- Com. Baburam Bhattarai  

 "At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or - what is but a legal expression for the same thing - with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution." - Karl Marx

1.0 Context and Theoretical Premises

An armed People's War has been initiated in Nepal from February 13, 1996 under the leadership of the Communist Party of Nepal (Maoist) with the proclaimed aim of establishing a New Democratic socio-economic system and state by overthrowing the present socio-economic system and state. This should be understood under the background that Nepal has slided to the status of the second poorest country in the world in terms of physical and cultural developments; 71% of its population fall below absolute poverty level; 46.5% of national income is in the hands of 10% of the richest people; more than 60% of its total population is illiterate, more than 90% of its total population live in rural areas and 81% of the labour force is engaged in the backward agricultural occupation; 10% are fully unemployed and 60% are under-employed or in disguised employment. Similarly the growth rate of food grain production, the most important national production, has shown decline in the last 30 years; foreign debt constitutes more than 60% of the gross domestic product and its intensity is increasing as years pass. It is thus but natural for everybody to be eager to know how the People's War and New Democratic Revolution is going to solve the above formidable problems. It is no secret that the present reactionary state for the last 50 years has been harping on various attractive slogans along with eight Five Years Plans in the name of solving these problems, but after each plan or campaign these problems have been further aggravated and the socio-economic position of the country has further slided down compared to other countries. In this context it is necessary to find out the root cause or the causative factor of this condition and provide a scientific solution, instead of merely looking at the outer symptoms of problem and solving it in a partial or isolated manner. For this, it is necessary to find out the solution by analyzing the problem with a historical materialist method, or the concept of Marxist-Leninist-Maoist political economy; and today in Nepal the Maoist People's War is trying just that.

In the process of producing goods required for satisfying their physical and cultural wants people use certain objects and technology (i.e. productive forces) and in that process a distinct relation (i.e. productive relation) is established among themselves. It is through the interactive combination of productive forces and production relations that a particular social system (i.e. mode of production) takes birth. Similarly, the contradiction between the ever changing productive forces and production relations provides the motion for the development of the society. In general, since the development of productive forces is faster and the development of production relations takes place at much slower pace, at some stage of development of society the productions relations block the development of the productive forces and this leads to retardation and distortions in society. Under such a situation it becomes necessary to smash the old production relations and to develop new production relations in their place. Only through this way that it is possible to remove the prevailing distortions and obstacles and in their place to develop new productive forces and give impetus to the forward march of society. This is the process and point of time of social revolution. Against this, the reactionary ruling classes of society and their allies attempt to develop productive forces by using various reformist steps, without smashing the old production relations, which have become obstacles to the process of development. Thus, in history, the first path to development is known as the "revolutionary" path and the second one as the "reformist" path. However, the relevance of the "reformist" path will only remain so long as there is possibility of developing productive forces within the old production relations and upon exhaustion of that possibility the "revolutionary" path becomes necessary and inevitable. It is important to understand here that in Nepal the attempt to create a New Democratic system by smashing the old system through the protracted People's War under the leadership of CPN (Maoist) has been made when all the attempts to carry out reforms within the old semi-feudal and semi-colonial system long ridden with crisis had failed.
Similarly, it is important to note right in the beginning that, just as in the case of all objects in the world, the decisive factor in the development of society is the motion generated by the inner contradictions within itself (i.e. between productive force and production relations). However, under specific conditions the intervention of external forces affect the internal development process in significant ways. Specially after the advent of capitalism and its highest stage, imperialism, because of the process of centralization and concentration inherent in the capitalist process of development (i.e. the process of devouring all the small capitals by the tentacles spread by the bigger capital and the expanded reproduction of capital), today no social system in the world is outside the influence of imperialist interventions, and it is not possible either. Similarly, the more the social formations are in primitive and backward state the more damaging is the influence of imperialist interventions in their internal development process. Specially in societies which are on the eve of transition from feudalism to capitalism, the alignment with imperialism distorts the internal production relations by promoting the growth of comprador and bureaucratic capitalism (i.e. a fake capitalism which functions as an agent of foreign monopoly capitalism, engages in financial and commercial activities instead of productive activities and assumes a monopolistic character since the very beginning by relying on the state) instead of industrial capitalism. That is why it is necessary to smash the relationship with external imperialism while bringing progressive transformation in the internal production relations through revolutionary means.

Besides this, it is important to understand the dialectical inter-relationships between the development process of society and the spatial structure. This is because along with the development of the social process, changes take place in the physical structure too, although the nature and quality of the change may be different or less than in the social structure. As far as the relationship between the two processes are concerned, it would be more scientific to view the physical structure more as "reflection" of the social structure and to a lesser degree as the "causative factor". It is necessary to understand the transformation processes of the social and spatial structures in their inter-relatedness as the distortion and malady of the social process is reflected in regional structure through uneven regional development, etc. It is only through this that the importance of the Maoist protracted People's War based upon the strategy of encircling the city from the countryside can be understood.

Based upon the above short account of the conceptual premises, the external and internal class relations of the Nepalese society and the resultant socio-economic and spatial problems may be analyzed and the path of the People's War to solve these problems may be evaluated.

2.0 The External Relations and Processes: Imperialism and Expansionism

2.1 The Imperialist Oppression

The present is an era of imperialism or monopoly capitalism. Because of the nature of unequal and uneven development inherent in capitalism most of the world's capital and wealth has become concentrated in the hands of the few imperialist countries of the West and the North, whereas most of the countries of the East and the South (i.e. Asia, Africa and Latin-America) are suffering from underdevelopment and poverty. That the gap between the rich and the poor have never been so wide in the history of mankind so far and this is growing ever wider has been acknowledged by the statistical findings of the imperialist organizations themselves. For example, only the annual sale amount of 200 big multi-national companies of the imperialist countries exceed the gross domestic production of all the countries except the nine big rich economies ( i.e. U.S.A, Japan, Germany, France, Britain, Russia, Italy, Canada and Australia) and they alone own one-third of the world's wealth. Similarly, the income differences between the world's richest and poorest countries in the decade of 1960s was thirty times whereas now it has increased to more than sixty times in the decade of 1990s. In a worldwide scale the siphoning of wealth from the oppressed countries to the imperialist countries takes place in the form of profits of capital investments in industries, interests of financial loans, commercial profits of trade in goods and services, etc. That is why whatever capital investments the imperialist forces make in oppressed countries through multilateral means like the World Bank, International Monetary Fund, etc. and through unilateral means like transnational corporations of their own country or their government, they take away ten times more capital to imperialist centres from the oppressed countries in various ways. Besides this, through their monopoly in science and technology, communication and capital the imperialist countries have caused the overall development process of the oppressed countries to be distorted and dependent. At the other end, according to the "bigger fish eats smaller fish" logic and rule of the imperialists there will always be fierce competition among monopolist capitalist groups to expand their hegemony and there will be war in order to maintain their own economic areas of influence (or territories), or to redivide the old economic territories. This is proved by the fact that after the advent of imperialism in the current 20th century, two world wars have occurred (more than l 60 wars have occurred after the Second World War) and six times more people have lost their lives in wars in this century as compared to in wars in the previous 19th century. Similarly, the very fact that imperialists spend one thousand billion US dollars per annum in armaments (almost half of which the USA alone spends) proves the nexus between imperialism and war. That is why imperialism is also called "era of war capitalism". Thus, at one end, contradictions between imperialism and oppressed nations are sharpening intensely and, at the other end, imperialism is pushing the whole world to the brink of war. Under such a situation it becomes not only natural but also inevitable for oppressed nations to fight the war of liberation based on the strategy of relying not on capital, armament or technology but on the oppressed masses.

Among the oppressed nations of the world, Nepal stands amongst the most oppressed ones. The very fact that it has slided down from the thirteenth position among the poorest countries in the decade of 1970s to the second poorest position in the world now indicates the pathetic state of the country. That this poor and underdeveloped state of the country is not because of lack of natural resources or due to laziness of the labouring masses but due to the internal and external reactionary class relations, can be proved by comparing Nepal's position before and after the semi-colonial Sugauli Treaty of 1816 with other contemporary countries of the world. Nepal sandwiched between the giant states of China and India and surrounded on the southern, western and eastern sides by India in the lap of Himalayas, was in its history first oppressed by British colonialism, and after the 1950s oppressed by various imperialist powers, and principally by Indian expansionism. After the Sugauli Treaty and up to now, the internal development process of Nepal has remained stunted and distorted by the destructive effect of external imperialist or/and expansionist forces. All the economic and non-economic indicators of social development prove this. Specially after the decade of 1950s when it was tied to imperialism through trade, finance and other means, the process of underdevelopment, distortion and dependency has become all the more intense. The fact that today the foreign debt has mounted to more than 150 billion rupees , annual trade deficit has reached nearly 50 billion rupees (which is equivalent to the annual budget), dependency in every field of economy has aggravated, etc. provides enough indication of the oppression of imperialism. According to the stipulation of the International Monetary Fund, any country whose foreign debt is more than 200 to 250 percent of the total export trade and whose debt-servicing ratio is more than 20 percent of the export trade is said to be in a "critical" state. However, in Nepal, both of these parameters have jumped in 1994-95 itself to more than 600 and 35 percents respectively. Hence there is no doubt that the condition of Nepal has become critical and tragic because of its entanglement in the imperialist net. It has thus become necessary to wage People's War in Nepal in order to get liberated from the oppression of imperialism and to march forward along the path of self-reliant development. From this point of view the People's War in Nepal is part of the world anti-imperialist national liberation movement.

