PM Manmohan Singh’s Forthcoming Visit to Nepal: The Nepalese Context

As per the media report, Indian Prime Minister Manmohan Singh is likely to make official visit to Nepal towards the last week of this month in March, 2012. Expectations are that this high level visit to Nepal by the Indian leader might add a new mile stone in relations between the two countries. It might also open different vistas of economic cooperation between world’s two closest neighbours.

But at the same time it cannot be forgotten that the visit at the highest level by the Indian leader to Nepal is taking place amidst situation in which Nepal is constrained by logjam caused due to the failure of the Constituent Assembly in making constitution despite a series of extensions. Nepal is also plagued by weak government, political instability, law and order problem, industrial chaos and growing influence of foreign forces in the country. Some of these challenges are also due to the lack of high-level visit by the Indian Prime Minister to Nepal. At this juncture, Manmohan Singh's visit to India could prove epoch-making if it is properly twined to the advantage of the two countries given the fact that the interest of one country is not much different to the interest of the other.

Unique Relation

No two countries of the world are bound as much by cultural, religious, geo-economic, political and strategic ties as Nepal and India. Therefore, people in India regard the Nepalese as closest to them and such is the attitude of people of Nepal towards the Indian people. Such people-to-people relations are unique, which is also made possible through the open border system for the people of one country to the other. Thousands of Nepalese and Indians marry each other. Millions of Nepalese benefit from employment opportunities across the border in India and similarly even many Indians also work in Nepal. Each day, the Nepalese go for shopping in India and the Indians come to Nepal. This uniqueness in relations between the two countries has really made the Nepal-India border borderless.

It is this unique relation between Nepal and India that paved the way to the 1950 Treaty of Peace and Friendship. Security interests of the two countries were locked through this Treaty. Each country made a commitment on taking joint initiative in case there was external threat to any of them. Perhaps, this bond of common security made the Nepalese Prime Minister Matrika Prasad Koirala publicly announce in 1950s that the defence of India was the defence of Nepal. Equally, true is the fact that the defence of Nepal is the defence of India.

Equally remarkable are the views expressed by the Nepalese Prime Minister K.I. Singh on Nepal-India relations. A foreign journalist asked him, “Why is it that the Nepalese value India so high when the Western countries and multilateral institutions pour so much money in Nepal in the form of foreign aid?” In his reply, Singh put counter question, “Why was it that Sita, the daughter of Nepal, had none else than Ram, son of India, to marry her? Why was it that there was no figure other than Sita whom Ram could have chosen for marriage?”

No house of the Nepalese is made pure until it is sprinkled with gangajal i.e. the holy water of the river, Ganga flowing through the Indian territory. No ritual is possible from birth to the death without gangajal. Even the ashes of dead bodies have to be immersed into the Ganga river. Souls of the ancestors do not find peace until certain rituals are performed in Gaya. People in Nepal have as much faith in Kashi, Ayodhya, Mathura, Vrindavan, Balaju or Rameshwar in India as the people in India revere Janakpur (the birthplace of Sita), Pashupatinath and Muktinath in Nepal.

Long Gap in Visit by Indian Prime Minister

Yet it was a pity that there was a long gap in high-level visit of Indian Prime Minister to Nepal. For nearly 15 years, no Indian Prime Minister visited Nepal. I.K. Gujral was the last Prime Minister of India to visit Nepal. Of course, Atal Bihari Vajpayee visited Nepal in January 2002, but the purpose of his visit to Nepal at that time was merely to participate in 11^th SAARC summit.

Turbulence in Nepal

Coincidently, the last 15 years has been the most turbulent period in Nepal’s history. More than 16,000 people were killed during the Communist Party of Nepal (Maoist) lead People’s war between 1996 and 2006. There was colossal loss of property and widespread destruction of government schools, offices, roads and other infrastructural facilities in the country during that time.

Following the historical Peace Accord between the government and the Maoists in 2006, the 239-year old monarchical institution collapsed in 2008. But even after six years of signing of the Peace Accord, the Maoist combatants are only partially laid off under the voluntary retirement scheme. The law and order situation in the country is still in fragile state. Armed groups have proliferated, particularly in the Terai region of Nepal. Most of the industries are closed on account of growing labour militancy, political instability, strikes, bandh, inadequate supply of power and raw materials. Forced donations and abductions have plagued the entire society. Because of the lack of employment opportunities at home, the number of youth fleeing the country for overseas employment (countries other than India) amounted to 600 per day until 2010, which more than doubled to 1,500 in 2011-12.

Nepal’s Challenges

The greatest challenge that Nepal is facing today is the failure of the Constituent Assembly to draft the constitution. As it is well known, the elections for 601-member Constituent Assembly were held in 2008 to adopt a Constitution within two years. Yet the there is no substantial progress in Constitution-making despite the fact that the tenure of the Constituent Assembly was extended several times in last two years. If the Constituent Assembly is not able to finalise a Constitution by May 27, 2012 when perhaps its final tenure expires, it would be a great set back to political stability in Nepal.

