The Asian Development Bank (ADB) has projected that the country's economic growth rate would be limited to 5.1 per cent in the next fiscal year.

The Bank made the projection in the book - Asian Development Outlook 2015 – that it made public at a function here today. The book is about the economic performance and prospects of the 48 countries of the Asia-Pacific region.

The Nepal section of the book states that robust agriculture and remittances boosted growth and the current account surplus. It is stated that growth is expected to slow this year with an unfavourable monsoon but revive n 2016 as the weather returns to normal.

Concluding the protracted negotiations over the new constitution would strengthen the outlook. Nepal can leave behind dependence on agriculture and remittances for an economy with a higher growth trajectory if it invests more in eliminating major deficiencies in infrastructure, the book states.

GDP growth accelerated to 5.2 per cent in Fiscal Year 2014 (ended 15 July 2014) from 3.5 a year earlier. A favourable monsoon boosted agricultural output and a marked increase in remittance income, now amounting to 28.2 per cent of GDP, bolstered spending on services, which account for over half of GDP.

Growth in agriculture, at 4.7 per cent, and in services at 6.1 per cent, was the highest in the last six years. Industry again advanced only marginally at 2.7 per cent, as long hours of power outages and other supply-side constraints continued to stunt manufacturing and divert to imports consumer spending on finished goods.

Addressing the book launching ceremony, ADB Country Director for Nepal, Kenichi Yokoyama, said, "Considering the unfavourable monsoon and the lingering political uncertainty, GDP growth is projected to slow to 4.6 per cent in Fiscal Year 2015, less than the government's revised target of 5.0 per cent."

The ADB states that the economic outlook is less favourable than in FY 2014 because agriculture output is crimped by a weak monsoon and the political situation is fluid. The weak monsoon and such natural disasters as floods and landslides will affect the output of paddy, maize and millet. Industry may see better conditions in the medium term following the government's strong commitment under the FY 2015 budget to ease business regulations by introducing updated policies and legislation, though the downside risk is that the unsettled political environment will derail legislative action.

Under the heading 'Policy challenge – accelerating capital expenditure', the ADB states that capital spending has been persistently weak, with both planned and actual spending languishing far below what is required to close the infrastructure deficit, which has been estimated to require capital spending equal to between 8.2 percent and 11.8 per cent of GDP per year until 2020. Raising the amount and quality of capital expenditure is one of the country's most pressing challenges. Accelerated capital spending is needed to scale up infrastructure investments and thereby attract private investment needed for Nepal to attain higher economic growth that is both sustainable and inclusive.

In its provision and quality of infrastructure, Nepal is rated one of the least competitive countries in the world, ranked 132 of 147. This indicates that Nepal needs more and better investment to foster innovation, make the economy competitive, and enhance the efficiency of markets for goods, labour and finance.

Given Nepal's huge infrastructure financing needs, budgeted capital spending is insufficient in itself to bridge the infrastructure deficit in such critical sectors as energy, transport, water supply and sanitation, irrigation, and telecommunications. The government's recent commitment to meet certain infrastructure needs by developing public-private partnerships is an encouraging sign that the gap can be closed, Yokoyama said.

The Outlook projects the GDP growth of Asia to be 6.3 per cent and that India will surpass China's present growth rate of 7.2 per cent attaining a growth rate of 7.8 per cent in the FY 2015/16 reports RSS.