August 27, 2010


[External powers are fishing in troubled waters. This may destabilise the country even further. The UNMIN is playing a questionable role in the affairs of Nepal. The policies of EU and the US do not inspire confidence. China is being wooed by many political parties as suspicion against India grows. Pakistan is active. Middle Eastern countries like Saudi Arabia are paying increasing attention to Nepal.]

By Arvind Gupta PhD
Nepal is in the throes of revolutionary change. It will be a while before it settles down. The transition to a democratic republic may turn out to be a long one and full of surprises. Until the new Constitution is finalized, political turmoil will continue. There is no guarantee that the Constitution will be drafted soon and that even if drafted, it will bring stability. India has legitimate economic and security interests in Nepal. In its dealing with ‘new NepalIndia would need to be patient. More important, India will have to contend with new forces and new uncertainties. Old policies may prove ineffective. A new paradigm is required in dealing with Nepal.

The Current Situation

Nepalese have mixed and contradictory feelings towards India. Anti-India feeling in Nepal is at its peak. On the one hand they recognize that India has played, can play, and should play a positive role in the peace process. On the other, there is all round unhappiness about how India is seen to be playing this role. India’s style of functioning is questioned openly. (Note: The recent visit of PM’s special envoy has been projected as a manifestation of India’s blatant interference in Nepal’s affairs. The foreign minister was constrained to give a statement in the parliament that the Special Envoy’s visit was a private affair, indicating that Nepal had no information about it. The Nepali media has been critical of the visit.)

The peace process in Nepal is extremely complicated. India helped bring about the 12-point agreement. But that was a different era. It is doubtful that India can help bring the peace process to the desired outcome.

There is considerable mistrust between the Maoists and others in Nepal. Yet, the Maoists are the most organized of all the parties and have the necessary means to pursue their goals. It is believed by most analysts that they would gain a majority were elections to be held now. Major parties (NC, UML, Madhesi Morcha) are in varying degrees of turmoil. The political alliances are marriages of convenience and tactical. Politics is highly individual centric. Moreover, people are angry with politicians and there is a disconnect between the two.

The Maoists express commitment to multiparty democracy and make promises about eventually becoming a normal civilian party without their armed cadres. But their commitments are not believed. The Maoists have an agenda of restructuring Nepali institutions in their own image. The Maoists say that they were not defeated and that they have come to accept multiparty democracy voluntarily. Wrong or right, they have a strong sense that India is trying to marginalize, isolate and humiliate them when it puts pressure on them. They feel that India has exerted pressure on the Madhesi parties not to support them.

The Maoists have sympathizers in UML and among the Madhesi Morcha. They hope to get the support from the Madhesis and smaller parties to reach the magic number of 301 in the contest for the prime minister’s position between Prachanda and National Congress’s Poudel.

India’s policy would have to reckon with the Maoist strength. It appears that it would be difficult to prevent the Maoists from coming to power by forging opportunistic alliances against them. Such arrangements are likely to prove temporary. The Maoists will need to be engaged and locked into agreements and arrangements common in democratic set-ups. They will be exposed if they do not play by the rules of democracy. There is no realistic way of keeping them away from power given their obvious strengths.

Nepal’s economy, despite political instability, has shown good growth in recent years. It has survived the global economic and financial crisis. This became possible mainly due to strong inward remittances from Nepali workers abroad. An astonishing 22 per cent of Nepal’s GDP comes from remittances from abroad. Agriculture, hydropower, infrastructure and tourism are potential growth areas. But developing them requires political stability, good governance, conducive labour laws, and investment in physical and social infrastructure. The continuing political instability is preventing Nepal from achieving its economic potential which, if realized, can make the country one of the most prosperous in the region. A large number of Nepali youth are leaving the country for unskilled unemployment opportunities in the Middle East and in South East Asia. The manufacturing sector in Nepal has suffered significantly due to power shortage, strikes and bandhs. Nepali investment is flowing out of the country.

External powers are fishing in troubled waters. This may destabilise the country even further. The UNMIN is playing a questionable role in the affairs of Nepal. The policies of EU and the US do not inspire confidence. China is being wooed by many political parties as suspicion against India grows. Pakistan is active. Middle Eastern countries like Saudi Arabia are paying increasing attention to Nepal.
New Paradigm
India has been focused on the politics of the peace process. But its policies may require adjustment in the light of the above realities. It is necessary to realize the limits of influencing the course of the political process in Nepal. Instead, India might benefit by re-focusing its attention on long term economic relations and in building human resource capacities in Nepal. India’s policies should be long term, people-centric and based on building economic capacities and human resource potential. Political leaders, despite their differences, appear to be open to engagement with India if India is seen as helping Nepal rather than using its resources for its own interests only. India needs to depoliticize its economic relationship with Nepal.

The issue of water resources is important for both countries. Nepalese are suspicious of India when they hear Indians talk about cooperation on water issues. Many in Nepal feel that mega projects will not help Nepal. India should engage the Nepali government and Nepali businessmen as well as environmentalists to understand Nepal’s concerns and then chalk out a new policy. Many Nepali experts believe that the India-Bhutan hydroelectricity model is not suitable for India-Nepal water cooperation. Nepali experts want India to pay peak-hour price for electricity generated in Nepal. They also want India to pay for the storage dams in Nepal for their considerable benefits downstream. Perhaps the days of Mahakali treaty and other such mega projects are over. A new paradigm for water cooperation is needed.

The unregulated, open India-Nepal border is a major security concern for both countries. Cross-border crime, smuggling, fake currency and infiltration of undesirable elements including potential terrorists into India are a major security concern. Nepal also has concerns regarding the smuggling of small arms from the Indian side into Nepal. A whole new look at cooperation in border management is required. Cooperation will not be easy due to ongoing political uncertainty. But India must do whatever it needs to do to improve border management practices and seek Nepali cooperation as much as possible.

India must take steps to improve its image in Nepal. This can be done by encouraging multifaceted engagement at various levels outside the official channels. India should engage more with the media and the youth as both tend to be anti-India. Films, entertainment, fashion, tourism, and religious pilgrimage offer other avenues for meaningful engagement.

Political missions, howsoever well-intentioned they may be, are misunderstood in Nepal. It may be better to regularly exchange high level economic and commercial delegations, particularly from business and economic communities to see how India can help Nepal. Nepal needs investments and jobs. Although it is difficult for Indian businessmen to invest when the business climate there is so uncertain, it may be useful to take a long term view and remain engaged in Nepal’s economy. The government could also consider a $1 billion package of assistance for projects in Nepal, as has been done in the case of Bangladesh and Afghanistan. It is interesting to note that Indian companies which have remained invested in Nepal are making profits. A sustained engagement with Nepal at this critical juncture will pay dividends in the long term to both countries. India could consider, as in the case of Bangladesh and Afghanistan, $ 1 billion worth of assistance in selected areas of infrastructure and capacity building. In the short-term, India could also consider selling power to Nepal which is reeling under power-shortage. This will be a timely and critical help.

Nepal is in critical transition and India is also changing rapidly. A stable and prosperous Nepal in whose making India should help is the ultimate guarantee of India’s legitimate security interests. India needs to chalk out a new paradigm of engagement with the emerging Nepal in which economic and border management issues are prioritized over political issues.