According to World Development Report 2012, Nepal’s per capita income is as low as $490. Even in Nepal's neighborhood, the per capita income in India is $1,340 – almost three times more than what Nepal does have. In 2010, Bangladesh’s per capita income was $640, Pakistan’s per capita income was $1,050 and Sri Lanka’s per capita income was $2,290.¹

Nepal recorded economic growth rate of 2.7 per cent in 2009-10; whereas during that period India’s rate of economic growth was 8.3 per cent and China’s rate of economic growth was 9.9 per cent.

Though many of the schools, colleges and universities have been opened in Nepal, the quality of the academic institutions is often questioned. They do not meet the expectations of the students. So there is a tendency on the part of many of the students to pursue education in countries outside Nepal. However, certain country/countries admit Nepalese students not for imparting quality education but for other political interests.

Issues of Concern between Nepal and India

Even after more than one-and-half decade of the signing of 6000 MW Mahakali Treaty between Nepal and India in 1996, it has not been implemented. So much so that even the hydropower projects with Indian investments, including the GMR Group working on 900 MW Upper Karnali and Upper Marshyangdi have been targeted despite the fact that the nation is facing acute load shedding of 14 hours a day and Bilateral Investment Promotion and Protection Agreement (BIPPA) was duly signed between Nepal and India on October 21, 2011. At the moment, Nepal produces power to the extent of 692 MW in the summer season against the demand for 860 MW. In the winter, the country produces only 393 MW of power when the demand is 588 MW. ²

Unfortunately, some other joint venture projects between Nepal and India, including Dabur Nepal and Surya Nepal have also been targeted. Therefore, for last several years no new joint venture project has come from India to Nepal. Even those joint ventures which are in operation in Nepal increasingly feel insecure.

The shortage of Indian currency (IC) has seriously affected trade and increased hardships to the common people, travelers and consumers all along the Nepalese-Indian border. In 2008-09, Nepal sold $1.5 million to buy IC amounting to Rs. 73.4 billion. ³ Furthermore, Nepal Rastra Bank sold $2.7 million in 2010-11 to buy IC worth Rs. 123.8 billion. In view of the shortage of IC, the Nepalese bankers have asked Nepal Rastra Bank, the central bank of Nepal, to allow them to purchase IC either directly from the market in Nepal or from across the border in India. The IC is in short supply in Nepal partly due to the trade deficit with India and partly for its demand to finance illegal imports mainly in the form of gold. Nepal Rastra Bank directive allows banks to exchange IC up to IRs. 25,000 in a day or up to IRs. 200,000 in a month. But this directive hardly addresses the requirements of the situation.⁴

Nepal’s trade deficit with India doubled from Rs. 121 billion in 2008-09 to Rs. 218 billion in 2010-11. The country imports goods worth Rs. 261 billion from India against its exports of Rs. 43 billion to that country.

Of particular concern are the growing cases of duplication of popular Indian trademarks by some unscrupulous elements in Nepal. This has not only harmed Indian interest but also the interests of Nepalese consumers. The Nepalese consumers have had to compromise with the quality of such products, which is detrimental to their health. Cases of duplication of popular trademarks of India by the local Nepalese companies are found in all such areas as the soap, detergent, shampoo, adhesive, T.V. sets, hair oil, cosmetics, powder, stationery, toilet paper, furniture, textile and garment, footwear, vegetable ghee, oil, razor, incense, medicines, toothbrush, battery, fan, electric bulb, pressure cooker, tobacco, chocolate, saving cream, alcohol, Gutkha, spices, Pan Masala, biscuits, rice, atta, etc. Such activities also create negative environment for investment in Nepal.

Quite often, the cases of smuggling of fake Indian Currency Notes through the Nepalese territory to India are published in the media, which by all accounts is counter-productive and against the interests of both the countries. There are reports that about Rs. 20 crore worth of fake Indian currency is smuggled through the Nepalese territory to India each year.⁵

Development of Nepal-India border region has been neglected all through the history, though it is of crucial interest to the growth of the two countries. Because of the British legacy to keep this region underdeveloped, very little could be done by the Indian government even in the post- Independence period for the growth of the region. In Nepal, too, the rulers have been reluctant in developing the peripheral border region for their own vested interests.

Under the pretext of launching development work, there are NGOs, INGOs and foreign missionaries that have been luring mostly the weaker sections of the population in Nepal for religious conversion. If they are not tamed, it is likely that more than half of Nepal’s total population would be converted into an alien faith in next 20 years. Such activities could have far reaching implications on Nepal-India relations in the long-term perspective.

Besides, certain groups of people in Nepal suffer from the notion of ‘small country’ syndrome vis-à-vis India. They do not want to have any positive deal with India – be it in water resources or other sectors. These are the people who target infrastructural facilities, including hydro-power projects in Nepal, even at the cost of plunging the country in the dark. The government has no control over elements who want to make the country hostage to perpetual poverty. On top of all this, law and order situation in the country is still deplorable. Even on the Indian part, many of the bureaucrats dealing with Nepal suffer from ‘big country syndrome’ mentality. They take it for granted that Nepal should do all at their command. In fact, both the ‘small syndrome’ and ‘big syndrome’ mentality among certain elite groups in Nepal and India are detrimental to initiating new era of economic cooperation between the two countries.

