The election of Nepal’s new Prime Minister Khadga Prasad Sharma Oli has renewed preemptive discourse on India-Nepal relations. Oli, a veteran communist party leader belonging to the Communist Party of Nepal (Unified Marxist-Lenninist) i.e. CPN (UML) [[i]] has been previously recognized for his “pro-China” stance. He has been keen on establishing strong commercial ties with China wherein the Belt and Road initiative plays a strategic role. Cartographic changes to the map of Nepal were mandated by Oli in 2020, which has now snowballed into the Kalapani dispute. Most importantly, Oli is known for his uncompromising stance towards the Indian government during the 2015 Nepal blockade.
The avant-garde nature of Oli’s past leadership is somewhat countered by its current coalition partner- the Nepal Congress (NC)- a liberal democratic party which is somewhat India-leaning in its diplomatic stances. This coalition holds 167 seats in total [[ii]], with the NC holding 89 of them. The agreement is for Oli to hold office for 21 months, after which it shall be taken over by NC’s Sher Bahadur Deuba for the rest of the period. The CPN (UML) recently asserted that Nepal aims to follow a “neutral foreign policy” [[iii]] under PM Oli that emphasizes territorial and national integrity.
Oli’s government in the past has been characterized by zealous infrastructure projects such as the construction of airports and Hydropower development projects. Chinese contractors were roped in to build the Gautum Buddha International Airport in Lumbini and the Pokhra Regional International Airport.
At the onset, the ideological implications of Nepal’s new leadership on India look fairly balanced given the dynamic nature of its coalition. However, Indo-Nepal ties have been potholed by territorial disputes, imbalanced trade relations, calls for amendment of the 1950 Treaty of Peace and Friendship, and China’s burgeoning presence in Nepal through the BRI initiative. These pending disputes will eventually bring India and Nepal to the negotiation table.
In 2020, Nepal released a revised political map [[iv]] that claims Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as well as the area of Susta in Bihar. The Kalapani area dispute in particular, is caused by the ambiguous origin of River Kali. It serves as a tri-junction for China, India and Nepal that holds exceptional strategic importance in South Asian diplomacy, especially with Nepal acting as a buffer state between India and China. According to former PM Baburam Bhattarai [[v]] Nepal holds the territory east of the Kali river as per the 1816 Treaty of Sugauli. This statement sounds an immediate need for India to engage in elaborate dialogues with its neighbor to resolve this territorial ambiguity.
India is Nepal’s largest trading partner. In terms of overall commerce, Indian imported goods account for more than 2/3rds of total share.[[vi]] As per status quo, the Nepali market is easily accessible to a variety of Indian goods which include automobiles- both two wheeler and four wheeler vehicles, sugarcane, fuel, rice, etc. This disparate trade relation between the two countries has resulted in a net deficit for Nepal [[vii]], which nudges it to focus on self-sufficiency, expand its export market and revise market accessibility norms with India.
China has constantly positioned its presence in Nepal, using the Belt and Road Initiative (BRI) as its most potent tool. Nepal signed in as a partner in 2017 [[viii]], with various hard infrastructure projects being arranged within and across Nepal’s boundaries. Two significant hydropower projects found mention in this list of BRI Projects i.e. the Phukot Karnali Hydroelectric Project and Tamur Hydroelectric Project. Both of these were handed over to Indian companies [[ix]] during then PM Dahal’s visit to India in June 2023- a move criticized by (then former) PM Oli.
The Kerung-Kathmandu railway line [[x]] is yet another lucrative project that China seeks to establish as a means of seamless connectivity between the two countries. The overall connectivity promised by such BRI projects are posited as an alternative to Nepal’s dependence on India, which becomes an attractive bait for Kathmandu in the face of impending trade deficits. New Delhi is currently wary of this advancement as it marks an increase in China’s footprints within Nepal. As a reaction of sorts, India had announced the construction of the Raxaul-Kathmandu railway [[xi]] in 2018. In June this year, the final location survey was conducted along with grant aid from India.
Nepal is informed of the caution against plausible debt traps through Chinese loans and is hence taking gradual steps to advance its BRI partnership through grants. Kathmandu’s stance so far, is indicative of striking a neutral, yet amiable balance with its neighbors. Moreover, the government will predominantly be occupied by more immediate concerns such as providing relief for landslide and flood victims in the aftermath of monsoon induced natural disasters [[xii]], as well as internal economic issues. In the meantime, New Delhi needs to prepare for high-stake negotiations on bilateral trade, transit and territorial disputes with its neighbor.
REFERENCES
[i] “Leader of Nepal’s largest communist party named new prime minister”, Al Jazeera, published July 14 2024 https://www.aljazeera.com/news/2024/7/14/leader-of-nepals-largest-communist-party-named-new-prime-minister
[ii] Prashar, S. “No using Nepal against India but important to address pending issues: Oli’s party”, Times of India, published July 14 2024, https://timesofindia.indiatimes.com/world/rest-of-world/no-using-nepal-against-india-but-important-to-address-pending-issues-olis-party/articleshow/111724164.cms
[iii] 1Ibid.
[iv] Pradhan, S. “Nepal Redraws Political Map by Incorporating Three Disputed Areas with India”, The Wire, published June 19 2020, https://thewire.in/south-asia/nepal-redraws-political-map-by-incorporating-3-indian-areas
[v] Prashar, S. “No using Nepal against India but important to address pending issues: Oli’s party”, Times of India, published July 14 2024, https://timesofindia.indiatimes.com/world/rest-of-world/no-using-nepal-against-india-but-important-to-address-pending-issues-olis-party/articleshow/111724164.cms
[vi] Pradhan, S. “Nepal Redraws Political Map by Incorporating Three Disputed Areas with India”, The Wire, published June 19 2020, https://thewire.in/south-asia/nepal-redraws-political-map-by-incorporating-3-indian-areas
[vii] Timalsina, S. “Trade and Transit Relations between Nepal and India: Political Implications”, The Journal of Economic Concerns, Volume 14, (2023): 84-85. https://nepjol.info/index.php/tjec/article/download/62316/47074/183473
[viii] Baruah, D. “Nepal Joined the Belt and Road. What Does That Mean for India?”, The Diplomat, published May 15 2017, https://thediplomat.com/2017/05/nepal-joined-the-belt-and-road-what-does-that-mean-for-india/
[ix] Shekhawat, S. “BRI In Nepal: An Appraisal”, Observer Research Foundation, published June 10 2024, https://www.orfonline.org/research/bri-in-nepal-an-appraisal
[x] 1Ibid.
[xi] “Preliminary Engineering-cum-Traffic Survey of Raxaul (India)-Kathmandu (Nepal) Rail Line”, Embassy of India, published 31 August 2018, https://embassy-nepal.companydemo.in/data-detail/377
[xii] Bhuyan, A. “India-Nepal ties under Oli’s Previous Stints As PM And What to Expect Now” , ETV Bharat, published July 15 2024, https://www.etvbharat.com/en/!international/india-nepal-ties-under-olis-previous-stints-as-pm-and-what-to-expect-now-enn24071507021
By Arshiya Khanna, Research Intern, CS3, USI