2.2 The Expansionist Oppression

The biggest direct manifestation of world imperialist oppression and exploitation in Nepal is the Indian expansionist exploitation and oppression. Expansionism is the process of exploiting and oppressing the smaller and the weaker economy by a stronger economy, which has not developed to the level of imperialism but derives its strength from the backing of external imperialist forces and its own state. Similarly because its hegemony cannot be maintained on purely capitalist competition the expansionist power uses extra-economic coercions (e.g. military, political, cultural, etc.) to maintain its economic areas of influence or the market. That is why Indian expansionism which is itself a prison-house of various oppressed nations has been exploiting and oppressing various neighbouring countries of South Asia and other Asian, African and Latin-American countries with the backing of imperialist forces such as the USA, UK, Japan, France, Italy, Germany, Russia, etc., or multi-national companies together with its own central state headquartered in Delhi. Indian expansionism has been keeping Nepal as its captive market through unequal treaties thrust upon it at various times taking advantage of the fact that Nepal is India-locked from three sides and that it is only through India that transportation, communication and trade connection with the rest of the world is possible. Historically, in 1816 British-India forced Sugauli Treaty upon Nepal reducing it into a semi-colony, and it is henceforth that Nepal's path of independent and self-reliant development; got blocked and a process of socio-economic retardation and under-development (i.e. distorted and dependent development) was initiated. If one is to compare the socio-economic development indices immediately before and after Sugauli-Treaty, this becomes very clear. For example, prior to that period Nepal was self-sufficient in basic industrial production, e.g., cotton fabrics, copper and brass utensils, domestic instruments, military armaments (including modern rifles), sugar, etc., and food grains. But after this, with the penetration of factory-made goods from India and concomitant decline of Nepalese industries, Nepal has now been reduced to a total dependency. This process did not take place all of a sudden but it started with the Sugauli-Treaty, then intensified particularly after the Nepal-India trade agreement of 1923 (which made Nepal a 'common market' of India) and reached to the pinnacle in the decades after the semi-colonial Treaty of 1950 with so-called "free" India. At present it is mainly through the 1950 Treaty that Indian expansionism maintains its semi-colonial and commercial, industrial, financial and fiscal monopoly over Nepal, and expansionist oppression and exploitation in different fields have been safeguarded by the periodic trade and transit treaties and other treaties and agreements based on the inherent unequal relations emanating from the 1950 Treaty. Semi-colonial relations have multifarious dimensions like economic, political, military, cultural, etc., and in Nepal, Indian expansionists exploitation and oppression, too, has multifarious character. However, all different forms are ultimately for economic exploitation and oppression and in Nepal, too, economy is the main and most glaring aspect of oppression and exploitation of Indian expansionism.
Traditionally Indian expansionism has been using Nepal as a captive market for its industrial goods. That is why up till the decade of 1950s, about 95 percent of Nepal's foreign trade used to take place with India. In the subsequent decades, with the increasing direct penetration of other imperialist forces into Nepal, India's trade share got reduced to about 30 percent, but the structure of trade is grossly unfavourable to Nepal (see, Table-1). In addition to that it is important to note that due to open border between Nepal and India, almost one third of the total trade takes place informally or illegally and thus the size of trade with India is always higher than provided by the official statistics. If one is to judge by the structure of the trade, Nepal's export/import ratio with India before the Sugauli Treaty was 5 times more in favour of Nepal and that remained 2 times even more during the period of 1923 trade treaty, and after the 1950 treaty it went 2 times against Nepal and today in the 1990s it has become almost 7 times against Nepal. Thus it is clear that with the ever increasing trade deficit Nepal's economy is getting entangled with the Indian expansionist trap beyond any redemption. Secondly, if one is to analyse the commodity structure of imports and exports, then Nepal is seen exporting less value-added goods mainly unprocessed or semi-processed agricultural products (64.14%) whereas it imports higher value-added industrial products from India (about 75%) and this ratio is further aggravating every year against Nepal. Thus the process of imperialist oppression and exploitation through "unequal exchange" is seen operating in the case of Nepal, too. Thirdly, as the semi-colonial Treaty of 1950 provides "national treatment" to the Indian monopoly capitalists to reside in Nepal and engage in economic activities in equal footing with the Nepalese citizens, they are able to monopolies the economy of Nepal completely. At present about one dozen India-based billionaire capitalists (mainly the Marwaris) have main control over Nepal's industry and commerce. According to the estimation of one Indian researcher done some time back, about 80 percent of Nepal's industry and commerce was in the hands of Indian or Indian-origin capitalists. The Indian expansionist state has been putting anchor on international transit facilities, which a land-locked country like Nepal is entitled to enjoy unhindered. Through this it has been additionally helping itself to hegemonise Nepalese economy by forcing upon Nepal adverse and unequal export-import trade conditions. This is reflected in the conflict that periodically arises every decade when trade and transit treaty is renewed and when the Nepalese people register protest against it. Another important aspect of the mechanism of making Nepal a captive market of Indian expansionists is that multi-national companies of various imperialist countries like USA, UK, Japan, German, etc., sell their goods produced in their India-based branches to Nepal, or they open sub-branches of their Indian branches in Nepal. For example, products of multi-national companies based in India like Bata (shoes) Hoecht (medicine), Proctor and Gamble (soap, chocolate, etc.), Nestle (coffee, milk products, etc.), Brook bond (tea), etc., and products of Indian joint-ventures with multi-national companies such as Maruti-Suzuki (automobiles), Hero-Honda (motorcycle), etc. are sold in Nepal. Similarly, multinational companies have opened sub-branches of their Indian branches in Nepal such as Hindustan Lever (soap) etc. This way world imperialism enters Nepal by riding over Indian expansionist horse. This combined intrusion and oppression of imperialism and expansionism has not only stunted the development of Nepal's national industries but it has also created a situation where previously self-reliant industries such as soap, tea, shoes, biscuit, paper, etc., are now beginning to get liquidated one after the other. Similarly those industries which have come up since the decade of the 1980s and are the principal exporters to the third countries (more than 92 percent of the total export), like woolen carpets and garments, have been overtly or covertly controlled by Indian expansionists due to their hegemonistic control over raw materials, labour, capital and trade. Similarly, the tourism sector, the main foreign currency earning service industry, is also under the control of Indian capitalists. This is proved by the fact that out of four five-star hotels, at first all the four and now three of them have collaborations with Indian capitalists (including one fully owned by the Indians) and that the forward and backward linkages of the tourism industry are intimately connected with the Indian economy.

Besides making Nepal a captive market for its industrial goods, the other specificity of Indian expansionist exploitation and oppression is its control over Nepal's natural resources, mainly the latter's rich water resources. Most of the rivers which irrigate the most populated northern Gangetic plains flow through Nepal and the cheapest and the easiest resource of energy required by India for future industrialisation and general consumption can be the huge water resources of Nepal, which has the second largest water resource potential in the world (out of estimated potential of 83000 Megawatt of hydro-power only 0.5 percent has been tapped so far). That is why the Indian expansionists have been in the past usurping Nepal's water resources mainly for irrigation purposes through the Sharada Dam Agreement in 1920, the Kosi Agreement in 1954 and the Gandaki Agreement in 1959. However, in 1996 through the so-called "Integrated Mahakali Development Project Agreement" they have taken full control of whole of the Mahakali river for the irrigation and power purposes. The earlier concluded Kosi and Gandaki Agreements were nakedly semi-colonial treaties as they had deprived irrigation to the Terai, the grain bowl of Nepal, by diverting all the irrigation water to India through the dams constructed just at the Nepalese side of the border (allowing only the negligible amount of water to Nepal and prohibiting to build other dams upstream for a considerable distance). The present Mahakali Treaty, however, has adopted a more fatal form of neo-colonial exploitation and oppression by talking equality in theory but in practice ensuring monopoly in the use of water and electricity to the Indian expansionists and instead imposing trillions of rupees of foreign debt upon Nepal. Besides this, through the "Joint Communiqué" of June 10, 1990, the Indian expansionists have opened the door for exercising monopoly over Nepal's most important water resources in future by declaring all the rivers of Nepal as "common rivers" for India as well.

Another fatal form of exploitation and oppression by Indian expansionism is seen in the form of securing the innocent, diligent and militant hill youths of Nepal into the mercenary services and other sectors as cheap labour and thus keeping semi-feudal agriculture of Nepal ever dependent on it. This process of exploitation of labour and temporary and "relay" (i.e. taking the father's place by his son!) migration which started immediately after the Sugauli Treaty has had a disastrous effect on the historical development of the industrial proletariat and indigenous capitalism in Nepal.

Similarly the common market and open border maintained by the trade treaty of 1923 and the "peace and friendship treaty" of 1950 has made Nepalese financial and monetary system totally dependent on the Indian financial and monetary system and this has had a very adverse effect on the development of national capital and industrialisation in Nepal.

In this overall context there is no doubt that 180 years of uninterrupted semi-colonial relation with Indian expansionism has had very negative and destructive effect on the development of internal class relations and socio-economic structures and in essence in the development of national capitalism in Nepal. That is why it is one of the most important objectives of Maoist People's War to break the chains of semi-colonialism and to usher in a new type of national capitalism (or New Democracy) by mobilizing people of all ranks and classes suffering under all forms of semi-colonial exploitation and oppression.

3.0 Internal Social and Spatial (Regional) Relation

As development of society gets influenced by the intervention of imperialism and expansionism but the main cause and basis of development must be sought in the internal class relations or production relations, it is necessary to seek the root cause of underdevelopment, poverty, socio-economic-regional inequality and cultural degradation of Nepal in the internal social and spatial relations and thereby attempt the path of its progressive transformation. In general, the present state of Nepal is in the process of transition from feudalism to capitalism but it has got stunted and decayed to semi-feudal and semi-colonial state due to external imperialists/expansionist intervention and internal reactionary class relations. Also, Nepal has its own geographical and historical specificities as reflected in the fact that out of the total land area 79 percent constitutes hilly region and only 21 percent as the plain land; there is immense geographical and ethnic diversity; it has had no direct colonial experience in history; for the last 225 years it has had an uninterrupted central state of the same reactionary classes, etc. In this context it would be useful to analyse the present socio-economic structure of Nepal and the problems arisen thereof in the light of some of the main social and geographical relationships.

