services in which they have a comparative advantage, rather than producing everything themselves.

Four Advantages of Specialization

1. Increased Efficiency & Productivity

   • Workers or firms become more skilled in producing a limited range of goods.
   • Example: A farmer specializing in cardamom instead of growing multiple crops increases yield.

2. Economies of Scale

   • Large-scale production reduces per-unit costs (e.g., bulk purchasing of raw materials).
   • Example: Nepal’s garment factories producing for export benefit from mass production.

3. Better Resource Utilization

   • Resources (land, labor, capital) are allocated to their most productive use.
   • Example: Nepal’s hilly regions specialize in agriculture (maize, potatoes) while Terai focuses on rice and sugarcane.

4. Encourages Trade & Global Integration

   • Countries trade surplus goods, leading to higher living standards.
   • Example: Nepal exports cardamom, carpets, and hydropower while importing machinery and petroleum.

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**Note:** For NEB exams, always link features to **real-world examples** (e.g., NEA, cardamom exports). Mixed economy questions often test **Constitution 2015** and **five-year plans**. Specialization questions may ask for **Adam Smith’s division of labor**—mention it if time permits.

**Marking Tip:** Use **bullet points** for features/advantages to save time. Avoid vague statements; instead of 'helps economy,' say 'reduces costs by 20% (as per Nepal Rastra Bank reports).'