K.P. Oli, the Prime Minister of Nepal, concluded a state visit to India on Sunday. Ties between India and Nepal have been tense since 2015, when the country accused India of a blockade that severely impacted the Nepali economy. Since then, Nepal has improved its relations with China.
Ties between India and Nepal date back to at least 300BC. There is archaeological evidence of Ashokan Buddhist relics in the region. India and Nepal share close linguistic, marital, religious, historic, and cultural ties. Diplomatic ties were formalised when the two nations signed the 1950 Indo-Nepal Treaty of Peace and Friendship. The border between India and Nepal is an open boundary, people of the two nations come and go freely. Nepal is a land locked country with India on three sides and China on the northern border.
Since signing the treaty, resentment towards India has grown in Nepal. Ties between the two nations have been further strained since 2015, and there have been reports of anti-Indian sentiment growing among the citizens as well as the government. These tensions came to a head in September 2015. India is believed to have supported minority groups such as the Medhesis, who were protesting the new Nepali constitution, which they claimed marginalised them. In September that year, the Nepali government accused India of imposing an undeclared blockade, preventing vital resources including fuel from entering the land-locked country. This caused an economic and a humanitarian crisis in Nepal. India denied that it had intentionally initiated the blockade.
The ties between Nepal and China began in the mid-7th century. Initially subdued, the trade ties have grown significantly since 1975. Nepal remained neutral during the Sino-Indian border conflict of 1952. Since 2016, China has opened 32 border crossing points into Nepal. China has also made significant investments in improving infrastructure in Nepal. It was announced in January 2018, that China will become Nepal’s second internet service provider. Up until now Nepal depended on India for internet access.
Nepal and china have a number of bilateral mechanisms in areas including economy and trade, agriculture, and border law. Chinese assistance to Nepal, which began in the 1980s, falls into three categories: Grants (aid gratis), interest free loans and concessional loans. Beijing is Nepal’s second largest trading partner. However, India continues to be Nepal’s key economic as well as security partner.
Nepali Prime Minister and leader of the Communist Party of Nepal K.P. Oli, recently concluded a state visit to India. This was his first official foreign visit after being re-elected earlier this year.
During his three day visit, the two countries reportedly confirmed the construction of a railway line from the Indian border town of Raxaul to Kathmandu, sponsored by India. The two nations also reached a consensus on the creation of inland waterways to help “the movement of cargo, within the framework of trade and transit arrangements, providing additional access to sea for Nepal,” according to the Indian foreign ministry. The ministry added, “This new initiative would enable cost effective and efficient movement of cargo. [Oli] noted the enormous impact the additional connectivity would have on the growth of business and economy of Nepal.”
Analysts have noted that India may be keen to mend ties with Nepal, which has deepened relations with Beijing. In what observers have called a retaliation to India’s 2015 blockade, Nepal signed 10 agreements on trade and transit with Beijing. In May 2017, Nepal joined China’s One Belt and Road initiative, and there are reports that a rail link between Tibet and Kathmandu is under construction. The China-sponsored Budhi Gandaki dam which was a sore point for the government in New Delhi, was cancelled in November last year. However, Oli noted his intention to revive the project earlier this year.
On Saturday, Prime Minister Oli noted that “trust is the key enabling factor” in Indo-Nepalese ties. “As friendly neighbours, our two countries need to be aware of, and respect for, each other’s concerns and sensitivities. Nepal has not allowed its land to be used against the sovereign interests of India. We are firm in our resolve to maintain this position. And it is natural that we expect similar assurance from India,” he said.
Oli Invited Indian businesses to invest in Nepal. He also referenced the 2015 blockade, and stated that India and Nepal must “ensure that bilateral as well as regional connectivity and transit arrangements run smoothly without any interruption at all times.” He added, “Recourse to obstacles in the movement of goods, services and people should not have any place in today’s interconnected world and in interconnected neighbourhood.”
Our assessment is that by strengthening Nepal’s ties with China, Prime Minister Oli has gained substantial bargaining power against New Delhi. India remains the main economic and security partner for Nepal. However, India must work to strengthen positive ties with Nepal if it wishes to maintain the image of a benevolent regional power. As stated previously, we feel that if China succeeds in replacing India as Nepal’s key partner with regards to economy and security, it could create a fissure at the Himalayan border that separates mainland India from China.