While there is nothing new in India providing financial and other forms of assistance to Nepal, the announcement of a Rs.1000 crore aid package during the recent visit of Prime Minister Girija Prasad Koirala is significant. Apart from offering economic benefits to the people of the neighbouring country, the move signals strong support for the political transformation they have launched with a remarkable unity of purpose. Implicit in India's `no-strings' offer is the promise that it will not try to influence the process of change. The Manmohan Singh Government would also do well to oppose all external intervention in Nepal's internal affairs. That Mr. Koirala chose India as the primary source of assistance is a tribute to an extremely close longstanding relationship. The aid package reflects a desire to help Nepal overcome its most pressing economic difficulties with a one-time grant of Rs.100 crore to infuse buoyancy into its budget. The Koirala Government faces a difficult fiscal situation as it tries to cope with the fallout of months, if not years, of political turmoil. A soft credit line of about Rs.500 crore has been offered for infrastructure projects; Kathmandu will be free to set the priorities of utilising this amount. The annual allocations for the `Aid to Nepal' scheme will be enhanced from Rs.65 crore to Rs.150 crore; dues outstanding on defence purchases waived; 25,000 tonnes of fertilizer provided at subsidised prices; goods manufactured in Nepal exempted from the four per cent additional customs duty; and the release of all funds under the Duty Refund Procedure Scheme expedited. India has promised to speed up work on all infrastructure projects and the two governments are to identify further areas of cooperation.

New Delhi might have faced few problems in deciding on its response to Kathmandu's requests for financial assistance. It needs now, more than ever, to display sensitivity and a sure touch as the Koirala Government and the Maoists move on to the next stages of a challenging political transformation. The two sides are currently considering a `code of conduct' that will control the behaviour of Nepal's regular forces as well as the People's Liberation Army. Once discussions begin on the modalities of a permanent ceasefire, tough questions are likely to arise about the nature of the monitoring mechanism to be put in place. India may have to strike a delicate balance between its traditional opposition to intervention by extra-regional forces in Nepal's affairs and the need to address the practical issues as they arise. While all major political forces in Nepal have agreed to hold elections to a constituent assembly, this process might take as long as a year to unfold. That should provide New Delhi enough time to make up its mind on the forms of assistance it can provide during this period of momentous political change. With the abolition of the `King in Parliament' concept, including his veto on laws, Nepal is on the fast track to becoming a republic. Republican India should have absolutely no problems with this.