Before Prime Minister Modi’s visit to Wuhan and his meeting with Xi Jinping, Chinese Foreign Minister Wang Yi had proposed to his counterpart from Nepal Pradeep Kumar Gyawali trilateral cooperation between India, Nepal and China in building an economic corridor with multidimentional connectivity through the Himalayas. This proposal, however, is not new and was first talked about by Maoist leader Pushpa Kamal Dahal or Prachanda about five years ago. It was discussed then by several Indian and Nepalese scholars. Today, in the light of the Belt and Road Initiative, it has assumed a different meaning. Nepal joined the BRI in 2017. In all probability, Nepal will go ahead with the idea of the corridor but India will remain noncommittal.
India has not signed the BRI and its intention of remaining aloof is now palpably clear, especially after the Doklam standoff. On India’s part, it is also a reaction to China’s going ahead with the building of $50 billion Economic Corridor in Pakistan (CPEC) about which India’s objection has been on grounds of sovereignty as it passes through the disputed territory of Pakistan Occupied Kashmir (POK). Around 30 countries have joined the BRI project.
When the idea of trilateral cooperation was mooted in 2013, even then India did not show much interest. For Nepal, it will be advantageous to go ahead as the proposed infrastructure project would connect with China. In any case, the present Prime Minister K.P. Sharma Oli seems very well disposed towards China.
For China, which is slowing down after three decades of fast growth and is running into high wage cost/ labour shortage economy in some areas, joining hands with Nepal will be attractive as it will increase tourism and exports to Nepal and via Nepal to India. It is also facing problems of growing enough food for feeding its population due to rapid urbanisation. Even though Nepal is a small country, it is mainly agricultural and in some parts can grow three crops. It can grow food for Tibet which is next door and transportation of food via Nepal by China will also be easier and cheaper. Also, Nepal has agreed not to allow its territory to be used for anti-China activities. In any case, China will be able to cut down its transportation costs greatly through the economic corridor for its trade expansion in the region.
Chinese are also becoming very conscious of the quality of food which is an outcome of higher incomes and there is big demand for organic horticultural products which Nepal can supply easily. Its honey and herbal products are world famous. Nepalese migrant labour could work in China’s agriculture if needed.
Nepal is rich in water resources but there is a big shortage of power. Its unemployment is at 4 per cent which is low but according to ILO around 70 percent of the employment is vulnerable, comprising family labour or self employed persons. India has helped Nepal a lot in building infrastructure and in the reconstruction process after the massive earthquake. The lack of infrastructure development is still a big problem for its industries and small scale units. Better roads and railways will promote Nepal’s trade with China and India and will boost Nepal’s exports leading to job creation.
India is afraid of China dumping consumer goods through Nepal which will worsen India’ trade balance with China further. Already it is around $51 billion. India is already facing smuggling of Chinese goods through the Nepal border. But India, on the other hand, can also expand its exports of bulk goods and raw materials to China should the economic corridor materialise. There is no doubt that India needs better infrastructure in the Himalayan region for not only trade with Nepal but also with Bhutan, Myanmar, Thailand and the ASEAN. Obviously China has the financial and engineering strength to build roads in high terrains and it has access to loans from the Asian Infrastructure Investment Bank ( Shanghai) for building infrastructure in the region.
Nepal has already declared its future cooperation with China in other economic fields such as railways, aviation, highways, electricity and telecommunications. In all probability, all these projects will be started soon and there will be presence of Chinese workers and other personnel right along the Indian border with Nepal. Thus, it is perhaps better to think again about refusing the Chinese offer to build infrastructure in India which can help India’s overall trade and investment. It can bargain with China about opening up its services for Indian IT workers and have freer access to Chinese markets for Indian goods.
Also with a corridor connecting the three countries, there is likelihood of greater tourism and people to people contact which is important for bridging the trust deficit that exists today between India and China.
China is a world power today and it is in India’s immediate neighbourhood and the two share a long border of 3488 Kms. If not now but in the future, roads connecting the Himalayan region to China will be built. It is better to build them now than postponing it because it can lead to rapid development of one of the poorest regions in the world which lie in Nepal and parts of northern and north eastern India. It would help in eradicating poverty in the region. There would be higher foreign investment and SEZs could be established in the border areas between Nepal and India, especially in UP and Bihar, which would create jobs and give employment to women. It will help India-Nepal trade and investment also which has suffered due to inadequate infrastructure.
In any case, India-China trade will continue to increase in the future, especially if India joins the mega Regional Comprehensive Economic Partnership treaty (RCEP), in which both India and China are members. This treaty is due for signing this year. Then, India will have to increase access to its markets for all the members, especially China through duty reductions. Though India’s fear of China dumping its excess production in India through the Nepal is genuine, this could be taken care of by retaliatory tariffs permissible under the WTO. India should think of the huge livelihood benefits the three country corridor will bring to the people living in its backward regions.
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David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany
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