--By Madan Lamsal
In Nepal-India relations, clichés like ‘Multidimensional and multifarious’, ‘age old’, ‘special’, ‘historical’, ‘unique’ as well as ‘complex’ may all be true, but in reality it could be all of them combined and yet far short to encompass the entirety of this relationship. No adjective perhaps can truly reflect and represent the kind of relations that these two sovereign countries enjoy, cherish, and also despise to some extent. We have mutual trust and distrust, expectations and apprehensions, and interests and concerns, all in the same basket. Therefore, it is but natural to have hiccups, highs and lows of warmth that needed calibration, more often than not.
With changing time and technology, however, more focus of these relations is being gradually condensed into two prime areas -- economic issues and security concerns. Nepal has economic concerns and security interests, and India has economic interests and security concerns, of course, with some degree of variance in interpretations. At least, it appeared so during the interactions of high officials and think tanks in India with over a dozen visiting Nepali editors of mainstream print media from Kathmandu.
Trade and investment
Nepal is net importer, which constituted 1.03 percent of India’s US$300 billion global export in the last FY (2012/13). More than 60 per cent of Nepal’s international trade– both exports and imports – takes place with India. The concern is: Nepal’s trade deficit with India reached close to US$ 3.49 billion (2012/13) in the last fiscal year. And worse, the trade gap has been widening over the years as Nepal’s export items are fast losing both comparative and competitive advantages in the Indian market. In addition to being Nepal’s largest trade partner, India is also among the countries that have the largest foreign direct investment (FDI) and tourists coming to Nepal.
But, interestingly, India didn’t seem to recognize the importance of such a big instant export market next door. Some of its policy makers like to view remittances to Nepal by the Nepalis working in India as the compensation to such whopping gap in trade balance. As Salman Khurshid, External Affairs Minister of India had said during the interaction with the editors, ‘Remittance that Nepal is receiving from India is helping balance the trade deficit between India
and Nepal.’
But remittance, by its very nature, is a different issue altogether. Several thousand Nepalis work in Indian security forces and far larger number of Nepalis work for low-paying informal sundry jobs in private homes, offices and roadside tea shops. The low paid people are in fact helping to retain the low output cost in Indian economy, thereby helping to contain inflation and maintain the country’s competitive edge. If the compensation argument is extended to the non-merchandise goods, the outflow of money from Nepal to India for education and health services could easily be comparable to the amounts of remittance inflows. It appeared during the discussions with the visiting journalists that these differences in perceptions, both on trade and remittance warrant an immediate streamlining to make them relate to reality.
On investment, Indian investment to Nepal, particularly in recent years, has not been to the level of its potentials. The ‘level’ may be a relative term but not a subjective assumption here. In view of the recent and rather exponential increase of Indian FDI to other foreign countries, Nepal’s highly untapped areas for investment like clean energy and its proximity to Indian markets could have attracted much more FDI projects than it is the case now.
But, as rightly pointed out by the Indian business community, problems lie on this side of the border as well. We have our own demand-side constraints -- prolonged political instability, pseudo-nationalism, lack of political will to decide. Indecision has become a culture. The worst of all, our political leadership doesn’t realize the fact that the country is lagging behind due to all these malaises. “Indian investment in Bhutan and Sri Lanka is increasing because these countries have political stability. On the other hand, Afghanistan and Nepal lack it,” said Sushanta Sen, Principle Advisor for the Confederation of Indian Industries (CII).
“To attract foreign investment, Nepalis first need to invest in their own country. Rigidities in labour laws and outsourcing problems are also some of the issues that are hindering Indian investors to invest in Nepal,” he added.
Very slow, punctuated progress through the bureaucratic channels in projects like Upper Karnali to be developed by the Indian energy major GMR, is often repeated example in power corridors of New Delhi as the reasons to Nepal’s inability to attract Indian investment. Though a little different story, the problems faced by United Telecom Limited (UTL) has also irked the potential Indian investors. Also, even the Indian business community feels that Nepal has not been able to convey the message that the majority of Indian companies now operating in Nepal are doing very well.
In every respect, each South Asian nation has some expectations from India. One of such expectations from India’s neighbours is the revival of the Gujaral Doctrine, initiated by the Late Indian Prime Minister Inder Kumar Gujaral in the mid 1990s. The doctrine proposed that India wouldn’t seek reciprocity with neighbours like Nepal but would help them through all means it could in good faith and trust.
