Three Years of the Modi Government

India-Nepal Relations: Mixed Fortunes

16 Aug, 2017    ·   5338

Dr Pramod Jaiswal reviews the trajectory of New Delhi-Kathmandu relations since 2014 and says it has seen several ups and downs

Pramod Jaiswal
Pramod Jaiswal
Senior Fellow, China Research Programme (CRP)
Narendra Modi’s electoral victory in May 2014 generated positive vibes throughout the region. His invitation to the heads of governments of the South Asian Association for Regional Cooperation (SAARC) member-states to his swearing-in ceremony and making Bhutan and Nepal his first official foreign visits clearly highlighted his prioritisation of India’s neighbourhood. In this context, this article assesses India’s relations with Nepal during the past three years.
Continuity and Change
As prime minister, Modi’s first public statement on foreign affairs was about Nepal, on Twitter, where he said that he was committed to strengthening relations. Unlike his predecessor, Dr Manmohan Singh, who failed to visit Nepal even once in his decade-long tenure, Modi visited Nepal twice - in August and November 2014 - becoming the first Indian prime minister to visit the country in 17 years. He enchanted the Nepalese people with a rousing address in Nepal’s parliament, which was the first such address by a foreign leader. Like in the past, Modi also assured India’s commitment to Nepal’s economic development. He announced a soft loan of US$ 1 billion and assistance in several infrastructure development projects in Nepal.

During this visit, Modi also agreed to review, adjust, and update the 1950 Indo-Nepal Treaty of Peace and Friendship, which has been deemed ‘unequal’ by generations of Nepalese leaders, and other bilateral agreements.He also reactivated, after a hiatus of 23 years, the Joint Commission that was formed in 1987 at the foreign ministerial level with a view to strengthen, understand and promote cooperation between the two countries for mutual benefit in the economic, trade, transit sectors and the multiple uses of water resources.

Within a few months, Modi visited Nepal again to attend the 18th SAARC Summit. He inaugurated an Indian-built 200-bed trauma centre, provided a helicopter to the Nepal army, and a mobile soil-testing laboratory. 

India was quick in its response during the devastating 7.9 magnitude earthquake in April 2015 that caused massive destruction and claimed thousands of lives in Nepal. Within hours of the calamity, Modi spoke to the then Nepalese Prime Minister Sushil Koirala and the then Nepalese President Ram Baran Yadav assuring them of India’s assistance. Within six hours, India dispatched a team of the National Disaster Response Force (NDRF) along with relief material. India’s total relief assistance amounted to US$ 67 million, and it committed another US$ 1 billion (one-fourth as a grant). 

Despite such increased engagement and assistance, Nepal continued to blame India for interference in its domestic affairs. Nepal’s claim to an equal share over a disputed tri-junction - Lipu-Lekh Pass - also caused controversy. Lipu-Lekh was mentioned in the China-India joint statement during Modi’s visit to China in May 2015. The joint statement read, “The two sides agree to hold negotiation on augmenting the list of traded commodities, and expand border trade at Nathu La, Qiangla/Lipu-Lekh Pass and Shipki La.” Nepal, under pressure from its media, civil society and political opposition, demanded that China and India remove the mention of Lipu-Lekh from their joint statement, arguing that it threatened Nepal’s sovereignty and territorial integrity. However, Indian experts counter-argued that both China and India have been referring to Lipu-Lekh Pass as one of their border trading points since 1954. Indian experts have pointed to Nepal’s position on Kalapani and Lipu-Lekh Pass as being politically motivated, especially given how ultra-nationalist groups have been involved in spreading anti-India sentiment and demanding a ‘Greater Nepal’ to gain political mileage. 

Unrest in Madhes, a region bordering the India-Nepal border, which propelled anti-India sentiment among the ruling elite, led to deteriorating bilateral relations. The Madhesis waged a 135-days long ‘non-cooperation movement’ along the border, which halted the entry of fuel and other essential supplies to Nepal from India. Kathmandu’s ruling elite claimed that the ‘blockade’ was imposed with Indian support as India did not welcome the new non-inclusive Nepalese constitution that had triggered the Madhesi protest. Despite denials of this allegation by both Madhesi leaders and New Delhi, the dramatic end of the ‘blockade’ before then Prime Minister KP Sharma Oli's visit to Delhi clearly lent fuel to such allegations. 

Though Modi began his tenure concentrating on India’s neighbours, he later became engrossed with building relations with bigger powers. Although Dr Singh had failed to visit Nepal even once, his government spent considerable time following the political developments in Nepal. Dr Singh's government played a great role in ensuring a smooth political transition in Nepal. However, the Modi government was not able to take control of the situation in time and intervened in the last minute, when it was too late. Modi sent the foreign secretary as the Prime Minister’s Special Envoy, but he failed to deliver positive results. 

Modi subsequently tried to control the damage. He invited Oli for a six-day visit to India before his scheduled China visit. However, Modi was unable to convince Oli to address Madhesi demands. Oli visited China a few weeks later and tried to challenge the Indian monopoly by signing an agreement on trade and transit with Beijing. This has been one of the major failures of the Indian government under Modi which will have long-term implications for India. However, India was successful in toppling the Oli-led government, forging an alliance between the Nepali Congress and Communist Party of Nepal (Maoist Centre). Sher Bahadur Deuba and Pushpa Kamal Dahal ‘Prachanda’, the respective heads of the two parties, agreed to serve the remaining tenure of 18 months on a rotational basis. 

India-Nepal relations were normalised after Prachanda was elected prime minister for the second time. India's then President Pranab Mukherjee and Nepalese President Bidya Devi Bhandari exchanged state-level visits. During Prachanda’s tenure, India accelerated the pace of development projects in Nepal and provided additional power supply to meet Nepal’s severe power crisis. With this, Nepal's growth rate was raised from a mere 0.8 per cent to 7.5 per cent, the highest in 13 years.

India-Nepal relations during Modi’s tenure have had mixed fortunes so far. While he was successful in winning over the Nepalese during his first visit, he later became trapped in controversies. He was appreciated for his support to the people of Nepal during the massive earthquake, but criticised on the issues related to Lipu-Lekh. He received high appreciation from Madhesis for supporting their demands for an inclusive constitution and standing for democracy and social justice, but could not deliver the desired results. With the rise of Modi and the Bharatiya Janata Party's (BJP) thumping victory in Uttar Pradesh, there were apprehensions that India might impose ‘Hinduism’ on secular Nepal or might attempt to revive the Hindu monarchy there. However, such fears have turned out to be unfounded. 
India has tremendous leverage in Nepal. It is still Nepal’s largest trading partner and contributes significantly towards the country’s development. New Delhi has played a crucial role in Nepal’s major political transitions, be it the overthrow of the autocratic Rana regime; restoration of democracy in 1990; abolition of monarchy; or the mainstreaming of the Maoists. It should play its role to bring stability and development in Nepal, which will eventually serve India’s prime interest: security. It also needs to manage its perception in the Nepalese media and the among the country's public to contain the rise of anti-India propaganda.