The cyclical system of economy is considered as a characteristic of capitalist economy. In general: national production, employment, price level, interest rate, demand-supply, savings-investment fluctuations and economic growth can be understood as to what state the economy is in.

Fluctuations in the economy are normal. However, rapid recurrence of fluctuations is not taken for granted. Even if stakeholders explain the state of the country's economy in their own way, there is a theoretical basis for looking at it. Changes in the overall economic variables and their determinants from time to time in the economy lead to such a situation.

Looking at the state of overall variables in Nepal's current economy, the external indicators are positive. Foreign exchange reserves are sufficient to cover about 14 months of imports of goods and services. Balance of payments is in surplus. There is sufficient liquidity in the financial system. Interest rates are at their lowest point. The price increase is within the target range. According to the Central Statistics Office, last year's economic growth is estimated to be around 4 percent, while the current year's target is 6 percent.

Domestic and foreign investors are reluctant to increase investment even though there is sufficient liquidity, adequate reserves of foreign currency, favorable interest rates for investment, and a strong government consisting of two major parties. This has reduced production, consumption and investment in all three sectors.

When the total demand decreases, the demand for loans has not increased even in the conditions of favorable interest rates and sufficient liquidity. Due to the lack of consumption and exports, domestic product growth has stopped, while despite the removal of all kinds of obstacles, imports have not been able to increase amid sufficient foreign exchange reserves.

In the financial year 2079/80, total exports decreased by 21.4 percent and in 2080/81 by 3 percent, while imports also decreased by 16.1 percent in 2079/80 and 1.2 percent in 2080/81. This also shows a decrease in demand. As imports shrink, the import-based revenue system is under pressure.

Real estate is considered as a means of making economic activity run faster, it is believed that the entire economy is affected when the real estate business remains relaxed. However, the problem at that time is the non-creation of total demand.

It is estimated that the market has not become viable due to the decrease in total demand. Demand does not decrease for no reason. Various components of the economy play a role behind the reduction in demand. Which is also considered as an obstacle to the expansion of the economy. Sustainable development of the economy is not possible without investment in the productive sector. However, unless the problems in land, capital, labor and entrepreneurship are solved, there is no possibility of the overall demand to increase, and the rapid ups and downs in the economy will not stop.

There are many problems (from fragmentation of land to classification, high prices, delimitation, etc.) in land, which is considered an important means of production. The demarcation regime is a hindrance to commercial agricultural production. Commercial farming is almost impossible with 10 bighas in the terai and 75 ropani in the hills. Restrictions are also hurting industrial expansion.

Similarly, the high cost of land is also increasing the cost of all types of production. The use and utilization of forest as another natural resource that comes along with the land has also become a hindrance to development to a large extent. There are hundreds of examples where the construction of infrastructure such as roads, hydropower etc. has been delayed for years due to the difficulty of obtaining permission to cut trees.

If we look at developed countries around the world, it seems that sustainable development is possible only with the sustainable use of the natural resources of the respective countries. There should be simple procedures and strict regulation in the use of natural resources. Until the development work takes its natural pace, it will affect the demand creation. Irregularity of government payments is also seen as another reason for the lack of demand creation.

The country lacks capital. The tax revenue of the government is insufficient to meet the general expenses. There has been no fundamental improvement in the situation of foreign aid mobilization. Foreign Direct Investment (FDI) is limited to commitments. In such a situation, the government cannot spend enough to increase the demand through the consumption of goods necessary for job creation and development. However, modest government spending also helps boost demand.

profit is the return on capital investment. No business can survive without profit. However, profit making is treated as a crime and the private sector is being chased by the comments of profiteers. In a competitive market, any investment and employment imagination, barring the profits earned by following the rules, is just a dream. In reality, the return on capital investment is reasonable profit.

If the government motivates the private sector for investment, facilitates it and guarantees a reliable parental role, a suitable environment can be created and demand for investment can be created. Without investment, there is no job creation. Without employment, there is no income. Since there is no income, there is virtually no question of increasing the demand for services.

The government should be able to guarantee good governance by increasing the monitoring and regulation capacity and encouraging self-regulation in the open market. Increasing transparency and accountability in regulatory bodies instills confidence in the private sector and helps create an investment-friendly environment as a long-term impact. Regulation, monitoring and supervision help promote healthy competition.

that boosts the morale of the private sector and motivates them to invest. Another important means of production is caught up in the labor problem. The internal labor market has not been able to take advantage of demographics. Because of this, the internal labor market, which is facing a shortage of all kinds of skilled, semi-skilled and unskilled workers, has not been able to stop people from going abroad for employment. 

In the year 2023, more than 1.6 million Nepalis went abroad according to the data of the Immigration Department. Out of that, 180,000 went to study, 204,000 as tourists and about 808,000 went for foreign employment. At a glance, 2,000 young people have emigrated daily.

As the most consuming class is out of the country, the consumption is reduced in a large amount and the demand is shrinking. Therefore, in order to organize the labor market, it is too late to study the needs of the market and make the necessary arrangements to prepare skilled workers.

Investors' interests are overshadowed by union-friendly labor laws. The investment environment is getting dark because the union activities of the political parties are not professionalized. Only labor- and business-friendly laws can improve the economic cycle by increasing the morale of investors and increasing income and savings through investment and job creation.

Risk is inherent in every business. Profit is taken as a reward for bearing risk. Innovation in entrepreneurship is only possible if risk is transferred. An example of this is the reliable management of insurance. However, since the development of the insurance sector in Nepal has not reached the expected speed, sufficient components of risk have not been used.

The incentive package adopted by the government for risk reduction helps create an investment environment and create demand. However, past stimulus packages and the current limited government efforts are failing to gain confidence in entrepreneurship development. Which has not encouraged the private sector to adopt risk-bearing investment-stimulating policies.

Lack of inter-agency coordination and practical regulation of open borders at the government level, frequently raised questions on governance commitments, existing supply chain problems and fragile government commitment implementation are also spoiling the investment climate. Similarly, it is alleged that the basis of revenue collection, which pushes the rate beyond the scope of the tax to create more transaction costs, is also playing a role in discouraging investment. 

Overall inflation has averaged 5.96 percent over the past decade. The inflation rate has been high in the last three financial years. 6.32 percent in 2078/79, 7.74 percent in 2079/80 and 5.44 percent in 2080/81. However, the income level of fixed income groups including employees did not increase during this period. As the income of the people living on limited incomes did not increase due to the increase in prices, the basis for increasing the demand was not created and the demand became narrow.

Nepal is between two big economies. The ability of both neighbors is the low cost of production and efficiency with quality in production. The government's policy of encouraging production, market size, labor adequacy, research and development along with 'economy of scale' are their strengths. It is difficult to increase investment demand even though we cannot become competitive with our neighbors who have competitively marketed around the world.

The government may have planned to move ahead with the recommendations of the Economic Reforms Commission headed by former Finance Secretary Rameshwar Khanal. We have to wait for some time to see what problems the commission will suggest for improvement and how the government will implement the recommendations of the commission. However, it seems that the state should play a role in increasing employment, production and income by taking the initial suggestions of the Khanal Commission and 'operating' the means of production ruthlessly.