Nepal, a key strategic buffer against China, has historically been close to India.
Nepal and Bhutan, though both geographically and demographically small nations, have a critical role to play due to their strategic location between the much larger China and India. Historically, both have maintained cordial relations with India. In recent decades, the three have often stood together geopolitically on international issues and at global forums. Healthy neighbourly relations are expected to persist despite China’s persistent efforts, especially with Nepal, to distance it from India. The intensification of these manoeuvres, however, necessitates constant vigilance and more meaningful actions by India toward Nepal, even if its responses are not always prompt or adequate.
NEPAL
Over time, India’s relationship with Nepal has been characterized by close cultural, historical, and geographical ties. Religion has played a significant role, with India having the largest Hindu population, while Nepal is the only Hindu nation in the world. Close people-to-people connections, with about 3 million Nepalese currently residing in India and 0.6 million Indians in Nepal, have existed for centuries. Citizens of both countries can travel freely without entry documents and can work without permission. The Gurkhas of Nepal form the backbone of the Indian Army, with 32,000 currently serving, and several thousand retired personnel now back in Nepal, but receiving monthly pensions and other assistance from local Indian disbursement and ex-soldier welfare offices. Intermarriage between the Nepalese and Indian citizens is commonplace. In terms of tourism, trade, and investment flows, India holds the top position, with $8 billion worth of annual trade taking place—$500 million in exports by Nepal, and $7.5 billion by India. 30% of FDI approvals are usually in favour of Indian businessmen who own over 150 large and medium sized manufacturing and services facilities.
India, with an 1,850 km long border across five of its northern and eastern states, has been mindful of the significance as well as the challenges facing Nepal, a country with a population of 31 million. It stands fairly low in terms of most economic and social parameters used to measure human well-being. The India-Nepal Peace and Friendship Treaty of 1950 forms the bedrock of the special relations. Under this treaty, all Nepalese citizens are granted the same facilities and opportunities in India as Indian citizens. The 1992 trade and transit arrangement allows unhindered, duty-free access for the movement of cargo to and from Nepal through the eastern ports of India. Last June, this arrangement was expanded to include transportation through waterways.
Indian development assistance to Nepal has consistently grown, exemplified by a budgetary provision of Rs 1,200 crore as aid in 2019-20. Lines of credit amounting to $1.6 billion stand extended for diverse infrastructural and construction activities. Indian engineers lead the charge on construction of scores of roads in the Terai region, and cross-border rail connections. Post the earthquakes of April and May 2015, a specific $750 million credit line was initiated for reconstruction, coupled with an outright grant of $250 million for immediate relief. Many essentials, particularly hydrocarbon-based fuels, food, and medicines, are primarily sourced from India. Over the years, significant military hardware, ammunition, and extensive training facilities have been provided. Through bilateral grants several hydroelectric projects and power transmission lines have been constructed, with agreements allowing the exchange of surplus power. Nepal has been recently authorized to sell its surplus power to various Indian states and not limited to Bihar any longer. The educational partnership thrives, with around 30,000 Nepali students annually benefiting from free scholarships in Indian universities, encompassing many pursuing Ph.D. degrees. A robust support mechanism has been evolved for cultural exchange. The recent agreements between India and Nepal include provisions for water sharing, flood management, and advancements in agriculture.
As if to try and match, or surpass India’s influence, China has intensified its “activities” in Nepal. Such emphasis commenced shortly after the abolition of constitutional monarchy in May 2008 and the declaration of Nepal as a federal democratic republic under the Peace Agreement of 2006, between government and the Maoist rebels. The powerful Chinese Communist Party has actively supported local communists to sway the electoral process and government formation. China has intensely engaged in developing specific highways to connect them with its Tibet Autonomous Region (TAR), where it has been constructing an extensive network of roads along the Line of Control (LOC) and interior lines of communication. Under its Belt and Road Initiative (BRI), which Nepal has signed, China aims to build roads and infrastructure to boost bilateral trade and reduce Nepal’s reliance on Indian goods. Given the precarious fiscal situation in Nepal, there is a strong concern that the nation might fall into a Chinese debt trap, similar to what has been observed in a southern Sri Lankan port of Hambantota, with potential consequences on its independence.
In another explicit endeavour to extend influence, China has offered to enlist Nepalese Gurkhas into its People’s Liberation Army on a long-term basis. This offer stands in stark contrast to India, which has not provided them with permanent absorption and instead launching the recently initiated short-term Agniveer recruitment program. Consequently, the Nepalese government has prohibited Gurkhas from joining the Indian Army. Alongside the Nepalese army receives substantial Chinese weapons and ammunition, complemented by extensive local training. Allowing the entry of the Chinese military would facilitate rapid deployment and movement of its motorized and mechanized military forces during conflicts, significantly enhancing communication lines along the LOC. This development, ostensibly aimed at modernizing the Nepalese Army, poses dangerous ramifications as it brings the Chinese military closer to Indian borders and renders its central sector of operation highly vulnerable.
