Nepal-India Economic Relations With Dr. Hari Bansh Jha

Dr. Jha because of his specialization chooses to focus on the economic aspects of Nepal-India relations- Amandine

Cross border exchanges and migrations

According to Dr Jha, Nepal cannot be qualified as a land locked country, but as an open country, as it is very easy to go to India. The open border between Nepal and India is something unique. Everyday people of both countries cross the border for pilgrimage, trade, education or health purposes. Before it was mostly Nepalese that were going to India as the Indians had better education and health facilities. This is now changing as these facilities increased in Nepal. These days some Indians are coming to Terai, as there are quality health institutions.

A large number of Nepalese are also crossing the border to find job in India. After working there for several months, sometimes serving in the Indian Army, they come back to their motherland. This scenario has changed drastically the socio economic situation of Nepal. The Ghurkha soldiers serving in the Indian army generate an income of billions of Indian Rupees that support the Nepalese economy. Because of this outflow of people to India, the amount of remittance has increased. It can be precised that mostly those leaving for India are illiterate or semi-literate whereas those who are educated try to immigrate to third countries, as it is very difficult for them to find job in India.

Three years ago, Nepal received almost 70 billions Nrs of the remittance, out of which nearly half came from India. Nepalese income otherwise depends mainly on exports of carpets and garments and on the tourism industry, which are not in a fabulous state for the moment. It is mainly due to the remittance received mainly from India that the value of the Nepalese currency vis a vis Indian currency did not decline.

Aid programmes

Until the political change of 1951, Nepal did not have relations with foreign countries except the British. Nevertheless the political change lead to a diversification of the diplomatic relations. Among the firsts to get involved in the country were the Americans, who funded a health programme to eradicate Malaria in the Terai plains. This successful programme enabled the populations of the hilly regions to migrate to the plain. There were also some people from India that came at that time, inaugurating a new kind of settlement.

 In 1952, India also joined this aid programme and by 1954 the Indian Aid Mission to Nepal was founded. India brought technicians at a time there was no infrastructures and no systematic administrative machinery built in the country as it was almost closed to foreign influences when the Ranas were ruling. The Nepalese government used this Indian mission to its advantage to develop different infrastructural facilities, such as roads, airports, irrigation, power and other such sectors. Apart from the Tribhuvan Highway that was built in only two years, the Indian Aid Mission assisted the Nepalese in the construction of the Tribhuvan Airport and the development education and health facilities. The level of enthusiasm of India was high. The first two plans (1956-1961; 1962-1965) were solely financed by India.

The embarrassing position of India

 Chinese attack on India in 1962 reduced India’s influence in Nepal . The construction of the Arniko Highway linking the capital to Tibet was one more humiliation for India. On top of this, in the 1960s, Nepal formed National Trading Company through which it was importing Chinese and Russian goods. China and the then Soviet Union tried to help Nepal to produce items that could replace Indian ones like cigarettes among other manufactured items. These public firms were supposed to help Nepal to reduce its dependence on India.

Actually Nepal tried to develop itself as a low tariff rates land whereas India at that time was very protective. In Nepa,l the tariff rates are still lower than in India. It is one of the crucial resources of revenue for Nepal. Most of the goods imported in Nepal due to the lower tariff rates began to be smuggled to India. But this did not help Nepal to develop its own industries, contrary to India and China.

Now, as Nepal entered WTO and SAFTA (South Asia Free Trade Area), the country will have to compete with others, and for this there is no sound bases. Moreover, as now Nepal has entered trade organisations its power of taking advantage of its low tariff rates will decrease.

Potentials and new opportunities

Everything is not over for the country. It has still a big advantage as being geographically situated between the two major Asian powers. China and India are no more enemies as they used to be in the past. So it is very much possible for Nepal to promote a larger trade between the two powers by inaugurating new trading routes that would enable a bigger volume of goods to be transported than what is now going through Sikkim. This is an incredible potential for Nepal to emerge as middle power at the world scale.

 If Nepal manages to take advantage of the situation, the environmental imbalances could even be corrected and the people below the poverty line might also be brought in the mainstream. 

There is also a great possibility to develop the tourism industry with India, as Nepal enjoys a fresher weather. Because of the climate as well, there is a potential to develop educational institutions.

Nepal in the past used to export food items and jute to India. It may now try to intensify the export of herbal products to that country and earn revenue.

There have been good results in some sectors like the media. Private investments in education has provided some young talented people job opportunities as teachers.

So there are new opportunities. What lacks is vision and political will. The ice will have to be broken somewhere, even as the political situation is rooted in the bad economic situation and the political troubles do not create an adequate environment for economic development. But anyway it is not possible to go on waiting like this.

 All is not lost for Nepal. There are positive gains and possibilities, but much has to be done to broaden the visions.

(Amandine is a French student of M.A Political Science currently an intern at The Telegraph Weekly conducting research on Nepal-India Relations)

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