3.1 Semi-Feudal Relations and Retardation in Agriculture

The basic economic foundation of the present Nepalese society is agriculture. This is because more than 81 percent of the labour force in the country is engaged in agriculture and nearly half of the gross domestic product comes from agriculture sector. That is why the level of development of productive forces and productivity in agriculture has a decisive effect on the development of economy as a whole and the existing production relation in agriculture plays a decisive role in determining the nature of the overall social structure.

The productive forces in Nepalese agriculture are extremely backward and are almost primitive in nature. First of all, the nature of the means of production reflects the level of development of the productive forces. The lower and more backward the level of development of agriculture the more it has to rely on the traditional means of production such as land, human and animal labour, primitive equipments, etc. In general even today nearly 99 percent of the total investment in Nepalese agriculture is made in land, human and animal labour and primitive equipments and only about 1 percent is invested in modern means of production (e.g. machine, fertilizer, pesticide, high breed seeds, etc.). On top of this more than 81 percent of the total labour force engaged in agriculture indicates a very primitive stage of the economy because excess labour gets wasted in the form of disguised employment or under-employment and ultimately has adverse effect on the overall national production. That is why the more developed the economy is the lesser percentage of labour force is engaged in agriculture and the extra labour force gets engaged in more productive sectors like industries or services. (For example in the United States less than 7 percent of the total labour force is engaged in agriculture.). While in Nepal the situation is that in an average three persons are engaged per hectare of land and in hilly region it is even six persons per hectare. Similarly, the other important index of development of productive forces in agriculture is the availability of irrigation facility. In Nepal up to the year 1991/92 only 13 percent of the total cultivated land (i.e., out of 2.6 million hectares) including 18 percent in the Terai region and just 8 percent in the hilly region has had permanent irrigation facility. This is not due to any natural lack of water or mountainous topography but due to purely social reasons. This is mainly corroborated by a report submitted earlier by the Asian Development Bank, according to which 60 percent of the total cultivated land in Nepal, including 80 percent in the Terai and 25 percent in the Hills, can be provided with irrigation facility. Mainly because of lack of irrigation the cropping intensity in Nepal is estimated to be just 90 percent (or less than one crop in a year), which indicates a very low level of development of productive forces in agriculture. Similarly, the primitive structure of agricultural production and the decreasing rate of production indicates low level of productive forces in agriculture. The more backward or lower is the society the more is the ratio of production of use values. From this point of view in Nepal, 80 percent of the total agricultural production is in food-grains and the production of cash crops is negligible that too centralized in the limited areas of the Eastern Terai region. The most annoying aspect is the decreasing rate of agricultural production. According to the official statistics for the decade of 1984/85 to 1994/95 the overall rate of growth of agricultural production was (-) 0.68 percent whereas for food grains it was (-) 7.23 and even among that for the principal crop rice it was (-) 16.17 percent. Thus Nepal, which was once a food grain exporting country, has now been reduced to a food importing country. The net import of food-grains worth 3.5 billion rupees in fiscal year 1994/95 from India and other countries indicates this. The conversion of most of hilly districts, which were traditionally self-sufficient in food-grains into food-deficit districts, provides enough indication of the declining and alarming state of agriculture in the hilly regions. The most important index of development of productive forces in agriculture is the productivity of land and labour and their rate of growth. However, it is not difficult to understand the abysmally low level of productivity of both land and labour in Nepal where the population/land ratio is very high and the use of irrigation and modern inputs in production is very low. According to one estimation made some years back, the average production per hectare of 10 crops was Rs.2700 at current prices whereas productivity of labour (annual) was only Rs. 1461. This very low level of productivity is further decreasing every year and except for few districts of Eastern Terai region, the state of agriculture is very delicate and alarming throughout the country, particularly in the hilly regions.

What is then the main reason behind the extremely low level of productive forces and mounting crisis in agriculture, the backbone of the country's economy and social structure? For this it is necessary to analyse the production relations in the agriculture sector. The most important means of production in agriculture is the land and the condition of ownership of cultivable land determines the mode of organisation and extraction and utilization of surplus product (i.e. production relation). In absence of scientific records and reliable data on land distribution in Nepal, it becomes very difficult to make an objective analysis of land relation; however some generalizations can be made from the data collected from government and quasi-government or non-government sources. The first picture one gets about the current land relation in Nepal in general is that distribution of land is very unequal and a large majority of population is of landless, semi-landless and poor peasant status.

In the relativity of the availability of cultivable land and its productivity in Nepal if one is to define those who own less than 1 hectare of land as "poor peasant", those owning from 1 to 4 hectares as "middle peasant" and those owning above 4 hectares as "rich peasant" or "feudal", then even data based on government statistics tell that about 70 percent poor peasants own only around 25 percent of land, 25 percent of middle peasants own around 45 percent of land and about 5 percent of rich peasants own 30 percent of land (see, Table-2). According to the more reliable report presented by one specialist from the UN's FAO, who had come to Nepal to evaluate the effects of much publicized "land reform" in 1964, the condition of land relations in Nepal is even more unequal. According to which, 8 percent of the Nepalese population is totally landless and of those who have land, 65 percent of poor peasants own only 10 percent of land, 25 percent of middle peasants own 25 percent of land and the 10 percent of rich peasants own 65 percent of land. And, in Terai those big landlords owning more than 10 hectares each garner more than 50 percent of the total land, whereas in the Hills the poor peasants constitute more than 80 percent of the population (see, Table-3). Thus it is easily discernible that the principal reason for the low development of productive forces in the Nepalese agriculture is the lack of land in the possession of labouring majority of peasants, whereas the overwhelming proportions of land is centralized in the hands of the non-labouring handful of persons.
Apart from the ownership of means of production, how the labour is organized and how the produces are distributed and how they are consumed will determine social class relationship and will finally determine social relations of production. In the Nepalese agriculture there is dearth of reliable statistics on this. However, a broad pattern of class relations in the Nepalese agriculture can be discerned by generalizing the data from governmental, semi-governmental and non-governmental sources.

There is no doubt that there is a majority of "owner-cultivators" who own small pieces of land and who work on their own land. However, as even those landlords who own hive than tens of hectares of land and have never stepped onto their farmland are enumerated as "owner-cultivators" according to the official agricultural census, it is impossible to believe that the number of "owner-cultivators" have increased from 60 percent in 1961 to 80 percent in 1971 (see Table-4). That is because in order to circumvent the tenancy law most of the landlords have made false declarations that they have been cultivating their own land and hence the numbers of "owner-cultivators" have been inflated. Similarly even now not only big landlords but also the middle peasants, because of various reasons (for example, because of physical disability due to illness or old age and engagement of other members of the family in other occupations etc.), have hired out lands to tenants for cultivation instead of cultivating themselves, but in government records they have been registered in the name of "owner-cultivators" instead of the tenants. From that point of view the figures provided in the report of a specialist from the FAO, according to which the number of "owner-cultivators" is 65 percent and land cultivated by them is 49 percent, may be accepted as being nearer to the truth (see, Table-5). Except those who cultivate their land through their own family labour, the rest either hire it out to the tenants or get cultivated by different forms of bonded labourers or waged labour. Because up till now the rights of the tenants have not been secured in the country and the number of unregistered tenants exceed far more than the registered tenants, it is not possible to make an estimation of the number of tenants and the amount of land tilled by them. According to the government based agricultural census conducted every decade from 1961 to 1991, the number of tenants as percentage of total cultivating households is shown to vary from a maximum of 40 to a minimum of 10 and the land tilled by them as a percentage of the total cultivable land is shown to vary from a maximum of 25 to a minimum of 6, which as mentioned above is clearly on the lower side. The report of the FAO representative shows the number of tenant households as 30 percent and the land cultivated by them as 24 percent; whereas according to other studies conducted by non-government organizations, the number of tenants are shown as 40 percent and the land tilled by them is shown as 30 percent. From our own practical experience, we feel the latter estimations are more nearer to the truth. By geographical differentiation, the ratio of "owner-cultivators" is higher in the Hill regions and that of "tenants" in Terai and Inner Terai, which is quite natural considering the availability of cultivable land and the pressure of population. According to the conditions of tenancy, nearly two-third of tenants till the land on share-cropping basis and the rest on fixed rent, either cash or kind, and other tenurial conditions. In share-cropping the tenants surrender half of their produce to the landowners, whereas in other parts of the world the tenants give away only one-third to one-sixth of the produce. Although the tenancy system exists under capitalist mode of production as well, however under Nepal's tenancy system specially in the share-cropping system, tenants are forced to till other's land for bare subsistence needs rather than to earn capitalistic profit, the rights of tenants are not secure, the rate of rent is high, the tenants are bonded to the landlord with the high interest on loans and other labour service conditions apart from the rent on land. Because of all these, this labour-relation is of a semi-feudal type and of a retrograde nature.

