The relationship between India and Nepal is a characteristic "Macro- Micro Power" relationship, one between unequal partners. It has witnessed many ups and downs since its initiation in Indo-Nepal Treaty of Peace and Friendship signed in 1950. The Indo-Nepal relations are strengthened by the common ethnic, linguistic and cultural identities. The minor strains has been largely attributed to difficulties stemming from geographical location, economics and the problems inherent in big power-small power relations.
Historically, Nepal was being ruled by Rana oligarchy till 1950 when there was a revolution in which the Nepalese people and King Tribhuwan participated succeeding in overthrowing the Ranas and bringing democracy to the country. King Tribhuwan fled to India and the Indian Government supported the democratic forces in Nepal. Had it not been for support from India, it would have been difficult for the democratic forces in Nepal to succeed in ending the despotic regime. Most of the leaders of Nepali Congress were living in India and had close rapport with leaders of freedom movement in India. There was a time in the 1950’s when India had paramount influence in not only international relations but also in domestic affairs of Nepal. Prime Minister Nehru stated in the Indian Parliament in 1950 “We have had from immemorial times, a magnificent frontier that it so say, the Himalayas. The principal barrier to India lies on the other side of Nepal and we are not going to tolerate any person coming over that barrier.”
Geographically sandwiched between the two rising powers of Asia, India and China, Nepal has traditionally been in the sphere of Indian influence. Indo-Nepal Treaty of Peace and Friendship marks the beginning of India’s engagement with Nepal. The last six decades of this relationship have not been always rosy. The first bout of tension between the two countries was when Nepal openly criticized India’s 1975 annexation of Sikkim which was considered as part of Greater Nepal. In 1975 King Birendra Bir Bikram Shah Dev proposed that Nepal be recognized internationally as a zone of peace; for which he received support from China and Pakistan. In 1978, heeding to long term demand of Nepal, India segregated trade and transit treaties; but in 1988 when these two treaties were up for renewal, Nepal's refusal to accommodate India's wishes on the transit treaty caused India to call for a single trade and transit treaty. Nepal took a hard-line position on this issue, which resulted in a serious crisis in Indo-Nepal relations and a virtual blockade of economic relations between the two countries which lasted till 1990. Eventough economic factors were major factors in the contention between the two nations, but India was also dissatisfied with Nepal’s acquisition of Chinese weaponry during that period; Treaties and letters exchanged in 1959 and 1965, included Nepal in India's security zone and precluded arms purchases without India's approval.
It could be discerned from the Indo-Nepal relationship that democratic governments in Nepal have always insisted on strong and amicable ties with New Delhi and it’s generally during the monarchist regimes that the relationship between the two nations has been strained. The security and economic cooperation between India and Nepal got an impetus in early 1990 with visit of Nepalese prime minister Krishna Prasad Bhattari and later Mr. Girija Prasad Koirala. The 1950 Peace treaty was revised and Nepal was accorded additional economic benefits. India sponsored Nepal admission into United Nations in 1990. The relations soured again in 2005, when King Gyanendra took over the reins of the country, not to be normalized till 2008 when democracy was restored and Prachanda became the Prime Minister of Nepal.
In 2008, Indo-Nepali ties got a further boost with an agreement to resume water talks after a four year hiatus. Both governments issued a 22-point statement highlighting the need to review, adjust and update the 1950 Treaty of Peace and Friendship. Under this treaty India would provide a credit line of up to 150 crore rupees to Nepal to ensure uninterrupted supplies of petroleum products, as well as lift bans on the export of rice, wheat, maize, sugar and sucrose for quantities agreed to with Nepal. India would also provide 20 crore as immediate flood relief. In return, Nepal will take measures for the "promotion of investor friendly, enabling business environment to encourage Indian investments in Nepal."
Apart from a shared culture and ethics, trade and economic interdependence between India and Nepal play a central role in the Indo-Nepal relations. India shares an “open border” with Nepal, one of its only kinds in the world, where free movement of capital, people and resources could take place across borders of two countries. One doesn’t need a visa to enter Nepal; you can cross the border as many times as you wish in a day and vice versa. India is an important trade partner of Nepal, and Nepal is an attractive FDI destination for Indian investors. Attractive incentives, Government’s positive attitude towards investors, low cost locations, cheap labour cost, easily trainable workforce as some of the factors which will make it attractive to Indian investors. Out of total FDI in Nepal, 36% is Indian FDI invested in sectors like tourism, consumer durables, garments and carpets. Indian companies as Dabur, Colgate and Hindustan Lever have set up factories in Nepal with the objective to export their finished products to India. Another sector in Nepal which holds strong growth prospects is hydroelectric power generation in which it enjoys a comparative advantage given its geography.
Of late, India has become increasingly concerned about the security challenges arising out of Nepal. The first shock to the Indian establishment in this regard came when the Indian Airlines airplane was hijacked by terrorists in 1999 at Kathmandu. The territory of the only Hindu kingdom in the world, that India had assumed would remain in friendly hands, was used to conduct terrorist attack against the airline of the country having the largest Hindu population. The Annual Report on Patterns of Global Terrorism 2003 published by the US Department of State had the following to say about Nepal:
“Limited government finances, weak border controls and poor security infrastructure have made Nepal a convenient logistic and transit point for some outside militants and international terrorists. The country also possesses a number of relatively soft targets that make it a potentially attractive site for terrorist operation”.
Also, the increasing Maoist Insurgency in Nepal is a matter of concern for India. There appears to be a nexus between the Maoist in Nepal with similar outfits as People’s War Group in Andhra Pradesh, Jharkhand, Bihar and Orissa. India is linked with its northeastern part by “Chicken’s Neck”, a narrow strip of territory between Nepal and Bangladesh. If insurgency in Jhapa district of Nepal were to spread to Chicken’s Neck, India’s control of the entire Northeast might be endangered. Thus, a peaceful resolution of the Maoist Insurgency is in India’s strategic interest.
The border management with Nepal calls for immediate attention. The “open-border” policy has acted as a safe haven in which illicit drug and narcotic trade, Maoist insurgency, terrorist activities and human trafficking take place across India-Nepal border threatening Indian security. As a country between three nuclear powers in a high potential conflict area, Nepal’s strategic importance has increased considerably.
India should strive to uphold its influence on Nepal; and boost the ties which it historically enjoys with Nepal. Given our cultural, ethnic and linguistic proximity; India has an ample scope to wield its “soft power” in Nepal. Thus a foreign policy approach which integrates security and economics is required to give an impetus to the Indo-Nepal relationship.
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The Writer is a student of International Business and works for Standard and Poor.