Print Edition - 2014-08-03  |  Free the Words

Long time no see

  • As the ultimate beneficiary of development in South Asia, Nepal’s progress would also help India
- Bhim Prasad Bhurtel
 Long time no see

Aug 2, 2014-

Indian Prime Minister Narendra Modi is slated to arrive in Kathmandu today for a two-day visit. This trip is indeed a major departure in Indian neighbourhood policy, at least for Nepal, because no Indian prime minister has made a formal visit to Kathmandu since 1997.

As India is Nepal’s largest bilateral trade partner in South Asia and shares a 1,600km border, the Nepali people expect forward-looking moves from Modi to warm Indo-Nepal relations in the future. Irrespective of what the politicians of the two countries have expressed publicly, it is assumed that Indo-Nepal ties can best be described as neither hospitable nor hostile. Any bilateral relationship should have a place in the hearts of the citizens of both countries rather than the minds of politicians and bureaucrats. In this context, Modi’s visit could be significant in overhauling bilateral ties. However, the task will not be easy for Modi because of the long list of outstanding issues between the two countries.

Democratic politics

First, Modi should assure Nepal that India has little to do with political developments here. Such an assurance will help put concerns about Indian interference at rest and will be a positive step forward to end the protracted political transition, consolidate the federal democratic republic and promulgate a secular constitution. There is a desperate need for a politically stable Nepal, which will open up avenues for economic prosperity.

Thus, Modi needs to eliminate growing fears among the Nepali people that the government change in India will lead to Nepal reverting to a Hindu country and/or a restoration of the monarchy. Whatever his party’s political ideology, Modi needs to appreciate that Nepal becoming a federal and secular republic is a reflection of the ‘right to self-determination’ of sovereign citizens, which will not be affected by a government change in another country. Besides, Nepalis think that India is unnecessarily micro-managing Nepal’s political affairs. So Modi should assure the Nepali people India’s actions will be different in the future.

Trade concerns

Second, India is Nepal’s largest trade partner as nearly 67 percent of Nepal’s foreign trade is with India. Nepal’s trade deficit reached nearly Rs 400 billion during the last fiscal year, and almost 68 percent of the imbalance was with India. To meet the trade deficit, Nepal has been selling US dollars to India, amounting to 4.8 percent of India’s total external sector accounts, as suggested by the Reserve Bank of India (RBI). Nepali traders and economists have accused India of creating tariff and non-tariff barriers.

Indian goods enter Nepal easily while Nepali goods face many obstacles while entering Indian markets. This is the sole cause of Nepal’s trade imbalance with India. Therefore, Nepali citizens expect Modi to take generous and bold steps to reduce the trade imbalance by providing unilateral concessions to Nepali goods in India. To make this happen, Modi needs to review and renew the Nepal-India Trade and Transit Treaty signed in 1996. The ripple effect of economic fortunes in Nepal will also benefit the people of the Indian states of Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand.

In return, Nepal needs to address India’s concerns related to ‘unauthorised trade’ and security. India and Nepal should develop a mechanism to send remittances to both countries through legal channels. Sources say that RBI and Nepal Rastra Bank, the central banks of the two countries , have agreed in principle to this initiative. However, interference from India’s Ministry of Finance has stalled the process; the reasons for which are not clear. If remittance can be sent to either country through financial institutions, more than 75 percent of the problems of unauthorised trade, fake currency and financing of terrorist activities can be resolved.

Three, India needs to support Nepal’s infrastructure development. More than 85 percent of four-wheelers and more than 97 percent of two-wheelers used in Nepal are manufactured in India. About 72 percent of the equipment and structures used in civil and mechanical works of hydropower and irrigation projects in Nepal come from India. Similarly, 76 percent of housing materials are imported from India. Therefore, the ultimate benefit from infrastructure development projects in Nepal goes to Indian entrepreneurs. Similarly, as a large economy, India has a huge energy and water deficit while Nepal has a large potential surplus.

We can exchange our weaknesses and strengths, factor endowments, deficits and surpluses, demand and supply and benefit from comparative advantages. The reason why there has been no such cooperation is the prevailing mindset. India invests heavily in power and infrastructure development projects from Afghanistan to Myanmar in the Hindu-Kush and Himalayan countries because India is the ultimate beneficiary of economic development in this region.

Away with asymmetry

Lastly, Modi should work to alleviate the prevailing asymmetric Delhi-Kathmandu relationship, which is not favourable to either side. Lopsided Indo-Nepal ties show that they are perhaps not based on principles of equal sovereignty and mutual respect. In 2001, then prime minister Atal Bihari Vajpayee visited Kathmandu but he was here to attend the 11th Saarc Summit. Similarly, no Indian president has visited Kathmandu since KR Narayan in 1998.

In contrast, all Nepali prime ministers during this period, except for Jhala Nath Khanal, have visited Delhi. Similarly, the late king Birendra, former king Gyanendra and President Ram Baran Yadav have all visited New Delhi three times. Therefore, if Modi removes this asymmetry, it will help improve bilateral ties and make them more pleasant and cordial. The Nepali people desire that India treat Nepal in accordance with Panchasheel, the Five Principles of Peaceful Coexistence. Incidentally, this year marks the 60th anniversary of the formal codification of Panchasheel in international politics. Modi’s visit should, thus, be a new start in this direction.

Indo-Nepal ties are not only important for martyalok (‘earth’) but also for paralok (‘heaven’) for the greater part of the people in both countries. The most important holy places for Hindus and Buddhists are located in India and Nepal, and thus, are important for pilgrimage . Thus, Indo-Nepal relations are important apart from trade, commerce and geopolitical and strategic interests. The leaders of the two countries, therefore, should be mindful of these facts and work closely in building a relationship based on mutual understanding, trust and peaceful coexistence aligned with the equal-sovereignty principle.

Modi may possibly achieve India’s dream of global prominence in the future, which is derived not so much from its past glory as by the opportunities it sees ahead for responsibly fulfilling its destiny. Such an Indian destiny should first be accustomed to immediate neighbours like Nepal.

Bhurtel was executive director of the Nepal South Asia Centre, a development think tank, from 2007 to 2011

Published: 03-08-2014 09:36

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