But for India, the country projected to be the third largest economy of the world over the next 15 years or so, it is certainly not easy to meet all the expectations of its neighbours. Naturally, India has its commitments beyond the region. “India has to fulfill its commitments already made for Africa, Sri Lanka, Bangladesh and Maldives,” said Khurshid. These commitments range from cultural and educational scholarships to financial and technical support for development. “There is equally huge commitment elsewhere as well for FDI,” Sen of CII echoed Minister Khurshid, in a different meeting. “Once the new government is formed [in Nepal], more investment is likely to flow from India to Nepal,” hoped Sen.
Isn’t BIPPA with Nepal a milestone? In theory, Indian business community agrees that it is a great achievement, but in practice, everybody is keen to first test the ground realities.
The China Factor
In viewing China, the Indian perspective is apparently dichotomous between the so called new and old schools of thought. The new school of thought believes that there is no alternative to having the best possible relations with China. Today, China is one of India’s largest trade partners. In the last fiscal year, 11 percent of India’s imports and six percent exports were with China. The Indian concern at present is the growing trade deficit with China which stood at nearly $ 47 billion in 2012/13. As both countries are members of the BRIC group of emerging economies, their trade volume is bound to grow. Indian Prime Minister Manmohan Singh’s visit to China last October has proposed a new trade corridor of Bangladesh-China-India-Myanmar (BCIM). “The corridor will surely release enormous growth energy and provide new vitality for the Asian economic integration and global growth,” Chinese Foreign Minister Wang Yi was quoted on this issue some time ago. Nepal here missed the boat to be in this group, for whatever reason. The new reality is: India and China are becoming closer than ever before, where Nepal has very little influence on the process.
But the old school in India is still apprehensive about the “increasing activities of China in Nepal”. They have problems with Nepal willing to maintain the policy of equi-distance with India and China. TP Sreenivasan, Director General of Kerala International Centre (a think tank) clearly said that Nepal cannot have the same relation with China as with India. “How can somebody marry with one and try to maintain similar kind of relation with another?” he questions. But in diplomacy, relations between two countries are not like a marriage.
For reasons of geographical, cultural and historical proximities, Nepal may appear more tilted to India, but at the policy level it is rather naive to expect sort of surrendered tilt at the cost of what is called balanced diplomacy.
India’s major concern is, understandably, security and it doesn’t want any threat to security to come from across the border. Ashok K Behuria, Coordinator of the Delhi-based Institute for Defense Studies and Analyses, claimed that there is an anti-social element in Nepal especially in the Madhesh region which has been fuelling anti-India feelings in the Himalayan nation. Indian authorities and policy analysts are also concerned over the growing number of Madarsa schools along the bordering areas such as Nepalgunj. They think that such Madarsas might be used by extremist religious elements for activities that are hostile to India and things can go wrong. Madarsas could also create problems for Nepal in the future, they add.
Nepal’s Political Roadmap
Like in Nepal, in India too, there is general happiness over the successful completion of the second CA election in November and hope that Nepal’s new constitution will now be written. The Indian politicians as well as top bureaucrats have hailed the high voters’ turnout in the election. They were not mincing words to praise the Nepali people, the Election Commission, security agencies and all other stakeholders for holding the election successfully. Foreign Minister Khurshid and Indian Foreign Secretary Sujatha Singh remarked that the election was ‘historic’ and expressed hope that Nepal would now get the new constitution on time. They also urged all political parties in Nepal, including the UCPN (Maoist) to respect the people’s verdict and work together to draft the new Constitution. However, they also cautioned that the issue of making the new constitution should not overshadow the issue of peace and development which is no less important.
On the issue of federalism, the Indian establishment has clearly said that Nepal can have its own model of federal structure as decided by the people of Nepal. This sentiment was echoed at the luncheon meeting with the Indian media where former ambassadors to Nepal Jayanta Prasad, Shiv Shankar Mukherjee, and Deb Mukherjee, among others, were present. Their collective view was that India doesn’t want to impose any federal model on Nepal. In fact, the advice was not to follow the flawed Indian model of carving out newer States incessantly. They also remarked that Nepal is moving forward in the right political direction.
(Lamsal is the Chairman and Editor-in-Chief of New Business Age Pvt Ltd.)
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