It is thus clear that the principal mode of surplus extraction in Nepali agriculture (and involving all sectors of economy) is the semi-feudal relation and the same relation plays the principal role in the underdevelopment and retrogation of the Nepalese agriculture (and by implication the whole economy). Apart from the owner-cultivators and the tenants, the remaining nearly 5 percent of the landlords use bonded labour and waged labour to cultivate the rest of 20 percent of land. Among them bonded labour system known as Harwa, Kamaiya, etc. exists in the central and western Terai region and a system of farming of land by seasonal waged labour exists in eastern Terai and areas around urban centres. The system of bonded labour whereby the labourers are kept under control as serfs and made to work in the land is a continued form of medieval feudal system and from that point of view this is the most primitive and retrograde labour relation existing in the Nepalese agriculture. Although the waged labour system is basically of a capitalistic nature, however in the case of Nepal its quantitative size is not only relatively quite small, but if one is to analyse it in depth, it will be difficult in most of the cases to accept it as progressive capitalist relation. This is because a majority of those who cultivate this way, do it not with the purpose of expanded reproduction of capital in the agriculture sector itself but do it either for subsistence in a small scale or for investing the agricultural surplus in trade or finance in the urban areas. As a result, this is not found playing any significant role in the development of the productive forces in agriculture. In totality although different labour relations exist in the Nepali agriculture, there is no doubt that the semi-feudal relation remains the principal and determining relation both qualitatively and quantitatively. Here it is necessary to be clear that although numerically the small owner-cultivators are in a majority, since they are tied with various economic and non-economic exploitative chains of the landlords, usurers and feudal tyrants, they are not "free" and have no independent social standing as it outwardly appears to be and they are forced to tow with the laws of the prevailing dominant semi-feudal relations of production.

Besides the ownership of land and labour-relation in the process of production, the characteristic reactionary role of the usury capital, too, has forced the Nepalese agriculture to get stuck to a semi-feudal state and has retarded the process of development. Peasants are usually in need of loan for production and consumption purposes. Taking undue advantage of this situation the feudal-usurers provide credits to the peasants at high interest rates and with oppressive conditions and by entrapping them in a vicious circle of indebtedness they enforce semi-feudal exploitation through interest and labour-service payments. This practice has been going on for a long time in the rural areas. In recent times, the centre of gravitation of this exploitation has been shifting gradually towards the merchant-usurers from the feudal-usurers, without in no way lessening the peasant's oppression either in quantity or quality. Besides this traditional form of usury capital, for several decades hence the imperialist financial capital has entered into the agriculture sector in the form of bureaucratic capital with the backing of the state. The main vehicle of the bureaucratic capital is the Agriculture Development Bank, which injects imperialist financial capital into backward Nepalese agriculture sector at high interest rates (i.e., 19 percent). This represents 85 percent of the so-called institutional credit. However according to the recent rural credit survey conducted by the Nepal Rastra Bank, even now 80 percent of the rural credit is under the control of traditional usurers and institutional bureaucratic capital is able to snatch away only 20 percent as its share. According to the same survey, more than two-thirds of peasants are caught in the debt trap of "traditional" and "institutional" usurers and that the poor peasants are more depended on "traditional" usurers who charge double (in practice three or four times more) the interest rates than the "institutional" ones. Similarly if one is to analyse by purpose of the credits advanced by the Agriculture Development Bank, it is seen that instead of investing on such sectors like irrigation, etc. which would enhance the development of the productive forces, more is invested in such sectors like "agricultural marketing" which would make the Nepalese agriculture a mere appendage of world imperialism. This way it is clear that in the Nepalese agriculture new bureaucratic capitalist relations have been superimposed on the old semi-feudal relations, but instead of developing the productive forces in agriculture it has only made it distorted and dependent.

Because of backward semi-feudal relations in the Nepalese agriculture sector, on the one hand, there is rampant disguised unemployment and under-employment as a result of entanglement of surplus labour in the production work, and on the other, there is large scale seasonal or temporary out-migration of labour from rural areas to urban areas and specially to India to supplement the deficit in-farm income with non-farm earnings, thereby perpetuating the reactionary process of reproduction of backward semi-feudal relations. According to a study of the Nepalese Planning Commission done some time back, out of the total labour days in rural areas nearly 63 percent remained unemployed. As a result nearly one-third of the labour force is flighted towards India as seasonal or temporary labour in order to supplement the farm earnings. The existence of this rampant disguised unemployment and underemployment is both cause and effect of backward agriculture, and without transferring this large scale surplus labour to non-agricultural sector it is just impossible to develop the agriculture sector and the overall economy.

 Since the decade of 1950s many attempts have been made to bring about reforms within the Nepalese agriculture without destroying the basic class-relations or to develop the productive forces by preserving the existing production relations. After the Second World War and specially after the end of the Rana rule in the decade of 1950s and 1960s attempts were made under the existing state structure to implement "land reforms" which have sought to bring about gradual reforms without destroying the old feudal structure and to facilitate penetration of imperialist financial capital. Similarly attempts were also made to implement growth-oriented different "development" plans based on the model of "green revolution", which were designed to make inroads into third world oppressed countries by the imperialist countries through the World Bank and the International Monetary Fund. After the failure of that model and apprehending the increasing danger of peasant revolution in oppressed countries, such programmes as the "Small Farmer Development Programme" which were brought forward by the imperialists through the World Bank in the decade of 1970s, were also implemented in Nepal. After the 1980s, along with imperialist slogan of "globalization" and "liberalization" once again such policies and programmes as making agriculture "export-oriented" and "enterprise oriented" are pushed forward through state apparatus. But just as the witch acting as an exorcist, it is impossible to improve or to change the economy oppressed by feudalism and imperialism under the direction of imperialists and under the leadership of feudal and bureaucratic capitalists, and this did not happen in Nepal, too. As a result, an agricultural economy marked by rampant poverty, disguised unemployment and underemployment, very low productivity, declining rate of growth and general retardation, exists in Nepal. The ruling classes and their planners have been trying to cover up this pathetic state of agriculture economy by making the excuses of mountainous geography, unfavourable weather, etc. But the truth is just the opposite of it, as the land, water, favourable climate and labour needed for agriculture are rarely available in a better condition elsewhere as in Nepal. Thus, the principle objective and rationale of people's war in Nepal is to develop productive forces in agriculture and to lay the foundation for overall development of the: economy by establishing new and progressive production relations after smashing the prevailing reactionary production relations backed by the reactionary state.

3.2 Decline of Industry and Expansion of Comprador and Bureaucratic Capital

 The most important measuring rod of economic and overall development of society is the quantity and quality of industrialisation. Because unlike in agriculture dependent more on the natural means of production it is in industry dependent more on the man-made means of production that the production process can be organized in large scale and in a more flexible manner and hence the overall development of society is faster due to rapid growth of social productivity. The higher the level of development of society the larger is the participation of total labour force in industry and greater the share of social product contributed by industry. Although the origin and existence of cottage industry as an adjunct and part of agriculture is seen from the primitive society, but still the rise and development of modern big scale factory industry has taken place along with rise and development of capitalist society. Historically the birth of industrial capitalism was accompanied by several concomitant processes, viz. the process of primitive accumulation of capital which resulted from the concentration of surplus social product from the old feudal agriculture sector as capital in the hands of few merchant capitalists; the process of deprivation of petty producers of old feudal society from their means of production and their transformation into free workers selling their labour power; and the process of producing the means of subsistence and the means of production as commodities to be transacted in the free market. In other words, it is necessary for industrial capitalism to have concomitantly a 'capitalist class' who invest capital in the process of production in order to earn continuously rising profits, 'a free proletarian class' who can go to any place to sell their labour power without any hindrance, and a 'free market' where subsistence goods and means of production can be sold and raw materials needed for industrial production can be purchased unlike the limited market of small upper class consuming only luxurious goods. If due to various reasons one or all three of these are deficient or lacking then it is not possible to develop industrial capitalism. On the contrary, the birth of and development of merchant capital took place since the beginning of human society in the course of exchange of goods necessitated by inequality and diversity in production in different communities. Similarly inequality in production among different producers within the same community necessitated credits at times and led to the birth of usury capital (or, interest bearing capital which is called financial capital after the birth of modern banks). Both of these two capitals do not participate in the process of production; however, merchant capital helps in realizing the value of capital by making the produce reach to the consumers and for this it usurps part of the profit of production capital, and finance capital usurps part of the profit of production capital in the form of interest for helping to make investment in advance. That is why when they operate within the capitalist mode of production and under the hegemony of industrial capital, the merchant capital and financial capital do not have so much of independent strength and they play progressive role in society. But in pre-capitalist feudal or semi-feudal society they present themselves as independent players and just as parasites in a tree, the bigger their size the more destructive and negative influence they exert on the development of the society. After the rise of world imperialism, the merchant capital and usury or financial capital of the third world's feudal and semi-feudal societies have turned themselves into comprador and bureaucratic capital as agents of imperialist capital. Their expansion plays doubly negative roles in the oppressed nations, through, on the one hand blocking the development of free industrial capitalism and, on the other hand, by transferring third world's capital to world imperialist centres as super profits in trade and as interests. In this background, it would be useful to analyse the decline of traditional industries and the stunted growth of national industrial capital and the expansion of comprador and bureaucratic capital in Nepal.

