Final answer:
Fiscal policies in Nepal affect economic growth by influencing investments in physical capital, human capital, and technology. Enhanced education and R&D can be encouraged through increased spending and tax incentives, while avoiding excessive government deficits to prevent the crowding out of private investment.
Step-by-step explanation:
The impact of fiscal policies on economic growth in Nepal can be explored by understanding how government actions influence investments in various aspects of the economy. Economic growth in Nepal, similar to other countries, is driven by the accumulation of physical capital, advancement in human capital, and the development of new technology. Government borrowing has the potential to crowd out private investment; however, fiscal policies can also be designed to boost public investment in infrastructure, education, and research and development. In this context, methods to improve the country's human capital could include increasing expenditure on educational resources and reforming the educational system to enhance incentives for success. Likewise, the advancement of technology could be facilitated by increasing R&D spending through direct government investments and providing tax incentives for businesses engaging in R&D. These strategies are essential for long-term economic growth, but they require careful implementation to prevent excessive government deficits that could otherwise hinder private sector investment.