PM Modi has changed tack, cooperated closely with Nepal

Contrary to conventional notions of a harmonious diplomatic relationship, there is a sharp difference in the way Nepal and India view each other. Following Independence, India emulated Britain’s approach in having a treaty-based relationship with Nepal, which led to Nepal’s grudging acceptance of India’s dominion. 

To be sure, China’s engagement in Nepal is not new. More importantly—and contrary to how it is portrayed in Nepal—it is not entirely positive. However, the engagement is crucial, since China’s newfound economic power is as yet unmatched.

This challenges India’s privileged position in Nepal. Indian Prime Minister Narendra Modi has taken various initiatives and has indicated that he intends to address Nepal’s concerns regarding India.

Nepal’s eagerness to engage with China has been of interest to observers and largely misinterpreted as Prime Minister Khadga Prasad Sharma Oli’s strategy to acquire more from India. 

However, the current approach fits perfectly in Nepal’s long tradition of pursuing a diversified foreign policy and partners, taking advantage of its key geostrategic position. Oli’s government aims to keep Nepal’s relationship with China independent of the one it shares with India. The question to ask is whether Nepal will be able to achieve this, given India’s discomfort with the increasing Chinese proximity.

New Delhi was for long perceived in Kathmandu as “hawkish” in dealing with sensitive matters. 

The most notable instances of this include different river treaties, reluctance to respond to regular border-encroachment complaints, high-structure build-up along the border, inundation complaints, trade and transit crises and embargoes.

There are historical reasons that explain the dynamics of the Indo-Nepal bilateral relationship. To maintain a sphere of influence, India needs sufficient soft power, as well as hard power, along with the confidence to act. 

Indeed, the nature of India-Nepal relations has always been a mixed bag. Due to its provisions and protocols, the 1950 treaty quickly became controversial and set the conflictive tone of the bilateral relationship. The provisions of the 1950 Indo-Nepal Peace and Friendship Treaty constrained Nepal as an ally and a state under India’s security umbrella. 

Given the asymmetrical size of the two countries, and Nepal’s reservations towards India due to the treaty-based unequal treatment, the open border has always been a crucial area of contention, except for communities and business groups that benefit from it directly.

Nepal’s largest trading partner is India (the total trade accounting for 65 percent), with whom Nepal runs the largest trade deficit. There was an improvement following the amendment of the trade commerce treaty with India in 1996, as exports increased and the deficit dropped. 

While, on paper, Nepal remains an ally of India, it has constitutionally asserted that its foreign policy is “based on the Charter of the United Nations, non-alignment, principles of Panchsheel (and) international law.”

Despite Oli’s “ultranationalist” election rhetoric, he has responded positively to Modi’s and Foreign Minister Sushma Swaraj’s overtures. Modi and Oli have established a relationship of trust, negotiating some important agreements during their visits. The agreement on the controversial Arun III hydel project, and their cooperation in revitalising the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation or BIMSTEC, are some of these indicators. 

The recent joint communiqués between India and Nepal seem to have all the right words and tone for a constructive move forward in their bilateral relations. Immediately after the successive visits of Modi and Oli to Nepal, there has been unprecedented progress in several areas. 

Regarding China’s inroads into Nepal, an option for India would be to defend the status quo by attempting to block Nepal’s options to diversify its cooperation with neighbours, through projects such as the infrastructure development by Chinese investment. 

India must introduce new economic, developmental and infrastructure initiatives with Nepal that will not only bring tangible benefits to Nepali citizens, but also address the vulnerabilities that will emerge in Nepal as the country engages with China. 

As things are, Nepal cannot dispense with its reliance on India. India is and will remain vital for the country in many ways. However, Nepal is now a member of China’s massive BRI, which puts India in a difficult position. 

Disregarding India’s traditional muscular diplomacy, PM Modi seems to have been following this line of cooperative diplomacy. The results are evident: the rapport between Modi and Oli, and Nepal’s increasing cooperation in Modi’s initiatives, which would have been impossible just a year ago.

Author is director, Nepal Matters for America