 3.2.1 As mentioned in the earlier part, up till the beginning of the 20th century the state of traditional industry was quite encouraging in Nepal, but when factory-made goods started getting imported without restrictions from British India then the local industries started dying gradually. During the global imperialist economic crisis of the 1930s and with the demands created on industrial goods by the Second World War, Biratnagar Jute Mills was established in 1936, and together with this the era of modern factory industries was ushered in Nepal. However, if one is to view the state of development of industries in Nepal after 60 years since then we find that it is in a state of continuous retardation and now the role of industry in the country's economy is just insignificant. This is proved by the fact that the proportion of total labour force engaged in industry and the share of industry in the gross national product is very low and that instead of increasing, it is decreasing or is stagnant. For example, of the total labour force engaged in various economic activities the percentage of those engaged in industry was 2.19 in 1952/54, 1.32 in 1971/72 and mere 1.25 in 1991/92. Similarly, of the gross domestic production, the percentage share of industrial sector has been mere 15.63 in 1964/65, 9.60 in 1974/75, 6.01 in 1984/85 and 10.33 in 1994/95 (whereas in developed economies, both the shares are above 40 percent). Apart from the small and negligible size of industrial sector in absolute terms, the industrial structure or type of use and quantity of goods produced also indicate a very backward and distorted state of the Nepalese industry. In Nepal, production of the basic goods (e.g. cement, electricity, etc.), capital goods (e.g. agricultural equipments, machines, etc.) and intermediate goods (e.g. construction material, thread, paper, etc.) essential for the overall development of economy is very low. Whereas the production of consumer goods and on top of that consumer non-durables (e.g. food stuffs, liquor, cigarettes, etc.) is quite high as compared to the overall production (or, more than 80 percent of total capital investment and more than 60 percent of total number of industries and workers). While amongst the consumer non-durables the production of luxury goods (e.g. beer, wine, cigarettes, soft drinks, etc.) consumed by a very limited upper class is high and is growing in a faster rate, the production of subsistence goods used by the majority of middle and lower classes is low and in a declining rate. For example, in the year 1994/95 the production of beer and soft drinks (Coca-cola, Pepsi cola) was such that they could be distributed at the rate of one liter each for the whole population of Nepal, whereas production of cotton fabric was such that one meter was available for every three persons and only one pair of shoes was available for every 30 persons. On top of this during the last ten years the production of beer increased five times more, whereas production of cotton fabrics and shoes fell down to one third.

Similarly, industries which are conducive for quick profit and which have no guarantee of stability (e.g. stainless steel in the 1960s, carpet and garment industries in the 1980s) have been mushrooming and vanishing in no time as compared to industries based on the indigenous raw material, labour and market, or which have greater value-added within the country. Those basic industries which were established within the country at state level with external help at a time of international conflict of cold war in the decade of 1960s are either in pathetic conditions due to negligence or corruption, or are being sold out at a throwaway price to the comprador bourgeoisie. Most of the industries are closing down either due to lack of raw materials or because they are not able to compete with foreign goods and nearly 50 percent of industries are utilizing less than 55 percent of their total capacity. Even after the decade of 1980s when the much propagated "liberalization" campaign was launched as directed by world imperialism, the multinational companies have not been investing as much capital as expected by the ruling classes and instead they are found investing more in sectors which benefit them most in terms of quick and big profit returns such as in beer, liquor, soft drinks (Pepsi-cola, Coca-cola), hotels etc. Similarly fake industries that assemble only imported parts (e.g. T.V., radio, etc.) or just paste local labels are increasing. In totality, the development of national industrial capital has been stunted and only a distorted and dependent kind of fake and rootless industries are developing to some extent. It is not difficult to understand the reasons behind the retardation and decline of industries in Nepal. The principal factor behind this is, at one end, the existence of semi-feudal relations and backward agriculture in the country and, at the other end, the lack of concomitant development of capital, labour and market needed for developing industrial capitalism, due to intervention of imperialism and expansionism.

 First of all, historically in Nepal, as the primitive accumulation of capital from agriculture and trade sector has been centralized in the hands of the big feudals of the ruling classes and India-based comprador bourgeoisie and because up till now their hegemony in the economy still continues, the development of the national industrial capitalist class has been marred. For example, the first modern industry, the Biratnagar Jute Mills, was started in joint collaboration of an Indian Marwari called Radha Kishen Chamaria and the then Rana Prime Minister, Juddha Shamsher, and even today in most of the big industry and trade joint investment of Rana-Shaha ruling family and the Marwaris continues to exist. This comprador class in total alignment with Indian expansionism finds it more fruitful to invest in foreign trade or to work as agents for foreign capital rather than developing national industrial capitalism. As this very class has been enjoying the patronage of the state so far, the emergence of any other independent national capitalist class has been impossible. Secondly, development of free working class has not taken in the country as semi-proletarian labourers are tied to the backward semi-feudal agriculture, the surplus labour from rural areas migrate to Indian cities as temporary or seasonal workers and labours from India are engaged in industries inside the country in general and in the Terai in particular. And thirdly, because of backward agriculture and prevalent rural poverty, adequate internal market for industrially produced goods and industrial raw materials could not develop; and whatever internal market existed it has been captured by imperialism and expansionism. Because of extreme economic inequality in the country, majority of the people do not have purchasing power and thus whatever limited number of industries are open they produce only luxury goods for the consumption of the limited rich, and since they too have limitations to expansion the industries cannot flourish. As per the foreign market, at one end, because of the low productivity the Nepalese industries cannot easily enter into competition, and at the other end, the Indian expansionists do not provide access to the Indian market by placing any number of hurdles of trade and transit and they also block the access to the third country's market. This way within the existing internal and external class relations and structure it is impossible to develop national industrial capital in Nepal and industrialize the country, which is proved by the hollowness and complete failure of the slogan of industrialization in the country for the last 60 years.

 3.2.2 Against the decline and deceleration of national industrial capital engaged in production in the country, the expansion of merchant, usurers or financial capital engaged only in distribution and facilitating in the flight of national capital towards the foreign countries through commercial profit or interests has been going at a rapid rate in the form of comprador and bureaucratic capital in the last decades. Though the absolute size of the merchant and financial capital in a society dominated by backward semi-feudal agriculture and subsistence economy is not substantial as yet, the rate of their expansion has been rapid and has grown more speedily in recent times. For example, amongst the labour force engaged in various economic sectors those engaged in trade and 'service-sector' (although in 'service-sector' not only financial services but other social services also are included) constituted 4.51 percent in 1952/54, 4.97 percent in 1970/71 and 8.32 percent in 1990/91. Similarly in total national production, trade and service sector's share was 12.81 percent in the year 1964/65, 14.34 percent in 1974/75, 27.23 percent in 1984/85 and 31.38 percent in 1994/95. The faster growth rate after the decade of 1980s can be attributed to the so-called 'liberalization' policy and it is not difficult to comprehend the basically foreign-inspired and reactionary nature of this growth.

 If one is to look at the state of merchant capital in Nepal, although its history is very old, however its size and influence has not been so big in the overall economy. But the main characteristic of merchant capital in Nepal is that right from the beginning its role has been more in the external trade than in the internal trade. Hence, as it was not attached with the country's production process, it got transformed into comprador capital instead of transforming historically into national industrial capital. The main reason behind this is that Nepal being situated in the trade route between Tibet and northern India, thus entrepot trade prevailed here right from the beginning and after the opening of road to Tibet via Sikkim in the beginning of 20th century and after the inundation of Nepalese markets by Indian factory-made goods merchant capital of Nepal got intertwined with trade with India. Even now the size of internal trade in the country is small, because only about 30 percent of production in the agriculture sector goes to the market and according to a survey conducted some time back internal trade worth only Rs.15 per person per month takes place in the country. But against this the quantity of foreign trade and that too mainly import trade has increased intensively. In the year 1964/65 the share of foreign trade in the gross national product was 16.75 percent (among that import trade contributed 11.32 percent), in 1994/95 its share increased by two and a half times more reaching to 40.13 percent (out of which import trade was 31.52 percent). Similarly, about one third of the annual budget revenue of the state comes from foreign trade and that, too, mainly from tariff in import trade, and when the sales tax is included about 60 percent of the state budget revenue depends upon the trade sector. From this it is clear that the current state is increasingly depending upon merchant capital and that the state itself is responsible for expanding bureaucratic capital. Although tourism regarded as one of the main earners of foreign exchange is called a 'service industry', as most of the materials used in it get imported from foreign countries and 50 percent of the total earnings goes back to the foreign countries, the present form of tourism should be considered as just one part of bureaucratic capitalism.

 In totality, if one is to analyse the structure of Nepalese merchant capital there is no doubt that its nature is 'comprador' as it mainly helps in realizing the value of foreign capital by selling the industrial goods of the imperialists and the expansionists. Similarly since it remains 'independent' of the production process within the country and helps in the flight of internal capital towards foreign countries in the form of commercial profit, it is clear that its expansion has a negative and destructive effect in the development of national economy. Since historically Indian traders and landed feudals of Nepal have had monopoly over the Nepalese merchant capital (e.g. 75 percent of wholesale trade of Kathmandu and Terai is in their hands, all major tourist hotels have joint investment from Rana-Shah families and the Indians, etc.) the merchant capital instead of integrating with the internal production process is centralized in the foreign trade, the foreign trade has been limited to the fulfillment of the demands of consumer goods for a handful of the richer classes, etc., the Nepalese merchant capital has transformed itself into comprador capital instead of developing into national industrial capital. Hence unless this process is corrected by destroying comprador capital and by nurturing national capital it is not possible to develop the country's economy.

 As far as the question of financial capital is concerned, the usurer's capital levying high interests and other service charges has been traditionally existing for a long time and even now it has a wide net-work in the rural areas. The birth of modern organized financial capital, however, took place only after the establishment of Nepal Bank Limited in 1937. Nevertheless up till the decade of the 1960s, at one end foreign currency was under the control of Reserve Bank of India, whereas internally individual usurer's capital was the main source of all credits. After the establishment of different financial companies (e.g. Nepal Industrial Development Corporation, Agriculture Development Bank, etc.) and commercial banks under the aegis of the state and foreign capital investment at the end of the 1950s and in the decade of the 1960s, the expansion of bureaucratic capital in the form of financial capital took place in a faster pace. In the decade of the 1960s the gross assets of all financial companies was to the tune of only 14 percent of the gross national product, but in the decade of 1990s it increased to about 50 percent. After the decade of the 1980s, foreign banks started entering in the country and in the last two years eight foreign banks have been established, and along with it the gross assets of commercial banks have increased by nearly 10 times from 7.7 billion rupees to 75.99 billion rupees. However, if one is to investigate the structure of this fast growing financial capital, it won't be difficult to discern its reactionary nature. First of all, the landed feudals and merchant comprador capitalists instead of investing on production-oriented industrial ventures invest their surplus from agriculture and profits from trade in this new form of usury where higher interests and quick returns can be achieved. This retards the development of agriculture and industry. Secondly, since most of the investments made by these financial institutions (approximately 50 percent) are in trade and in consumption credits and less in productive sectors of agriculture and industry, this will have negative impacts in the long-term development of the economy. Thirdly, as these financial institutions are basically appendages of imperialist finance capital, through them the country's capital will be flighted away and thus it will thwart the development of industrial capital in the country. The very fact that the present fast rate of expansion of financial capital has no positive correlation with the development of agriculture and industry in the country, conclusively proves the reactionary nature of this financial capital.

