Impact of Budget, Loan, Inflation, Remittance and FDI on GDP: A Case of Nepal

Abstract : This study examines the impact of size of total budget, total loan, inflation, remittances and foreign direct investment on GDP. The selected dependent variable is GDP and the selected independent variable are total budget, total loan, inflation, remittances and foreign direct investment. The study is based on secondary data with 114 observations for the study period from 2005/06 to 2023/24. The data were collected from annual report of Nepal Government and Ministry of Finance. The correlation coefficients and regression models are estimated to test the significance and importance of fiscal policy on GDP. The study showed that the size of the total budget has positive impact on size of the GDP. The size of the total budget in Nepal has positively contributed to GDP growth, reflecting the supportive role of fiscal policy in economic expansion. The beta coefficients for total loan are positive with GDP. It indicates that size of the total loan has positive impact on the size of GDP, indicating that increased borrowing has contributed to economic growth and development activities. The beta coefficients for the inflation are insignificantly negative with GDP. Inflation in Nepal has not shown a significant impact on GDP, suggesting that price level changes have had a limited effect on overall economic growth. The beta coefficients for remittances are positive with GDP. Remittances in Nepal have positively influenced GDP, highlighting their vital role in supporting economic growth and maintaining foreign exchange stability. The beta coefficients for FDI are insignificantly positive with the GDP. Foreign direct investment (FDI) in Nepal has remained low due to political instability, complex regulations, and inadequate infrastructure creating an unfavorable investment climate.