What is that India should do?

India could establish a few Delhi Public Schools in Nepal. Besides, academic institutions like that of Jawaharlal Nehru University, Indian Institute of Technology and Indian Institute of Management could be established in Nepal. Even India could establish medical colleges of same standard as the one established by this country at Dharan. Besides, India might think of opening standard journalism courses as there is no any such institution throughout the Terai region of Nepal. With the opening of such world class academic institutions, much of the resources that are spent on the education of the students in third countries will be saved.

Since India has made outstanding performance in Information Technology (IT) sector, it could establish its unit/units in Nepal. In 1996-97, India exported software to the tune of $1 billion, which increased spectacularly to $23.4 billion in 2005-6⁶ and $63 billion as of March 31, 2008.⁷

Prospects are also quite high for the development of Export Processing Zones along the Terai region of Nepal to take the advantage of proximity factor with India. Such zones, if established along the dry port region and having backing of all the infrastructural facilities as road, rail and air connectivity, apart from the availability of electricity, raw materials and cheap labour, could accelerate the pace of industrialization and generate huge employment opportunities in the country. Prospects are high for the growth of such industries in Nepal as pharmaceuticals, water resource based ventures like water supply and sanitation, fruit and vegetable processing, textiles, carpet, garment and local handicrafts.

In order to help Nepal reduce its trade deficit with India, there could be provision of free trade with common tariff with India. With this development, many of the Indian industries would make further investment in Nepal. Goods thus produced in Nepal could be exported to India. Besides, the consumers in Nepal would be getting products at the same price as it is available to the Indian consumers.

Nepal’s rate of economic growth largely depends on the growth of infrastructural facilities. India, therefore, should speed up the construction of its projects in Nepal, which include Postal/Hulaqi highway, Broad Gauge Railway line connecting Jaynagar (India) to Bardibas (Nepal) via Janakpur and Mechi-Mahakali railway line, and Kamala diversion project. India could also speed up construction of link roads connecting the Terai region of Nepal with India along such points as Janakpur-Pipraun-Darbhanga, Japakpur-Bhitamore-Sitamadhi and Birgunj-Raxaul-Motihari. Besides, Indian government could complete the work of Brihattar Janakpur Parikrama Sadak (Larger Janakpur Circumbulation Road) that covers part of Nepalese territory and part of Indian territory. India could also think of developing such religious cum historical regions of Nepalese Terai as Birat, Baraha, Salhesh, Simraungadh and Lumbini and try to link them with the other religious spots in Bihar and Uttar Pradesh for the growth of religious tourism in both parts of Nepal and India.

Indian Prime Minister Manmohan Singh could talk to the Nepalese authorities for setting up a high level umbrella organization of the two countries “Nepal-India Border Authority” with a view to addressing such problems as flood, drought, crimes, counterfeit currency, smuggling and other such activities along the border region. There should also be increased cooperation between the security agencies of the two countries to address some of these problems.

Both Nepal and India should see to it that political instability and weak socio-economic structure in Nepal should not give room to certain external power/powers to have free play in the country. Such foreign powers in their game plan have been trying to erode, if not eliminate, the age-old special relations existing between Nepal and India.

A Way Forward

Under the existing situation, Prime Minister Manmohan Singh needs to use his influence in establishing academic institutions of excellence at all the levels from school, college to the university levels. Bottlenecks in implementation of hydro-power projects, including the Pancheshwor project and Upper Karnali need to be removed. Free trade area with provision of common tariff regime is established to address the problem of growing trade deficit between the two countries. Work in the Indian aided projects in roads, rail and other sector needs to be speeded up. Focus should be on the development of Nepal-India border region by establishing high level body such as “Nepal-India Border Authority.” Of course, the road map for Nepal-India cooperation for their mutual benefit does not appear to be that smooth. Yet given the statesmanship that Manmohan Singh has in diplomatic relations should be fully utilized to bring the war-torn and underdeveloped Nepal on the forefront of South Asian countries through cooperation at all the levels. Peace and prosperity of Nepal is in the best interest of India and therefore India should extend all possible support to Nepal even if certain cost is involved in it.

Reference

1. The World Bank. 2012. World Development Report 2012. Washington, DC., pp. 392-93.
2. Editorial, “Lacking steam,” The Himalayan Times, February 25, 2012.
3. The Himalayan Times, September 22, 2011.
4. My Republica, March 1, 2011.
5. Lalita Panicker, “It’s time to see red” in the Hindustan Times, 2 May 2011.
6. Jagdish N. Bhagwati and Charles W. Calomiris (Ed.). 2008. "Introduction" in Sustaining India's Growth Miracle. New Delhi: Stanza, p. 4.
7. Prem Shankar Jha. 2010. India and China: The Battle between Soft and Hard Power. New Delhi: Penguin Books India Pvt. Ltd., pp. 31-32.