New Delhi might have been a reluctant midwife these past few years but it always managed to come out on the right side of the changes Nepal was undergoing. Not anymore.

You know you've hit rock-bottom when an intelligence operative in the Indian mission in Kathmandu calls up a member of Nepal's Constituent Assembly and threatens to have his daughter's provisional admission in the embassy-run Kendriya Vidyalaya revoked if he doesn't vote a particular way.

Welcome to the diplomatic brilliance of a rising India, a country which is bedevilled with intractable political problems in Kashmir, its forested heartland and the north-east but which doesn't think twice about plunging headlong into the cesspit of day-to-day politics in a neighbouring nation. The threatening phone call was made by the Indian embassy official on the eve of the fourth round of voting in the CA earlier this month between the Maoist candidate for Prime Minister, Prachanda, and the Nepali Congress (NC) candidate, Ram Chandra Poudel. Given the prospect of fence-sitting Madhesi political parties moving over en masse to the Maoist camp, the Indian effort was aimed at ensuring this didn't happen and that the stalemate between the two candidates continued.

For the record, Indian officials deny the allegation made by the CA member, Ram Kumar Sharma, but there is hardly anyone in Nepal who doesn't believe it is true. Even by the interventionist standards of the past, the threat marks a new low. Leaving aside the moral and diplomatic implications raised by this unpleasant episode, the threat of punitive action against a young girl suggests a wider, even catastrophic, failure of Indian policy. In the past, India always had the ability to work behind the scenes with a wide cross-section of players in order to produce a political outcome that broadly benefited both Nepal and itself. Today, that is no longer the case. Even when they play their hands in the open, our men in Kathmandu are unable to ensure a stable outcome.

Last week, I followed the lead of Prime Minister Manmohan Singh's special envoy to Nepal, Shyam Saran, who had just been in Kathmandu, and met senior leaders cutting across all major political trends: from the Maoists, who are the biggest party with 40 per cent of the seats in the CA, the NC, the Unified Marxists-Leninists and the different Madhesi factions. Even though their views on the current political crisis varied sharply, virtually all the politicians I met agreed that Indian interference in the politics of the country had reached a new high. Many blamed this interference for the failure of these parties to establish some sort of modus vivendi among themselves.

This failure is costing the country dear. It has delayed not only the writing of the new constitution but also the completion of the peace process — the integration of erstwhile combatants of the People's Liberation Army (PLA) within the official security forces and the democratisation of the Nepal Army. On paper, these are goals India officially supports. And the fact that Nepal has come so far on all of these questions has a lot to do with New Delhi's earlier support and encouragement, particularly in the struggle against the now-abolished monarchy. But somewhere along the line, India has lost the plot, allowing the paranoia and tunnel vision of its security and intelligence establishment to compromise its long-term strategic interests.

Ever since the confrontation between the Maoist-led government and the Nepal Army in 2009 led to the resignation of Mr. Prachanda as Prime Minister, India has been dead-set against the Maoists leading any kind of coalition government in Kathmandu. Indeed, the officials running India's Nepal policy made it clear the Maoists should ideally not even be allowed to join a coalition headed by someone else, that they be “punished” — a word Indian diplomats in Kathmandu have used with their counterparts from other countries — for having dared to presume they could call the shots in the wake of their victory in the April 2008 CA elections.

During the wasted year of Madhav Kumar Nepal's premiership, which India backed to the hilt, New Delhi hoped the Maoists would either split or come under pressure to accept a unilateralist reading of the Twelve Point Understanding and the Comprehensive Peace Agreement — two documents which paved the way for the constitutional and political transformation of Nepal. Though the Maoists see themselves as creating a new mainstream, India wants them to stick to the old mainstream and abandon the hope of restructuring the Nepali state and its institutions in any fundamental way. This the Maoists are not prepared to do.

After 12 months of political stagnation, matters slowly started coming to the boil again since the end of May when a package deal struck to extend the life of the CA by another year led to the resignation of Mr. Nepal as Prime Minister. Last year, Indian officials split the Madhesi Janadhikar Forum of Upendra Yadav in order to ensure that Mr. Nepal had the requisite numbers to form the government. But efforts to ensure a similar arrangement again are floundering over deep divisions within the UML. A rightist faction led by K.P. Oli shares the official Indian antipathy towards the former insurgents but party leader Jhalanath Khanal believes only a consensual approach towards the Maoists will allow the CA to finish its work.

Within the charged political atmosphere, an all-party government led by Mr. Khanal with the participation of the Maoists and the NC would have been the most propitious arrangement if the aim is to complete the peace process and write the constitution by the new deadline of May 2011. Indeed, the Maoists last month said in writing that they would support Mr. Khanal, whose party insisted he have not just a simple plurality of CA members backing him but a two-thirds majority. However, the last minute defection of Upendra Yadav meant Mr. Khanal's numbers fell short, leading to Mr. Prachanda and the NC's Mr. Poudel entering the fray.

Whatever New Delhi may say, UML leaders and politicians from virtually every other party blame Mr. Yadav's sudden change of heart on Indian pressure. What makes these allegations credible is the extent to which the Indian embassy in Kathmandu has got involved in micro-managing political events and even media discourse in the country. Last month, Nepal's biggest newspaper group, Kantipur, which has been critical of the Indian position, faced the prospect of suspending publication because supplies of newsprint were deliberately held up by customs authorities in Kolkata on instructions from the intelligence agencies. The issue was resolved only after the newspapers agreed in meetings with Indian embassy officials to adopt a more “constructive” editorial position.

As matters stand, India does not see the integration of the PLA and constitution-writing as part of an organic process. For that reason, it shares the indifferent attitude of Nepal's old mainstream towards the writing of a new constitution even as it insists the PLA question be resolved quickly. There are a number of proposals for PLA integration and army restructuring on the table, including a non-paper by the U.N. Mission in Nepal. But these cannot be discussed and taken forward in the absence of a consensual atmosphere.

If the next round of voting in the CA is inconclusive, the Maoists and the NC should withdraw from the fray and explore the possibility of Mr. Khanal leading such a government with the participation of all. The Maoists should realise that 40 per cent is not enough for them to have their way on all issues and that heading a government for just 9 months should not become the be all and end all of political strategy. All constitutions are living documents. If the Maoists win a majority in the next election, they can always try and improve the constitution. On their part, the NC and the UML, and the Indian establishment, should stop looking at the Maoists as an ‘insurgent' outfit just because several thousand PLA soldiers are still living in UNMIN-supervised cantonments. These soldiers confer no political advantage to the Maoists since the “people's war,” once abandoned, cannot be restarted. Integrating them into a democratised national army would be a win-win all round. In exchange for the loss of dedicated party cadres — 5,000-8,000 men would never be able to stage a coup or subvert a lakh-strong force — the Maoists want the national army to be ethnically inclusive and brought firmly under civilian control. Surely that is something everyone ought to back wholeheartedly. By working against the possibility of a new political equilibrium that can accomplish these goals in Nepal, India is playing a dangerous game that will eventually boomerang.