Event ReportsPublished on Nov 07, 2014
To foster India-Nepal relations, the focus should be on the 3Cs -- connectivity, communication and communities - according to Sujeev Shakya, Founder CEO, Beed Management and Chair of the Nepal Economic Forum.
Modi effect: Revival of trust in India-Nepal relations

Pointing out that the two emerging economies of India and Nepal have an opportunity to transform their relationship, Mr. Sujeev Shakya, Founder CEO, Beed Management and Chair of Nepal Economic Forum, said that there has been a revival of trust amongst the two neighbours following Prime Minister Narendra Modi’s recent visit to the Himalayan nation.

Mr. Shakya was speaking on "The Modi Effect: Redefining India-Nepal Relations" at Observer Research Foundation on November 7, 2014.

He said Modi’s Kathmandu visit in August this year, aimed at addressing the India-Nepal relationship, was timely as well as well received. The visit was considered historic as it was after 17 years that an Indian Prime Minister visited the country. Mr. Modi managed to connect with the people of Nepal and his speech at the Parliament was well received. By addressing issues like Buddha’s birth and Mt. Everest’s location, both in Nepali Territory, he won the hearts and minds of the people.

Mr. Shakya spoke about the India-Nepal relationship and said that four parts were distinguishable in the timeline. First, he spoke about the state of the relationship before Prime Minister Modi’s visit. During this time, there was a sense of mistrust between the two countries, more so on the Nepal side. Nepali nationalism included an ’anti-India’ feeling. The Nepalese see themselves as similar to Bhutan which has a population of about 800,000. However, Nepal is a country with 30 million people and accounts for about 1.5 million of the border population. The dynamics of trade and economics has, thus, taken a backseat in the country. On the other hand, Mr. Shakya pointed towards India’s Sino-phobia. He said that Nepal has always been linked to security issues and the question of how a border economy can be developed has not received much attention.

The second part in the timeline, according to Mr. Shakya, was Modi’s visit during which he cleared doubts in the minds of many Nepalese. He emphasised that India wanted to buy water from Nepal and was not asking for it free of cost. He also offered a $1 billion credit line to Nepal on India’s behalf and highlighted the importance of a Power Trade Agreement (PTA) and Power Development Agreement (PDA) besides proposing ideas like the promotion of tourism as well as making the Himalayas a centre for healing and holistic care. Mr. Shakya appreciated the Prime Minister’s speech for having expanded the Nepali vision and diluting the anti-India feeling in Nepal.

The third part that Mr. Shakya spoke about is the present scenario in Nepal after Prime Minister Modi’s visit. On the economic front, the PTA has been inked and the PDA for Upper Karnali in Nepal has been concluded. The PDA for the Arun III project will be finalised soon. There has been enhancement of cooperation on border issues. An example of this is an agreement between the two nations on the cross border movement of vehicles. Mr. Shakya also said that there has been increased interest among Indians towards investing in Nepal and this has further generated a similar interest internationally. European BFIs, FMOs and CTCs from across the world are looking to invest in Nepal.

Finally, Mr. Shakya spoke about looking beyond 1950 and towards the India-Nepal relationship in 2030. He pointed towards Gorakhpur and Bareli which can serve has huge markets because of rising consumerism and talked about the opportunity to promote tourism in western Nepal. He highlighted the need to do away with certain cumbersome procedures, like registration of vehicles, faced by Nepali tourists in India. To foster India-Nepal relations, the focus should be on the 3Cs, according to Mr. Shakya, i.e., connectivity, communication and communities. There should be an emphasis on increasing connectivity in the form of free movement of goods, people and money; developing communities that take care of people to people relations; as well as more frequent official communication.

The Chair of the discussion, Dr. C. Raja Mohan, Head of Strategic Studies and Distinguished Fellow, Observer Research Foundation, commented on the image of the India-Nepal dynamic as an unequal relationship between a comparatively smaller Nepal and a larger Indian economy. He focused on the potential of Nepal to emerge as a strong economy and emphasised that Nepal should not be looked at as a micro state. He suggested freer movement of goods across borders to incentivise investments and exports as a step towards furthering India-Nepal economic relations. He also proposed the idea of a Customs Union between India and Nepal.

The session was enriched further through inputs made by various eminent participants. Ambassador Jayant Prasad said that Nepal is a small economy and shares its northern border with China and thus developing a border economy would promote smuggling of merchandise between India and China. Therefore, he suggested that informal trading of petty merchandise from Nepalese as part of the creation of a border economy should be avoided for security reasons. Ambassador Pinak Chakravarty suggested that there should be medical facilities at the borders. He also spoke about taking into consideration the development of border markets which can be developed with minimum infrastructure especially against the backdrop of the success of such markets in Bangladesh’s case. Ms. Jayshree Sengupta discussed ideas like the promotion of Special Economic Zones (SEZs) and the creation of training institutes on the borders. Mr. Bharat Bhushan pointed towards ground level problems that exist in Nepal like the frequent change of party affiliations amongst politicians and the nexus between the politicians, business houses and NGOs.

Ambassador Rakesh Sood threw light on the importance of setting up industries in Nepal in order to support the PTAs and PDAs. Industries facilitating transportation, provision of diesel, and availability of transmission lines are some pre-requisites among others for the realisation of the potential benefits of these agreements. He also emphasised the need for a change in style of communication amongst diplomats to involve clearer discussions on economic issues and security issues like the infiltration of terrorists across borders and the use of fake Indian currency among others.

(This report is prepared by Ittika Takkar, Research Intern, Observer Research Foundation, Delhi)

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.