The visit of Nepal’s Prime Minister Sher Bahadur Deuba to India, beginning April 1 — four years after a Nepali leader visited New Delhi — is significant. It is the first bilateral visit abroad for Mr. Deuba who leads an election government; local elections are to take place on May 13 and federal elections are slated later in the year. In April 2018, Nepal Prime Minister K.P. Sharma Oli had a lacklustre-feel good visit to India, with little achievement worth talking about.
Mr. Deuba assumed office in July 2021, his fifth time as Prime Minister, leading a fragile coalition that has not been able to make Parliament function. The Nepal Parliament has been dysfunctional since July 2020 after cracks within the former Communist alliance developed in December 2019. The novel coronavirus pandemic has been a face-saving event for political forces.
Nepal’s relations with India, that plummeted to a historic low after the Indian blockade in September 2015, have yet to recover as Nepalis do not see relations with India improving any time soon. India’s refusal to accept demonetised bills with the Nepal Rastra Bank worth just INR₹7 crore and the unknown fate of the report submitted by the Eminent Persons Group (EPG) have not helped in securing it a better image in Nepal. The fact that passengers boarding flights from Nepal to India are still subjected to a pre-boarding security check even over 20 years after the hijack of an Indian Airlines aircraft, determines the perception of trust of India in Nepal. This is despite thousands of Nepalis serving in the Indian Army and Nepali villages expressing grief whenever violence escalates in India as many lose their lives defending a country that is not their own.
Geopolitics is a complicated challenge for Nepal, whose geography requires it to make best use of its position between China and India. The last couple of months are an example of how complicated it can get. When the Nepalese Parliament ratified a U.S.$500 million grant assistance-Millennium Challenge Corporation (MCC) pact, there were street protests and big-time social media campaigns supported by China. However, India’s silence and the offer of other routes for power transmission as an alternative to the MCC confused everyone: was India for or against the MCC grant to Nepal? With relations between India and the United States further complicated by the China factor and India abstaining on the Russia vote in the United Nations even as Nepal voted in favour of it, the problems have continued to mount.
The recent visit by the Chinese Foreign Minister, Wang Yi, to Nepal has resulted in a situation that everyone in Nepal is trying to decipher. Analysts also suggest that Mr. Wang did assure his Indian counterpart that Nepal should work out its internal equations with India and that China would stay out. But in reality, the Chinese engagement has been very deep as seen in the anti-MCC campaign. U.S. grant and investment activities are seeing a revival post the MCC ratification and India does not want to see other powers active in Nepal.
With Mr. Deuba leading a fragile coalition, there are not many issues he may want to accomplish, but he should be able to push some of the key pending ones.
The main priorities
First, the power trade agreement needs to be such that India can build trust in Nepal. Despite more renewable energy projects (solar) coming up in India, hydropower is the only source that can manage peak demand in India. For India, buying power from Nepal would mean managing peak demand and also saving the billions of dollars of investments which would have to be invested in building new power plants, many of which would cause pollution.
Second, while trade and transit arrangements go through the usual extensions, it is time to undertake a complete rethink as the sales of goods and payments moves through electronic platforms — this can provide many new opportunities for businesses on both sides of the border.
Third, the Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between India and Nepal needs more attention from the Nepali side. A commitment from Mr. Deuba on implementing this would attract more foreign investments from Indian investors. The private sector in Nepal, especially the cartels in the garb of trade associations, are fighting tooth and nail against foreign investments. So, it will be important for Mr. Deuba to deliver a message that Nepal welcomes Indian investments and that he is willing to fight the domestic cartels knowing well that it may dent a bit of funding for his party for elections.
A new Nepal now
Finally, it is for Mr. Deuba to provide the confidence that Nepal is keen to work with India while at the same time making it clear that it cannot take on India’s pressure to ignore China or the U.S. In the context of Nepalis currently living in 180 countries, India must note that it is a new Nepal it has to deal with from now.
Perhaps there is hope that the situation can improve — in the appointment of Dr. Shankar Sharma, a seasoned economist, who was also Nepal’s Ambassador to the U.S., as Nepal’s Ambassador to India. He was responsible for recalibrating Nepal’s relations with the U.S. Perhaps we can hope that India will engage with him more deeply without the usual condescending attitude. Perhaps, an open moment has arrived.
Sujeev Shakya is the author of ‘Unleashing Nepal’ and ‘Unleashing The Vajra’