Is it the end of India’s special relationship with Nepal?

By Prashant Jha ( 8 March 2018) – On Monday, Nepal’s newly elected Prime Minister KP Oli received his first foreign visitor — the Pakistani Prime Minister Shahid Khaqan Abbasi.

It was unusual. Nepal and Pakistan share cordial ties and are both a part of South Asian Association for Regional Cooperation (SAARC), but Islamabad and Kathmandu don’t quite share ties so intimate as to warrant Abbasi being the first visitor to greet Oli after his win.

This incident, however, symbolically marked the changing times in India’s neighbourhood.

Nepal’s Prime Minister usually makes his first visit to India and Oli is still expected to do so. But after winning the election on an explicitly ‘ultra nationalist’ platform, where he has promised to diversify Nepal’s relations beyond India and deepen ties with others, particularly China, symbolically, Oli will do all he can to show his ‘independent’ credentials. And in Nepal’s political lexicon, both ‘nationalism’ and ‘independence’ have come to be synonymous with resisting India. Having the Pakistani Prime Minister over is as good a sign of signalling independence.

This assertion of ‘independence’ in Nepal has left India with an almost schizophrenic policy approach.

On one hand, a strong section of the political establishment believes it can do little but to engage with the new government, ‘appease’ it, remain detached from the domestic politics and hope Nepal doesn’t move too close to China. On the other, an influential section in Delhi believes that the aim must be to get even more invested in Nepali politics, contain Oli and tilt towards the north and prepare for a situation where an alternative coalition can be eventually constructed against him.

But this throws up a larger question. Is the Nepal-India ‘special relationship’ undergoing a fundamental shift? Despite deep ties, this may well be the case, where India is no longer exercising the same influence over Nepali politics and does not command the same levers to shape Nepali elite opinion and society.

The special relationship

No two countries – as leaders of both remind us – share ties as intimate as Nepal and India.

This ‘special relationship’ takes concrete cultural forms. Nepalis and Indians visit each other’s country for religious pilgrimage – -Pashupati and Janakpur are traditional centres in Nepal, as Varanasi and the four dhaams are in India. The Buddhist network is interlinked — Lumbini is in Nepal, while Kushinagar, Gaya and Sarnath are in India. The special relationship has explicit state support. Nepal and India have an open border, with free movement of people. Nepal’s currency is pegged to the Indian currency.

Nepali and Indian workers can work freely in each other’s countries, without visas and work permits. Nepal and India gain tremendously from remittances from the other. Nepalis can own property in India. Generations of Nepali students have studied in India.

Nepal depends on India for third country trade. Its essentials — from fuel to basic medical supplies – -come from India. India is Nepal’s largest trade partner and there is abundant informal trade that exists across the open border.

There has also been an explicit political contour to the special relationship. India has played a key part in Nepal’s democratic movements — helping oust the Rana oligarchy in Nepal in the early 50s; indirectly supporting the restoration of democracy in 1990; engineering a peace accord between democratic parties and Maoists to oust the monarchy in 2006.

The China-Nepal romance

 In 2016, Nepal’s PM KP Oli visited China. Both signed three dozen pacts, agreements and MOUs, including the Transit and Transport Agreement.

 China has provided 3 billion Yuan for Nepal’s Reconstruction to be used in the jointly selected 25 major projects for 2016-2018 period.

 In 2015/16, total exports to China stood at US$ 181 million. In contrast, import from China has been growing at the rate of 39% per year. It rose from US$ 421 million in fiscal year 2009/10 to US$ 1,247 million in 2015/16.

 China has emerged as the largest source of foreign direct investment in Nepal. Chinese investors have shown intent to spend over $8.3 billion in Nepal during the Nepal Investment Summit concluded in Kathmandu in March 2017.

 In 2015/16, total exports to China stood at US$ 181 million. In contrast, import from China has been growing at the rate of 39% per year. It rose from US$ 421 million in fiscal year 2009/10 to US$ 1,247 million in 2015/16.

 China is the 2nd largest source of foreign tourist to Nepal. Over 100 thousands people visit Nepal annually.

 Nepal is the founding member of the AIIB. Nepal holds the observer status in the Shanghai Cooperation Organization.

Key Chinese projects include:
 Upper Trishuli Hydropower Project- Power station and Transmission Line Projects (concessional loan)
 Food/Material Assistance (grant) in 15 bordering districts of northern Nepal
 Kathmandu Ring Road Improvement Project with Flyover Bridges (grant)
 Tatopani Frontier Inspection Station Project (construction of ICDs at Zhangmu-Kodari) (grant)
 Pokhara International Regional Airport (loan)


But there appears to be a rupture in the relationship at four levels.

The first is indeed politics and India’s ability to influence Nepali politics. In September 2015, Nepal’s Constituent Assembly adopted a constitution; despite India urging Kathmandu to accommodate the concerns of the people of the Tarai, Nepal’s political elite did not listen. India tacitly supported Madhesi protests at the border, crippling essential supplies. This generated a backlash in Kathmandu and the hills. India developed cold feet and eventually lost out on all ends. It earned the hostility of hill communities; and it could not deliver to Madhesis and get the constitution overhauled.

Once it became clear that India’s word could be defied, and defying it could well be politically attractive, KP Oli took on the mantle of an ultranationalist leader. Delhi tried to block his electoral alliance with the Maoists; it tried to block their election victory; and it tried to stop the announcement of the merger of the two communist parties. It failed on all ends.

Second, a geopolitical alignment is underway. China was getting aggressive in precisely this period. It had stepped up economic investment and trade linkages. But as Indian influence waned, it got involved in shaping politics.

Beijing backed the communist alliance and Oli’s rise. KP Oli himself had made a trip to the Nepal-China border right after his win, and has said he will deepen ties with the north to increase his leverage with the south.

The third rupture is happening at the level of the Eminent Persons Group (EPG). Nepal and India set up an EPG, of four members each, to relook at the entire gamut of relations – in particular the 1950 treaty. It is now clear that the group would recommend an overhaul of the treaty. This in itself is fine.

But Nepali members have pressed hard for regulation of the border and documenting entry and exit of each person. This is bound to generate complexities for communities who live at the border, who have deep cross-border livelihood networks, and could well jeopardise the people to people ties.

And finally, Nepali society — particularly the hill dominated Kathmandu bureaucracy, media, civil society institutions — is becoming more autonomous of Indian influence.

The elites now go to the west for training; others have come up through the Nepali-speaking world. Their emotional investment in India is limited. Their networks here are barely present. Those who could have balanced these views in politics and society — the people of the Tarai plains –lie marginalised.

As Delhi’s Nepal policy swings from excessive involvement to neglect, from a desire to shape politics to tendency to stay away from it entirely, a major shift is certainly underway. India-Nepal special relationship is in its final leg.

This article was first appeared in The Hindustan Times.


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