 Another example of the penetration of imperialist financial capital and its destructive activities in the form of bureaucratic capital is the so-called foreign aid. After the decade of the 1950s when the entry of imperialist and expansionist financial capital in the name of foreign aid was initiated, its quantity has been increasing in subsequent decades and along with it the total foreign loan and dependency of the country have also increased. As a result it has now become entangled in the vicious circle of debt trap in the form of requiring further foreign loans to pay back the foreign debt. In the year 1970/71, foreign loan per capita was Rs. 15, but after 25 years of 'development', i.e. in 1994/95, foreign loan per capita was increased by 400 times, to more than Rs. 6000 and one fourth of the annual budget revenue had to be spent in foreign debt servicing. Similarly, how the country's external dependence has been increasing is demonstrated by the fact that whereas in the year 1975/76, 40.8 percent of total 'development budget' was dependent upon foreign loan and aid; in 1994/95 that dependency had increased to 61.60 percent. Also, the principal objective of the foreign loan, apart from earning the interests, has been to expand imperialist and expansionist markets. This is proved by the fact that for the last 40 years more than 60 percent of 'foreign aid' has been used in the field of transportation and communication. Similarly, in keeping with the imperialist plan of checking the mounting crisis in oppressed nations after the decade of the 1970s from breaking into revolutionary upheavals, in Nepal, too, billions of rupees have been pumped in the rural areas in the name of NGOs/INGOs.

 Thus, to develop national industrial capital by destroying the comprador and bureaucratic capital and to pave the path of self-reliant development by breaking away with dependency, a revolutionary transformation of society and the process of People's War have become inevitable.

3.3 Regional Inequality and the Nationality Question

 Social processes take place in geographical space. Hence social division of labour gets manifested in geographical division of labour. In history, the division between town and countryside started along with the social division of labour. That is why along with the historical development process of society the process of organisation or transformations of the geographical space also goes ahead. In other words, according to the system of production, distribution and consumption of goods in the society, the structure of human settlements, transportation and communication system and the overall regional structure also get crystallized. In pre-capitalist societies particularly in feudal mode of production which are primarily based on agriculture (in which land, the principal means of production, cannot be transported from one place to another), and in which market exchange has a negligible role, there is abysmally low differentiation of geographical regions. There exist only few towns as military forts or politico-administrative centres and as consumption centres of a miniscule parasitic classes of society, and rest of the productive classes of people live in small rural settlements or hamlets scattered widely. As a result mono-centred regional structure marked by a big capital city at the centre and homogenous small rural settlements all around is the specificity of feudal society. It is only after the advent of the capitalist mode of production that big modern cities developed as the centre of production, distribution and consumption and unprecedented changes in the regional structure started taking place. Along with it wide regional disparity and uneven development takes place as a geographical manifestation of social inequality resulting from the process of centralization and monopolistic tendency inherent in capitalism. The regional structure of feudal or semi-feudal society tied in a colonial or semi-colonial relation with international monopoly capitalism (i.e. imperialism) is like a hybrid of feudal and capitalist structure. In other words, at one end, the overwhelming agricultural hinterland is in a backward rural stage while, at the other end, there exist limited urban centres and islands of extraverted 'development' that accumulate social surplus product from backward regions, and transfer it to foreign countries and import foreign products to distribute countrywide. This condition of unequal development generates among oppressed and backward regions a consciousness of regional identity and autonomy or independence and this usually takes the form of a nationality question. Because those inhabiting the backward and oppressed regions are often the indigenous people, and where there is a confluence of common territory, language, economy, and culture such as a regional oppression manifests itself as national oppression and this way the regional and the nationality questions get inseparably intertwined with each other. This (regional unequal development) is the main reason why nationality question becomes more intense after the advent of capitalism or imperialism. In this very light we should understand the regional and the nationality question in Nepal, which is in a stage of transition from feudalism to capitalism.

 Even now in Nepal 90 percent of the total population live in the rural areas and only 10 percent live in the urban areas. This is the overt manifestation of low geographical division of labour corresponding to the low social division of labour of a semi-feudal agriculture-based society (whereas in developed societies 80 to 90 percent of the population live in cities and only about 10 to 20 percent live in the villages). In 1953/54 urban population in Nepal was 3 percent and after 40 years it has reached to 10 percent, which is not significant by any account. However, the process of urbanisation and the mode of development of transportation and communication system in the last 40 years indicate some important changes in Nepal. In 1952/54, out of ten urban centres having more than 5000 population five were in Kathmandu Valley and five in the Terai and by distribution of urban population Kathmandu Valley had 83 percent and the Terai had 17 percent. If one is to look at the history prior to the establishment of some trade centres in the Terai in the aftermath of extension of Indian railways up to the Terai border of Nepal by the end of 19th century, then the settlements that could be called urban centres were only Kathmandu, Lalitpur, and Bhaktapur, and thus the total urban population of Nepal was centralized within the Kathmandu Valley. This urban-rural structure and their distribution pattern conform overwhelmingly to the mono-centred structure of the feudal society. However, out of the 33 settlements officially designated as 'urban centre' in the form of municipalities in 1991, 3 are in Kathmandu Valley, 22 in Terai and 8 in the Hilly regions, and the distribution of urban population in them is 35 percent, 53 percent, and 12 percent respectively. This way it is evident that when after the decade of 1950s the Nepalese economy was increasingly entangled with imperialism and expansionism, as its physical manifestation 'urban' centres mushroomed along the Indian borders and the overall regional structure of Nepal started becoming extraverted. Nevertheless the earlier primacy of Kathmandu Valley as the capital region was retained though in a slightly reduced proportion. This condition is further proved by the fact that the road and air traffic flow and communication systems are mainly oriented towards Kathmandu and then towards cities in the Terai, and that of the total vehicular traffic in the country those going to and fro Kathmandu Valley constitute 40 percent. Such a mono-centred and extraverted regional structure reflects the semi-feudal and semi-colonial social structure and the process of unequal and distorted development in the country.

 If one is to analyse the condition and pace of development of the main geographical regions of the country, then one sees a very alarming picture of absolute backwardness at one end, and an increasingly unequal and distorted development at the other. Physically, Nepal can be divided into the Himalayan Mountains, the Hills and the Terai plains (including the inner Terai) from the north to the south and into Koshi, Gandaki and Karnali watersheds from the east to the west, and the Kathmandu Valley situated within mid-hilly region as a separate region because of its specificities of historical development. Leaving aside the pre-historical period, if one is to observe the history of the past three thousand years the east-west spine of the central Hill region in the middle is seen to be the main habitation zone and the Kathmandu Valley was the most developed area. It is only after the end of the 19th century when there was massive deforestation of Terai (as the economic importance of timber and fertile land of Terai was enhanced with the extension of Indian railheads up to the border) and furthermore after the eradication of malaria in the decade of the 1950s, that the habitation in Terai started increasing. Among Hill regions, prior to the establishment of the centralized state, the level of development was almost identical everywhere; however afterwards, the Gandaki region in the middle became more developed because it was nearer to the seat of central state and was the place of origin of the principal military and non-military bureaucracy and also it was full of plateaus and river basins favourable for agriculture as compared to the Kosi and Karnali regions, which are far off from the citadel of the central state. The fact that before the decade of 1950s, 60 percent of the total population of the country lived in the Hills (including Himalayas) 5 percent in Kathmandu Valley and 35 percent in the Terai, clearly indicates that the Hill region was the main habitational zone till then. However, by the decade of 1990s the pattern of distribution of population in different regions had undergone a change and it was 42 percent in the Hills, 11 percent in Kathmandu Valley and 47 percent in the Terai. In the context of the continued agricultural-based nature of the economy and no significant level of industrialisation anywhere, it is clear that this population transfer is not an economic sector wise vertical transfer (i.e., from agriculture to industry, which is historically progressive) but merely a geographical territory wise horizontal transfer (i.e., from agriculture to agriculture). Thus, migration from Hill agriculture to the Terai agriculture will not solve the problem in the long term, but it shifts the problem from one place to another and only postpones the problem for some time. This in fact further retards the development of the Hill region constituting a vast territorial expanse (i.e. 79 percent of total area). As regards the increasing trend of migration towards the capital region of Kathmandu Valley, it is to a certain extent due to the availability of non-agricultural employment opportunities and mainly due to the distress flight of the semi-proletarian peasants as 'informal refugees'. Together with this because of the centralization of almost all the economic and social services including central administration and physical facilities in it, the rural feudals and the nouveaux riches from all over the country flock to Kathmandu to invest their agricultural surpluses in financial and commercial activities or in real estate business. Some indication of how the capital from all over the country gets poured into Kathmandu and that Kathmandu itself consumes most of the share of 'development' is provided by these figures: 60 percent of the deposits and 50 percent of the credits of commercial banks are centred in Kathmandu; one third of internal trade of the country takes place in Kathmandu; 69 percent of investments in tourist hotels are made in Kathmandu; 60 percent of motor vehicles in the country are registered in Kathmandu; 60 percent of industries in the country are located in or around Kathmandu, etc. Against this, Hilly regions and most of the rural areas are without basic physical infrastructures such as roads, water, electricity, etc. and social services like education, health, etc. When a district wise composite development index with indicators of agriculture, industry, finance, social service, physical infrastructure development is constructed, it is seen that districts of Kathmandu Valley (i.e. Kathmandu, Lalitpur and Bhaktapur) rank first; far eastern Terai districts (i.e. Morang, Sunsari and Jhapa) come second; districts like Parsa, Kaski, Banke, Chitwan, etc. with big urban centres come third; rest of the Terai districts come fourth; and the Mountainous and Hilly districts stand at the lowest rung.(See, Bhattarai, B., The Nature of Underdevelopment and Regional Structure of Nepal, CSRD/SSS, JNU, New Delhi, 1986) Even among districts in the Mountainous and Hill regions, the districts in the Karnali watershed are most underdeveloped. Thus, along with the general backwardness and underdevelopment of the entire country the inequalities among regions is increasing within the present semi-feudal and semi-colonial dispensation and unless this process of mono-centred and extraverted development is rectified, it is certain the regional disparity in future will get even more acute.

