The recent swearing-in of Pushpa Kamal Dahal “Prachanda” as the new Prime Minister of Nepal has attracted international attention, more so from India. Prachanda’s predecessor, KP Sharma Oli, was known to be pro-China and his tenure witnessed strained India-Nepal ties. Now, with a new regime in place, the dynamics of this bilateral relationship are anticipated to change once again.
Areas of Cooperation Between India and Nepal
The cooperation between India and Nepal extends across various sectors, including trade and economy, connectivity, defence, and humanitarian assistance.
India is Nepal’s largest trade partner with bilateral trade surpassing USD 7 billion in FY 2019-20. Indian firms account for more than 33% of total Foreign Direct Investment (FDI) in Nepal. Despite being a landlocked country, Nepal shares substantial economic connectivity with India, thanks to various joint programmes aimed at building people-to-people linkages and fostering economic growth.
Defence cooperation involves the Indian Army assisting the Nepalese Army with modernisation by providing equipment and training. Annually, both nations conduct joint military exercises known as Surya Kiran. Furthermore, Nepal is a significant recipient of India’s humanitarian assistance because it lies within an ecologically fragile zone prone to earthquakes and floods.
The two countries also share multiple multilateral forums such as BBIN (Bangladesh, Bhutan, India, Nepal), BIMSTEC, Non-Aligned Movement, and SAARC.
Challenges in India-Nepal Relations
However, numerous challenges persist in India-Nepal relations. Foremost amongst these is the Kalapani boundary dispute. Originally demarcated in 1816 by the British, this boundary resulted in territorial disputes after India inherited these areas post-independence in 1947.
The 1950 Treaty of Peace and Friendship, initially sought by Nepal to maintain an open border and right to work in India, is now perceived as a sign of inequality and Indian imposition.
China’s increasing intervention poses another significant challenge. As Nepal moves away from India, it gravitates towards China, welcoming Chinese investments, aid, and loans. Additionally, internal security issues arise due to the lightly policed and virtually open Indo-Nepal border, which is exploited by terrorist outfits and North-Eastern insurgent groups.
Moving Forward
To improve relations, both nations must commence a sincere dialogue and display sensitivity towards each other’s concerns. For its ‘Neighbourhood First’ policy to succeed, India needs to establish itself as a sensitive and generous partner. Enhanced engagement in terms of people-to-people relations, bureaucratic coordination, and political interactions is crucial. Moreover, Nepal should pay more attention to the Bilateral Investment Promotion and Protection Agreement (BIPPA) signed with India.
Ultimately, both countries need to navigate their challenges and foster a relationship defined by mutual respect and cooperation.