VIF Delegation’s Visit to Nepal

The VIF delegation led by Lt. Gen. R K Sawhney, and joined by Lt Gen (Dr) Rakesh Sharma (retd) and Shri Avadhesh Mathur visited Nepal between 21 September and 24 September, 2024. The visit included extensive interactions with various dignitaries and organizations. Those consisted of:

• Hon’ble Mr Prakash Man Singh- Deputy Prime Minister and Minister for Urban Development, Nepal
• Hon’ble Mr Damodar Bhandari- Minister of Industry, Commerce and Supplies, Nepal
• Hon’ble Mr Raj Kishore Yadav- Chairperson International Relations and Tourism Committee of Nepali Parliament
• Hon’ble Mr Bimalendra Nidhi- former Minister for Physical Infrastructure and Transport and former Deputy Prime Minister and Minister of Home Affairs of Nepal
• Hon’ble Udaya Shumsher J.B. Rana- MP from Nepali Congress and member of International Relations and Tourism Committee of Nepali Parliament
• Hon’ble Mr Madhav Kumar Nepal- former Prime Minister of Nepal
• Hon’ble Mr Pushpa Kamal Dahal “Prachanda”- former Prime Minister of Nepal
• Hon’ble Mr Bishnu Prasad Paudel- Finance and Deputy Prime Minister of Nepal
• Professor Dr. Shiva Raj Adhikari- Vice Chairman, National Planning Commission, Nepal
• Hon’ble Mr Narayan Kaji Shrestha- former Deputy Prime Minister and Minister of Foreign Affairs, Nepal
• Hon’ble Dr. Ram Prasad Dhital- Chairperson, Electricity Regulatory Commission of Nepal
• Hon’ble Mr Kul Man Ghising- Managing Director of Nepal Electricity Authority
• Hon’ble Mr Pradeep Kumar Gyawali- Former Foreign Minister of Nepal and CPNUML Central Committee Member
• Hon’ble Ms Anjan Shakya- former ambassador to Israel and a former National Planning Commission member of Nepal

The visit also comprised of meetings with Nepal-India Chamber of Commerce and Industry (NICCI) and the Communist Party of Nepal (Unified Marxist-Leninist)’s wing on foreign relations. The discussions brought to light several key points and suggestions which are outlined in the succeeding paras.

NEPAL: A Deeply Rooted Democracy

Nepal is marked by a deep-rooted democracy and a culture of free expression. However, mass migration, particularly among the youth is reshaping the country. Wealthier individuals are relocating to countries like Australia, the UK, and Cananda for education and jobs, while those with fewer resources often seek employment in the Gulf, South Korea, and Japan. An estimated over 7 lakhs Nepalese leave the country yearly. Next elections in Nepal will be pivotal, especially with rising independent figures like Balen Shah, the popular mayor of Kathmandu, who may influence the political scene in Nepal. Labor migration in Nepal is concentrated in areas like Karnali Sudurpaschim and Madhesh, signalling a shift in workforce and societal structure in Nepal. For Nepal’s development, it is essential to investigate and study its resources, particularly hydropower, which is a key sector needing attention. Agriculture must be considered the foundation of the economy, and water resources must be prioritized.

India-Nepal Relationship

It has been well recognised that in the last three years, especially in Pushpa Kamal Dahal Prachanda’s last 18 months of rule, India was able to undertake a lot of progressive work with Nepal, like the oil pipeline, railway line and in power-trade with India and Bangladesh. Several agreements were also signed and several projects were launched. In terms of connectivity and economic initiatives between India and Nepal, projects like Arun 3, a hydropower project, is advancing with significant progress. Nepal supports India’s Neighbourhood First Policy and desires a friendly, mutually beneficial relationship with India. The relationship between Nepal and India is unique and distinct from other international ties. Nepal and India share a long and deep-rooted relationship, enabling them to address any issues as neighbouring countries. As India emerges as a rising power, Nepal seeks to benefit from this growth and aims to strengthen their bilateral ties.