 The oppressed regions within the country are primarily the regions inhabited by the indigenous people since time immemorial. These indigenous people dominated regions that were independent tribal states prior to the formation of the centralized state in the later half of the eighteenth century, have been reduced to the present most backward and oppressed condition due to the internal feudal exploitation and the external semi-colonial oppression. They have been left behind the historical development process because of blockade of their path of independent development and imposition of socio-cultural along with economic oppression upon them with the backing of the state by those forces who had come from outside. Thus it is quite natural that the question of regional oppression of Mongol dominated eastern, central and the western Hilly regions or the Austro-Dravid dominated Inner Terai and Terai regions are manifested in the form of national oppression. There the regional and the national questions have intertwined with one another. Besides this, the problem of the Khas dominated far western Karnali region can occur as regional question instead of a nationality question and it will have to be tackled accordingly. Thus, according to the concrete situation it is necessary to solve the problem of oppressed regions and nationalities by granting regional and national autonomy.

4.0  The Economic Policy, Programme and Process of the New Democratic Revolution

 From the above analysis of the condition and process of social and regional development it is clear that the main hurdle for the development of social productive forces is the internal and external class-relations, or the social relations of production under the prevailing semi-feudal and semi-colonial dispensation. Hence it is not possible to forge the Nepalese society historically ahead just through reforms or change only in the superstructure and by keeping the base of the old society intact. It has become a historical necessity to establish a new kind of socialism oriented capitalist, or New Democratic, system of production by destroying the old semi-feudal mode of production chained to imperialism and expansionism. To put it more clearly, history has been compelled to bid goodbye to the feudal and comprador and bureaucratic capitalist classes hindering in the development of society from the arena of Nepalese history and to hand over the responsibility of organizing a new and higher form of social system (i.e. New Democratic system) to the new progressive classes (i.e. workers, peasants, petty bourgeois and national bourgeois). The People's War is the inevitable instrument of this historic New Democratic revolutionary transformation. The People's War waged under the leadership of the Communist Party of Nepal (Maoist) and with the joint participation of all the progressive classes of society is aimed at building a New Democratic base after destroying the base of the old semi-feudal and semi-colonial society and ultimately at creating a classless and exploitationless society. The economic development policy, programme and process of such a New Democratic revolution can be presented as below.

4.1 Economic Development Policy

  The main economic development policies of New Democratic revolution in Nepal will be as follows:

 The main economic policy of New Democratic revolution in Nepal would be to change the old relations of production in order to develop the productive forces and to give a faster pace to the development of society in general. Although there exists an interactive relation between production relations and productive forces and that any change in one affects the other but in the present historical stage of the Nepalese society the retrograde semi-feudal and semi-colonial relations have become the main obstacle in the development of a new and higher form of capitalist mode of production. In this situation the attempts at placing emphasis only on the productive forces (or, capital and technology, and that too foreign!) and keeping the old relations of production intact would not only be completely retrograde but have in practice, too, proved a failure. Thus the main policy of the revolution would be to confiscate the means of production that have been in the hands of the reactionary classes, mainly land which has been in the hands of the feudals and capital in the hands of the comprador and bureaucratic capitalist classes, and then to hand them over to the progressive forces (i.e. workers, peasants, petty bourgeoisie and national bourgeoisie) and to organize the mode of production in a new way. It is only by unleashing the revolutionary initiatives of the majority of the working and the progressive masses that revolutionary transformation of a backward economy like that of Nepal would be possible. That is why it can be said that the slogan of "Grasp revolution, Promote production" advanced by the great Mao would be relevant to Nepal as well. However, because of the backward semi-feudal state and a very low level of development of productive forces in Nepal, the principal form of the new production relations would not be socialism at the outset but of a capitalistic type and only after going through a transitional stage that a socialist transformation would be carried out. In the New Democratic stage big and basic industries and financial companies would be under social ownership of the state, some of the larger means of production would be jointly owned by the state and the individual and in agriculture, the largest sector of the economy, there will be private ownership by the peasants and in small and medium industry and trade there will be ownership by the industrialists and traders.

B. Independent and Self -Reliant Development

 The other principal development policy in the New Democratic economy would be the independent and self-reliant development free from the oppression and exploitation of imperialism and expansionism. The country's development is impossible without freeing itself from the trap of imperialism and expansionism because the process of underdevelopment of Nepal was accelerated after it got entangled in an unequal and exploitative relation with world imperialism and particularly with Indian expansionism, and at present it is caught in an irretrievable foreign debt trap, unbearable trade deficit, all round dependency and plundering by foreign capitalists and multinational companies. Hence, instead of the present extraverted and dependent development policy an inward-looking and self-reliant development policy relying upon its own natural resource, capital, labour, technology and market would be followed. This does not at all mean that there would be no economic ties with foreign countries or there would be no utilization of modern science and technology as falsely alleged by the imperialists or their agents. There would be the policy of maintaining trade and other relations with all on the basis of equality, mutual benefit and national needs and of utilizing modem technology to the extent possible. However, its viability in practice would depend upon the policy of the foreign forces towards the revolutionary state.

C. Planned Development

 The other important policy would be to make a planned development of the economy through a scientific assessment of the available and potential resources of the country and physical and cultural needs of the society. At present there prevails a tendency of producing and distributing goods in an anarchic manner with the view of making profits for the few monopoly capitalists and for the indefinite market under the control of imperialists/expansionists in the name of so-called open market or for the conspicuous consumption of a limited upper class of the society. Because of this, at one end, there is a big wastage of larger part of productive instruments and resources of the society, and at the other, a majority of the people in society are deprived of even of the minimum basic needs of life. Thus it is right both in terms of economic logic and social utility to organize the economy scientifically and in a planned manner according to the needs of the society, as against such an anarchic, wasteful and inhuman mode of production. However, while talking about planned development one should refrain from the tendency of citing the negative experiences of the past Soviet Union (specially after 1956) and visualizing a command economy. Here planned development means the creation of a genuine mass-oriented and efficient economy functioning under a centralized leadership and guidance and decentralized initiative and management, which to a large extent was practiced in China during Mao's time.

D. Balanced Development

 The other important economic policy of New Democratic revolution would be to bring about balanced development both economically and geographically by maintaining a correct balance and harmony between country and town, between Hill and Terai, between agriculture and industry, between small scale cottage industry and big modern industry, etc. At present there is increasing inequality and imbalance between different economic and geographical regions. Balanced development in the country will be achieved by ending pre-capitalist and bureaucratic capitalist: monopoly in the economy, by granting national and regional autonomy to the oppressed nationalities and regions and geographical regions, and by pursuing the overall planned development strategy. The main strategy of balanced development would be based on treating industry as the leading sector and agriculture as the foundation in the development of the economy, and in the context of regional development, pursuing the policy of 'urbanisation of the countryside' and not the 'ruralization' of the cities.

4.2 Economic Development Programme

 To remedy the grave economic distortions and problems prevalent in the country the following economic programmes will be carried out with full sincerity and as a national campaign in keeping with the above basic policies during the course of the New Democratic revolution and on its completion.

A. Revolutionary Land Reforms

 In a semi-feudal agriculture-based country like Nepal, the New Democratic revolution means basically the agrarian revolution. That is why revolutionary land reform is the biggest and the most important economic programme of New Democratic revolution. The principal objectives of land reforms would be: (1) to make maximum use of the productive capacity of majority of the peasants and to accelerate the development of social productive forces by making landless peasants the owners of the land and by availing adequate means of production (land, credit, etc.) to the poor peasants; (2) To increase social production by bringing to maximum use of the wasted or under-utilized means of production (land, money capital, etc.) belonging to the feudals; (3) to avail capital and raw materials for the country's industrialisation by increasing agricultural production and by diversifying agriculture; (4) To ensure adequate internal market for the industry by enriching peasants which constitute a majority of the country's population, etc.

 The principal strategy of land reform would be to usher in capitalist relations by destroying completely feudal, semi-feudal and bureaucratic capitalist relations prevalent in agriculture. It would be primarily based on the policy of "land to the tiller". In other words, the land of those feudals (and also guthis) who do not put their labour or capital on the land would be confiscated without compensation and distributed to the landless and poor peasants and the tillers would be made owners of the land. However, the land belonging to the middle or rich peasants (who may have hired their land out to others due to various reasons) will not be confiscated, but a ceiling to landownership, tenancy right and the rate of rent will be fixed and implemented. Together with this all forms of debt incurred by landless and poor peasants would be completely nullified and labour-services and other forms of payment forced upon them would be cancelled. In order to enhance production and productivity of agriculture and to protect the backward agricultural sector from the competition of industrial, commercial or financial sectors, adequate institutional provisions of irrigation, modern inputs (e.g. fertilizers, seeds, pesticides, machines, implements etc.), credits and market would be made to the farmers and in order to guarantee proper price for the agricultural produces, necessary monetary and price policy would be implemented at the state level.

