Saving is a virtue or a vice. There is debate among economists about the role of saving in the macro economy. In some situation, increasing saving increases the capital formation rate that increases the income and employment. But in another situation, increasing saving decreases aggregate demand as a result the income and employment decreases. Classical economists argued that individual saving are transferred automatically into investment via interest rate flexibility that ultimately increases income in economy. To Keynesian, saving depends upon income and increased savings in the economy are possible only when the total income of the economy increases. But the increased saving means less expenditure and hence less of effective demand that leads to reduction in income in the economy. They call this situation as the 'paradox of thrift'. Nepal is suffering from capital deficiency in economic development. Saving is the basis of capital formation. About 55 percent Nepali household receive remittances. According to Economic Survey (2016/17), Nepal received Rs.450 billion remittances which is about 30 percent of GDP. According to the World Bank date 2016, the share of gross domestic savings in GDP is 3.8 percent in Nepal while its average value in develop country is 22.2 percent. Due to lack of capital, mega infrastructures are hindering in Nepal.

a) Saving is a virtue or vice. Justify with suitable example.

b) Is the' paradox of thrift' relevant for Nepal? Give your arguments.

c) What could be the cause that Nepal is suffering from capital deficiency?

d) What type of fiscal measures would you suggest to overcome the problems of low saving and capital deficiency faced by Nepalese economy?