16 December 2021, NIICE Commentary 7559
Akhilesh Balaji
The South Asian geopolitical landscape encompassing India, Nepal and China has witnessed significant tectonic shifts in recent years. A rising China, the changing tide of Indo-Chinese relations and a growing American footprint in the subcontinent, have brought about both challenges, as well as opportunities for Nepal’s foreign policy. Wedged between India and China, Nepal’s access to the Himalayas, river belts, strategic boundary and road links, natural resources and its geo-strategic position, have made Nepal one of the global geo-strategic hotbeds of this century. The formulation of effective and pragmatic foreign policy becomes all the more crucial in this respect, if it seeks to utilize these influential determinants to gain strategic, political and economic advantages.
Nepal Foreign Policy and the Indian Factor
Historically, Nepal-India relationship has been characterized by cooperation and friendship. The 1950 Indo-Nepal Peace and Friendship Treaty forms the substratum of their relationship. This is complimented by an open border policy, healthy people-to people exchange and strong economic intercourse between the two countries. India is the largest trading partner of Nepal and Indian firms are one of the largest investors in Nepal accounting for over 30 percent of all Foreign Direct Investment (FDI). Both these countries have also collaborated in water resource cooperation, energy cooperation, security cooperation as well as connectivity and development assistance. Nepal-India relations, however, have always been characterized by a high degree of dependence of Nepal on India.
Nepal fully understands its dependence on India: The Nepali rupee, for instance, is pegged to India’s currency, Nepal’s reliance on Indian ports for trade, its dependence on India for the supply of essential goods and the six million Nepalese working in India. Nepal’s dependence on India, however, is not limited to tangible elements. It involves a significant measure of history as well. India, for a long time now, has always held an influential position when it comes to Nepal’s foreign policy. Traditionally, Nepal’s diplomatic ties were largely relegated to India due to New Delhi’s role in reinstating the Shah family in 1950. Several scholars in the field of foreign policy, for instance, concur that Nepali foreign policy was always formed under the influence of the Indian government. Apart from this, analysis of the Indo-Nepal Peace Treaty of 1950 coupled with other areas such as trade and commerce and the water treaties signed by the two countries indicate the generation of an asymmetrical relationship between Nepal and India, benefitting India more than Nepal.
Nepal’s overt dependence on India have caused the rise of anti-Indian sentiments among Nepali people which has contributed to the rise of communist party in recent times. This has further been compounded by turbulent relations between the two sides in recent years. Disputes and disagreements over unsettled issues have massively contributed to this turbulence. In 2020, for instance, India and Nepal published maps- first India, followed by Nepal- in which they included Kalapani, Lipulekh and Limpiyadhura region, located at the trijunction of Nepal, India and China, in their side of their respective territories. Apart from the border dispute, Nepal and India also share disagreements on the provisions of existing water treaties such as the Mahakali agreement and issues related to trade and commerce. As Anil Sigdel, Director at Nepal Matters for America at Washington D.C observes “Local enterprises fail to grow, simply unable to compete against lower-priced Indian products that flood the market. India’s imposition of non-tariff barriers and lack of standard infrastructure have added to Nepal’s discontent with India.” Thus, although India and Nepal share close bilateral ties, Nepal’s one-dimensional foreign policy with a singular focus on India have in many ways constrained its abilities to diversify its approach and be pragmatic in dealing with its immediate neighbors.
The China Equation
Sino-Nepalese relations, although formally established in 1955, have witnessed an upward trajectory, particularly after the abolishment of the monarchy in Nepal in 2008. Active Chinese outreach in Nepal have opened up a broad horizon of opportunities for Nepal to improve, not only its bilateral relations with China, but also the opportunity to contribute to development in Nepal. The announcement of the ambitious Belt and Road Initiative (BRI) by President Xi Jinping and Nepal’s subsequent endorsement and approval of the project has become a primary instrument for advancing bilateral relations. Other bilateral projects such as the Trans-Himalayan Railway have opened up opportunities as well. Apart from this, both the countries have made tremendous progress in pursuing engagement in sectors such as hydropower, aviation, tourism, telecommunications, security cooperation, people-to-people relations, cultural exchanges, industry and technology. Moreover, within a span of a few years,
China has overtaken India to become Nepal’s largest FDI partner. China’s eagerness to engage with Nepal and Nepal’s subsequent willingness to pursue elevated bilateral ties with Nepal is unmistakable. In the last decade, China has managed to chip away, slowly but surely, India’s unfettered sphere of influence which it had enjoyed in Nepal for several decades. In 2018, in a significant move, Nepal officially endorsed the ‘One-China policy’ in a joint communique with the PRC. In a statement released by the Ministry of Foreign Affairs, Nepal said the following: “The Nepali side reiterated its firm commitment to the one- China policy with Tibet and Taiwan affairs as being China’s internal affairs, and the determination on not allowing any anti-China activities on its soil”. China has successfully managed to increase its political profile in Nepal thanks to the above-mentioned progress that both these countries made in several areas. In the face of such developments, the primary question that arises is what must Nepal’s foreign policy posture be for the future in the face of this ‘China equation’?
The Way Forward
The question about Nepal’s future foreign policy posture is further made complicated in the face of deteriorating India-China relations. Given such a bleak situation, it becomes all the more important for Nepal’s government to devise a calculated foreign policy for its future. Several foreign policy analysts and journalists have answered this question through the lens of zero-sum competition, wherein increased engagement with China would spell doom for India-Nepal relations and vice-versa. Under this lens, Nepal is left with essentially two choices: either endorse China for primacy in Nepal at the cost of India or endorse India at the cost of China. However, such a reductionist lens fails to capture the complexity of geopolitical competition and the advantages of pragmatic foreign policy, if done the right way. As reiterated earlier, traditionally, Nepal’s foreign policy outlook has been severely influenced by India due to New Delhi’s influential role in reinstating the throne of the Shah family in 1950. Due to this, Nepal’s foreign policy has been constrained to a one-dimensional lens with no scope for diversification. After the fall of the monarchy and subsequent upward trajectory in Sino-Nepal relations, however, a landscape has emerged that enables Nepal to diversify its foreign policy objective to gain most from both India as well as China. Contrary to the ‘zero- sum view’, it would be in Nepal’s best interest to espouse a pragmatic, long- term foreign policy approach that would enable it to maintain a delicate balance between India and China. Such a posture would not only enable Nepal to be more dynamic and flexible in its diplomatic engagements but also enable it to maximize the Indian and Chinese spheres of influence in Nepal, in order to benefit from what both these countries have to offer and at the same time, enable effective diversification of its foreign policy. With a South-Asian landscape that is undergoing constant transformation, the need of the hour for Nepal, thus, is the formulation of a policy that serves to its best interests without coercing it into entering a choosing game between the elephant on one side of its border and the dragon on the other.
Akhilesh Balaji is a Research Intern at the Nepal Institute of International Cooperation and Engagement.