 The process of implementation of land reforms would be the most important and scientific and revolutionary. It is not possible to implement revolutionary land reform programme without making the peasants conscious and organized, as they are subjected to oppression and exploitation from time immemorial and are very backward culturally. That is why it would be necessary to take co-operation from the local peasant's association and to mobilize the general peasant masses in order to prepare the actual records of landownership, to ascertain the class status of peasants (i.e. landless, poor, middle and rich peasants and feudals) and their role in the village, to identify the actual tillers and to implement land reforms at the village level. Similarly, land reform programme would be implemented in stages (i.e. in terms of both social class and geographical regions!) and by taking local specificities fully into account. In that process maximum caution would be exercised so as to avoid both 'leftist' and 'rightist' errors. Special attention would be paid while implementing land reform programme to mobilize the 70 percent of the landless and poor peasants actively in favour of revolutionary land reforms, to bring the 25 percent of the middle and rich peasants in support of the land reforms or not to let them go against the programme, and to strictly carry out the land reform programme against the 5 percent feudals and bureaucratic capitalists. Of the 2.6 million hectares of cultivable land currently available in the country if one is to confiscate only the minimum 40 percent of land belonging to the 5 percent of the feudals and bureaucratic capitalists then the surplus land turns out to be 1.0 million hectares. If one is to distribute this among the 70 percent of landless and poor peasant families then it comes to more than 0.5 hectare per family, and if one is to distribute it among the 44 percent landless and semi-proletarians (i.e. those owning less than 0.5 hectare) nearly one hectare each can be given to them. Similarly at present only 0.25 million hectares of land has permanent irrigation facility, whereas according to the estimation of technicians 1.4 million hectares of land can be irrigated. If one is to mobilize the huge surplus labour available to bring irrigation facility to the additional 1.15 million hectares of land then even within the present technical level of production, agricultural production can be increased by many times. Hence there is no doubt that dramatic turns in the agriculture sector and in the overall economy can be brought about through revolutionary land reforms in the country.

B. National Industrialisation

 The other important economic programme in the New Democratic revolution would be to bring about industrialisation of the country at a rapid rate by placing industry as the leading sector in the economy. The principal objective of industrialization would be: (1) to increase general social production and productivity of labour and that of the overall economy by putting to use the surplus labour stuck in the backward semi-feudal agriculture sector into productive use; (2) to make way for the development of superior mode of production (i.e. capitalist and socialist mode of production) in agriculture and ultimately in the whole economy by producing necessary capital goods for the agriculture sector, by providing markets for agricultural products and by providing productive employment to the surplus labour in the agriculture sector; (3) to prevent the flight of capital away from the country and to end dependency by producing necessary capital goods, basic goods, intermediary goods and consumer goods; (4) to promote export by producing goods with comparative advantage in the international division of labour; (5) to cater to the higher material and cultural needs of the society; etc.

 The coordination of capital, labour and market essential for national industrialisation will be done primarily through the process of revolutionary transformation of the existing society. For primitive accumulation of capital, the capital originating from the agriculture sector and lying idle in the hands of feudals or being spent on conspicuous consumption or in circulation for usurious purposes and the capital in the hands of big comprador and bureaucratic capitalists would be confiscated and brought under state control. Besides this, protection and encouragement would be given to the small and domestic industrialists in large numbers, to the small and medium traders and to the capital of national bourgeoisie in small numbers, and a maximum capital accumulation from the agriculture sector and its investment in industry would be promoted. Ultimately it is the agriculture sector, which would be the main source of capital for industrialisation. Similarly, main emphasis would be on labour-intensive industrialisation since there would be dearth of capital and a surplus of labour within the country for a long time to come. Special attention would be given for the development and use of indigenous technology. Main stress would be on harnessing the immense hydropower potential of the country through small hydro-electricity projects for the supply of necessary industrial energy and to ensure self-reliant, pollution-free and sustainable development. From the beginning, adequate attention would be paid to the primary and medium level technical education for the production of skilled labour and technical manpower, which would be increasingly needed along with the process of industrialisation. As per the market for raw materials and finished products, a policy of primarily relying on the internal market would be pursued. At one end, supply of raw materials would be ensured by enhancing production of medicinal herbs, animal husbandry, horticulture, cash crop production, processing of minerals, etc., taking full advantage of the geographical diversity and, at the other end, necessary market would be created for the industrial products by eliminating existing socio-economic inequalities and increasing the purchasing power of the general masses Thus the creation of a big market for the means of subsistence and means of production for the general masses instead of the current narrow market for the luxurious goods meant for only the limited upper class of people would accelerate the process of industrialisation. Similarly, special measures, e.g. cancellation of unequal treaties, control of the open border, adoption of correct tariff-financial-monetary policies, would be taken by the state to protect the national industries from the interference and domination of world imperialism and particularly of Indian expansionism.

 It is obvious that the state would have to play a special role in the industrialisation process of Nepal because of the country's semi-feudal and semi-colonial conditions and due to the immensely backward state of the productive forces. Nevertheless the industrialization in the New Democratic stage would be of a capitalist nature rather than of a socialist nature. The state would provide leadership and guidance to the overall industrialisation by means of the ownership of basic industries and financial institutions and through central planning and fiscal/monetary policies. On the other hand, there would be private ownership and initiative on other modern industries, small and domestic industries and small and medium trade. Thus, only by getting liberated from the imperialist and expansionist oppression under the leadership and guidance of a progressive state that the development of industrial capitalism would be possible in Nepal and the base can be prepared for the construction of a higher level of society.

C. Regional Balance and Integrated Development

 The other important development policy and programme of the New Democratic revolution would be to coordinate economic development with regional development from the very beginning and to ensure balanced and integrated development throughout the country. Principal strategy for this would be: (1) to accelerate the pace of social development by making maximum use of the productive potentials of different geographical regions; (2) to make the economy self-reliant and to protect it from the danger of external interference and oppression through decentralization in economic and geographical terms; (3) to orient the society towards more advanced and democratic stage by checking social and geographical polarisation; (4) to ensure sustainable development through interdependence among different social sectors and geographical regions; etc. For regional balanced and interdependent development, such programmes would be implemented as: controlling the polarisation between city and countryside; developing settlement system based on interdependence of big, medium and small towns and villages; developing interactive relations between Hill and Terai regions by ascertaining the division of labour between them; establishing production zones based upon integrated development of big and small industry and agriculture; enforcing national autonomy in oppressed nationality-dominated areas; implementing regional autonomy and local self-government in the oppressed and remote areas; etc. In the old social systems, particularly because of the centralization of the basic economic, social and physical services and infrastructures only in the few urban centres, an uncontrolled population, concentration in the big cities takes places leading to the 'ruralization of the cities'. Against this, in the New Democratic system, economic, social and physical services and infrastructures (e.g. industries, banks, colleges, hospitals, electricity, motorable roads, etc.) would be provided in the rural areas and a policy of 'urbanisation of the countryside' would be followed. These policies and programmes would be carried out through integrated development planning and necessary economic and other policy measures.

4.3 The Process of Revolutionary Transformation

 Transformation of one social system into the other, or negation of the old by the new does always take place by force and in a revolutionary leap: People's War is such a means of negating the old by the new force and of taking a new leap into a new and higher (social) system. There would be two important specificities of the process of New Democratic transformation through the protracted People's War in Nepal:

A. Dialectical Process of Destruction and Creation

 Because the present Nepalese society is in a semi-feudal, semi-colonial stage and there prevails unequal development and a very low level of material and cultural development, it is necessary to destroy the old mode of production bit by bit starting from its weakest spots and to create the new mode of production systematically from the same place (i.e. a strategy of protracted People's War). To put it in concrete terms, as the contradiction is the sharpest in the rural areas the process of destroying the old structure and creating a new one should commence from there. Hence along with the development of the People's War in Nepal the process of destruction of old relations of production and the creation of the new relations would go on concurrently from below. Accordingly, existing semi-feudal relations in the rural areas would be destroyed and in its place the policy of revolutionary agrarian reform, industrialisation and balanced development would be implemented-on a New Democratic basis. However, without consolidating the new state power it would not be possible to implement economic construction, or even if implemented, it would be impossible to preserve it. That is why the policy of organizing New Democratic system of production would start from below in keeping with the stage of development of the new state power, and only after capturing the state power throughout the country the New Democratic system would be implemented throughout.

B. Transitional Capitalism and Continuous Revolution

 New Democratic system is basically a capitalist system. However, in the present era of imperialism and in a situation of intensely backward state of productive forces as in Nepal, it is impossible to develop the capitalist system in the old form and to make it stable. Specially, it is not possible for the owners of small parcels of land and small capital to increase productivity by labouring individually and to protect themselves from the monopolistic assaults of the big capital. Hence it is only through gradual co-operativisation of agriculture and through state protection for industry, or by systematically moving ahead in the path of socialisation that the large number of small producers can preserve their existence and increase their productivity. In that sense the New Democratic system is only a transitional capitalist system and its contradictions would have to be solved through the higher form of a socialist system. Thus it is only through the process of a continuous revolution that it would be possible to solve the newly emerging problems and contradictions in the society at a higher plane. The process of People's War in Nepal is a link in a chain of such a continuous revolution to solve the problems of the society. The principle objective and rationale of the People's War in Nepal is, thus, to develop the social productive forces and create a higher form of society through a continuous revolution in the base and the superstructure or by putting "politics in command".