Opportunities for cooperation between India and Nepal

India and Nepal have significant opportunities for cooperation in urban development across various areas, including housing, smart cities, municipalities, waste management, climate change, and river system clean-up. India is actively working on smart city initiatives, making it a potential partner for Nepal in urban planning and development. Skill development is another critical area for collaboration between India and Nepal, especially as many young Nepalese migrate abroad for work. Both countries should prioritize providing skills training to address this issue. India’s Industrial Training Institutes (ITI) can play a vital role by offering skill development programmes for youths in Nepal. Initiating a dialogue on this matter can be facilitated by organisations like Vivekananda International Foundation (VIF) and Asian Institute of Diplomacy and International Affairs (AIDIA). There are opportunities for technological cooperation as well particularly in sectors like telecommunications and water management, which can further strengthen ties between the two nations. There is considerable potential for cooperation between India and Nepal in the industrial sector, particularly through skill development initiatives. Establishing Industrial Training Institutes (ITIs) in various districts of Nepal, in collaboration with India, could help provide essential skills to the youth in Nepal. Nepal seeks both technology and capital investment from India. While its legal framework is conducive to attracting foreign direct investment (FDI), Nepal still requires technological support. There is a strong case for encouraging more Indian tourists to visit Nepal, emphasising the interconnectedness between the two nations. As India experiences rapid growth, Nepalese expectations are that India will view it as a partner in its development. With shared open borders and an understanding of each other’s security concerns, enhancing technological collaboration could benefit both India and Nepal. Developing border areas together can help reduce psychological barriers and strengthen bilateral relations between India and Nepal. Strengthening coordination between security forces of both nations and diversifying Nepal’s exports to India beyond energy are essential for fostering a robust economic partnership. India represents a significant market for Nepal’s hydropower, given its high demand. Both countries can enhance cooperation in various areas, including artificial intelligence, tourism, religious sector, and industry. Additionally, new sectors for collaboration should be identified. Indian tourists remain the largest group visiting Nepal, with potential for growth through better marketing and publicity. Key areas for enhanced cooperation include water resources, energy, infrastructure, and the IT sector. A conducive environment exists for deepening these ties, which both nations should continue to foster. India's "Neighbourhood First" policy is crucial in this context.

India-Nepal Power Transactions

Currently, power transactions between Nepal and India occur primarily through the Day-Ahead Market (DAM) and Term-Ahead Market (TAM) segments. Power trading between India and Nepal has potential to increased availability without any additional investment coupled with increased revenue to both countries. Presently Nepal transacts with India on Day Ahead and Real Time Market through Indian Energy Exchange (IEX). The key highlights of the visit included:

• The delegation emphasized expanding economic cooperation between India and Nepal, with a particular focus on power trading and energy integration.
• Strategic meetings were held with Dr Ram Prasad Dhital, Chairman of Electricity Regulatory Commission of Nepal and its key officials.
• A key component of the visit was a high-level discussion with the Managing Director of the Nepal Electricity Authority (NEA) Shri Kul Man Ghising. These discussions addressed critical areas like energy trade, policy harmonisation, cross-border transmission integration, and initiatives to boost bilateral energy cooperation.

The visit underscored the increasing importance of cross-border power trading in the region. It also provided a platform for exploring avenues to accelerate energy exchange programs between the two nations. The visit served as a catalyst for deeper collaborations and signified a growing commitment to fostering stronger energy ties between India and Nepal.

Significant Gaps does exist between India- Nepal relations

Despite a generally positive high-level relationship, down-the-line issues and communication gaps persist between both the countries. More channels of communication and economic diplomacy needs to be established to address these concerns. Trade dynamics are significant, with 65% of Nepal’s trade occurring with India. However, logistical challenges such as poor infrastructure and the difficulty of moving goods from Nepal to India, must be resolved. While there was a plan of establishing an organisation equivalent to Bureau of Indian Standards in Nepal, this initiative has not been materialized as yet. In recent years, there have been positive developments between India and Nepal, particularly in trade and commerce, such as advancements in digital payments systems, Nepal’s inclusion in India’s Inland Waterways Initiative, and the construction of Integrated Check Posts. However, gaps remain, particularly concerning long-standing trade issues that have received declining attention from both governments. The 1996 Nepal-India Trade Treaty, now 20 years old, requires a comprehensive review. Since 2018, the intergovernmental committee (IGC) responsible for trade and transit discussions has not met regularly, failing to produce clear outcomes. This lack of consistent engagement undermines the effectiveness of any signed agreements. Despite initial favourable conditions under the treaty, trade between the two countries has become heavily imbalanced, with Nepal's imports from India consistently outpacing exports at a ratio of 90:10. This has resulted in a significant trade deficit, alarming for Nepal's economy. While India has expanded duty-free access for other least developed countries, Nepal's preferential treatment has diminished despite its unique ties with India.

Recommendations and Suggestions

The broader South Asian region requires attention, especially concerning minimalistic trade amongst countries, which has raised concerns that necessitate regional discussions. Equally important are security policies, which should be emphasised alongside economic strategies. Given the rising external influence in the region, it is critical for Nepal to maintain a strong relationship with India for its stability and development. Steps should be taken to formulate a common strategy to navigate these challenges. India and Nepal should engage in more frequent discussions to foster progress and deepen their connection. There are numerous areas for collaboration, and the strong people-to-people ties between the nations should be emphasised. Both countries should focus on their strengths rather than weaknesses, particularly in addressing common challenges like unemployment, working together to find solutions. The region requires deeper economic integration, as trade among neighbouring countries is minimal compared to other integrated regions like the EU and ASEAN. Youth unemployment is projected to become a significant issue in the next decade, warranting discussion. Additionally, both countries recognise climate change as a critical concern and should cooperate on climate justice initiatives. Initiatives like opening Industrial Training Institutes (ITIs) in Nepal and sending Nepali civil servants to India for training were proposed. Recommendation includes a closed-door discussion in early 2025 to address trade and connectivity issues, along with forming research teams to identify specific border challenges. There is a proposal to release a book prepared by NICCI at this event.