In addition to the Gurkha recruitment issue in the Indian Army, two other points of contention have strained the bilateral ties. The first was the 2015 economic blockade that hindered the entry of oil and other essentials into landlocked Nepal. Initiated by the Madhesis, who have caste and ethnicity similar to residents of Bihar and Eastern Uttar Pradesh, this blockade was in protest against Nepal’s adoption of a new Constitution. The second point of contention arose in 2020 when the communist-led government, led by K.P. Sharma Oli, released a political map depicting three border regions—Kalapani, Limpiyadhura, and Lipulekh—as parts of Nepal’s territory. While India was blamed for the economic blockade, the map incident, including the Nepal Parliament’s full endorsement, drew a sharp response from New Delhi. The cumulative effect has soured public perception against India, raising serious concerns as people-to-people ties have traditionally formed the foundation of bilateral relations. Exploiting this shift in public sentiment, communist-led governments in Nepal have swiftly moved towards China, signing a Trade and Transit Treaty in 2016, joining the Belt and Road Initiative in 2017, and engaging in joint military exercises since 2017-18. The lack of swift resolution to these issues, allowing them to fester for years, has caused a rapid nosedive in bilateral ties.
None of the aforementioned issues of difference was inherently difficult to address promptly. The economic blockade against the new Constitution could have been publicly decried by India, avoiding the emergence of suspicion that it was backed by India. The map published by the communist government and approved by the Nepal Parliament, was a response to a map initially released by India following the abrogation of Article 370, delineating the boundaries of the newly created Union Territories of Jammu and Kashmir and Ladakh. The contested Kalapani region was depicted in Ladakh. Evidently, the government wing that authorized the publication was not aware of the historical context and had not consulted the Ministry of External Affairs. The recent dispute regarding longer service and pensionary benefits for the Gurkhas could also have been prevented by retaining both tracks of recruitment for Gurkha soldiers—continuation of regular recruitment with customary benefits and privileges, and the new Agniveer scheme for those opting for shorter durations despite the absence of pension benefits.
In the quest to maintain cordial relations with Nepal, it is crucial to constantly remind ourselves that facilities and concessions granted to smaller neighbours need not be on a reciprocal basis. Nepal’s strategic location vis-à-vis China, India’s formidable competitor, necessitates that India goes the extra mile to maintain the status quo in ties, if not constantly strengthen them. Moreover, any concession, especially geographical ones, granted to China by Nepal could potentially be turned into a distinct military advantage, as observed in Tibet and Aksai Chin in Ladakh. Geopolitical strategy aside, the standard of living in Nepal is relatively low, marked by significant unemployment and poverty. Assisting in ameliorating these conditions can contribute to internal political and social stability, thereby mitigating a range of potential adverse effects on its larger neighbour.
With this in mind, it would be beneficial to promptly implement remedial measures. The four-day visit last June by three-time Premier Pushpa Kumar Dahal, popularly known as Prachanda, was able to optically effect a thaw in the bilateral relationship. Premier Modi and he agreed on various issues to bring the relationship back on track. This included initiating a diplomatic dialogue to resolve the border dispute and witnessing the signing of seven agreements to boost cooperation in energy, trade, and connectivity. It is crucial to act upon these and past accords pending for years, with particular attention to the air routes agreements finalized 26 years ago during PM I.K. Gujral’s visit. Additionally, starting work on the 900 MW Upper Karnali hydro project assigned to the GMR Group in 2014 and progressing with the construction of an International Buddhist Centre, whose foundation stone was laid by the present Indian PM last year, should be prioritized.
India should consciously work towards remaining the only significant partner of Nepal in exploiting its vast hydro power potential by intensifying the assistance for their construction with a tenable assurance of buying up all the surplus power at market rates. To keep going its hydrocarbon connectivity, India needs to build a cross border petroleum pipeline to start with, and later supplement it by setting up a refinery there. It could also bail out Nepal from the debt taken by it from China to build the expensive new international airport at Pokhara and a smaller one at Wushan, both of which are lying almost unused since their commissioning a year ago. It can prompt its airlines to fly there by including the two airports in its Udaan scheme under which considerable benefits are extended for flying on the less profitable routes. Nepal can also be facilitated in a number of ways to improve its trade and other economic connections with Bangladesh. A fair amount of funding and technical support for such infrastructure and related projects would be forthcoming from the Asian Development Bank and the World Bank which are keen to expand their role in a Least Developed Country like Nepal.
Alongside this, India should exercise extra caution in actions that may provoke strong sentiments among the average Nepalese population. For instance, avoiding prolonged waits for its new Ambassador to meet India’s Foreign Minister, and expediting the report of the Eminent Persons Group established jointly in 2016 (during a period of historic lows in the relationship) to suggest ways to restore it to previous levels, including revising the Nepal-India Friendship Treaty signed in 2015. India should refrain from displaying the Akhand Bharat map in its new Parliament building, a move that drew strong reaction from the Nepalese leadership, prompting them to unveil a Greater Nepal map in the Mayor of Kathmandu’s office. Recognizing that structural changes have taken place in both countries, there is need for a new approach to cultivate ties. While material assistance from India must be constantly increased, importance needs to be placed on respecting perceptions, particularly those of the vocal and temperamental youth as well as their intellectual and political groupings.
Dr Ajay Dua is an ex Union Commerce and Industry Secretary.
Write-ups on other neighbours would follow.