India-Nepal relations soar high

Source: The post is based on the article “India-Nepal relations soar high” published in the Business Standard on 7th June 2023.

Syllabus: GS 2 – India and Neighbourhood relations.

Relevance: About India-Nepal relations.

News: The recent visit of the Nepali Prime Minister to India has highlighted the ongoing developments in India-Nepal relations.

What are the key decisions made during the recent visit?

What are the recent developments in India-Nepal relations?

Why does Nepal need India’s assistance?

Poor state of Nepal’s economy: Nepal’s economy is in bad shape. It is facing food and fuel inflation, shortage of essential commodities, and depleting foreign exchange reserves. Nepal is also experiencing a recession with an increasing trade deficit, inflation, unemployment and declining foreign direct investments.

Currently, Nepal is seeking assistance from an extended credit facility offered by the International Monetary Fund. Thereby, its immediate focus is on containing inflation and maintaining foreign exchange. In that, India can help Nepal significantly.

Political Instability in Nepal: Domestically, Nepal continues to be politically unstable. The lack of a clear majority in Parliament and the recent unveiling of the Bhutanese refugee scam has made the present government venerable.

Issues with Chinese project deliverance: China’s infrastructure and assistance has fallen short of Nepal’s expectations. Border infrastructure remains underdeveloped, and the trade deficit with China has grown disproportionately. None of the nine Belt and Road Initiative (BRI) projects have been implemented to date. Similarly, the proposed Shigatse (Tibet)-Kathmandu rail link was also stalled. This is because Nepal wants these to be financed through grants rather than loans.

China has also begun to intervene in Nepal’s internal politics to further its interests.  China’s limitations have compelled Nepal to focus on beneficial Indian projects and partnerships.

Note: Nepal’s degree of caution on Chinese projects is also observed among other South Asian countries. This has created space for India to expand its profile once again in its neighbourhood.

How India can improve India-Nepal Relations?

-Sustained engagement can address their mutual suspicions and build trust between India and Nepal.

-Recognise the strategic importance of each other in the evolving global order and maintain a positive momentum between India-Nepal relations.