New Delhi: Nepal went to the polls on Thursday to pave the way for a new constituent assembly that will make its king a commoner and write a new constitution to transform the Himalayan kingdom into a republic.
The historic election, marred by sporadic violence in the past few days in which 70 people died, is closely watched in India because of its potential to revolutionize the relationship on both sides of the 1,900km-long open border, said an Indian government official who did not wish to be identified.
“The elections will usher in a new government which will be able to shed the baggage of the past. For India, to have a stable government on its border is a peace dividend that we value above everything else,” India’s ambassador to Nepal Shiv Shanker Mukherjee said by phone from Kathmandu.
However, security has been tightened along the border and will remain on alert for at least another week, the same official said.
Indian businessmen based in Nepal, who have faced the brunt of labour unrest over the past couple of years, were equally concerned. “What will happen after the elections? Will there be peace and stability in Nepal? That is the question we are all asking,” said Udayan Ganguly, chief executive officer of Dabur Nepal Pvt. Ltd.
Nepal is closely linked to India, not only because of common religious and social ties, but also because the landlocked nation is dependent on India for its day-to-day survival. As much as 67% of Nepal’s exports go to India, up from less than 20% in 1996, 64% of its imports are from India, and nearly half of its foreign direct investment comes from this country. Nepal’s entire consumption of petrol and oil lubricants comes from India, according to a commerce ministry official who did not wish to identified.
Vital contribution: A Nepali soldier casts his vote in the former Maoist stronghold of Rolpa, Nepal.
Significantly, New Delhi has taken the lead in recent years to promote the economic relationship, aware that enhanced trade and investment will go a long way in mitigating “anti-Indian prejudice in Nepal, sometimes nurtured by sections of the Nepalese royalty”, said an Indian government official who did not wish to be named.
The Indian change of heart “to put economics above politics,” the person said, came after New Delhi supported the Maoist-led “people’s movement” on the streets of Kathmandu in April 2006.
It is one of the poorest countries in the world—40% of Nepal’s 25 million population lives below the poverty line of $12 (Rs480) per month, according to United Nations’ International Fund for Agricultural Development. India realized that lack of economic growth and deteriorating standards of living were pushing the people to support the Maoist insurgency that began more than a decade ago.
Within months of the April 2006 movement, India had embarked on an ambitious trade-related infrastructure initiative in Nepal, building integrated check posts on four points across the border, with the Raxaul-Birgunj checkpoint on the Bihar border serving as a model.
The buzzword, the ministry of external affairs decided, was “connectivity”. If the lives of people had to be improved, “an informal economic space spanning South Asia, rather than a political union, was imperative,’’ said an external ministry official, who declined to be named.
And so, several road projects totalling 1,500km within Nepal to provide easy access to the east-west highway across the mountainous country have begun, besides a link road connecting the highway to India. On the anvil are as many as five cross-border rail links to boost trade and commerce.
By November 2007, India permitted bilateral cargo in flat wagons and liquid cargo in tank wagons. It also offered transit facilities at the Jawaharlal Nehru Port Trust, besides the Kolkata port.
Around the same time, India made another offer. If Nepal was hesitant to open up its enormous hydropower potential—which at 80,000MW is said to be the second highest in the world—to the Indian public sector, then private Indian companies could participate in the bidding.
That’s how Indian infrastructure company GMR Group won a bid to build the 300MW Upper Karnali hydroelectric project, and state-owned Satluj Jal Vidyut Nigam Ltd was chosen to build the Arun III 480MW hydropower project.
At the India-Nepal power summit in the Indian capital late last year, three Nepalese ministers—finance minister Ram Sharan Mahat, power minister Gyanendra Karki and foreign minister Sahana Pradhan—agreed to “take the politics out of power”.
However, private business was unwilling to follow the government’s lead in doing business with Nepal. When a major chamber of commerce from Delhi sought to lead a delegation to Nepal late last year, it had to scramble around for people.
“Their excuses were many, from labour unrest in Nepal to the security situation, to the fact that the Nepalese government was not giving extra-special attention to Indian businessmen,’’ a chamber official said, who declined to be named.
“Problem is, Indian investment is generally drying up in South Asia because the money to be made in the West is far greater,’’ he added.
Confederation of Indian Industry’s adviser for South Asia, Sushanto Sen, said India and Nepal should focus on “new areas”, such as agriculture and food processing, health care, education, and tourism.
Suranjan De, director of Varun Beverages Ltd, a bottler for PepsiCo Inc. in Nepal, and the Ravi Jaipuria Group that has in the last one year invested Rs20 crore to build houses in Kathmandu, conceded that despite all these problems, the company has made a profit.
“Despite the lawlessness, we feel there is great opportunity here. The elections will help to stabilize the situation. We feel that the situation will get better over time,” De said.
Ganguly of Dabur Nepal pointed out that the fact that Nepalese businessmen include Diwakar Golcha from the Nepali Congress, and Bimal Kedia from the Jan Morcha, were contesting the elections indicated that business and politics were at last beginning to understand each other.
“There has been a great deal of uncertainty these last few years,” Ganguly said. “But now it seems as if the economic agenda has dawned on the political parties.’’
Ambassador Shiv Mukherjee summed it up. “It is a fruitful but strained relationship. We are natural partners across open borders, but the Nepalese people should make use of India much, much more.”