Nepal juxtaposed as it is between India and China holds  strategic and  economic importance for both. It is thus axiomatic that both want to exercise such influence thereon that helps them derive geostrategic advantage. Recent years have shown China make inroads to the detriment of India’s interests. A cogent articulation of the events through the years and the way ahead for India

Nepal lies nestled on India’s North-Eastern frontier, sharing not just the 1850 km long territorial border, but also deep-rooted historical, cultural, economic and political ties. As these connections have developed over the course of centuries, the country’s position relative to India’s geostrategic, diplomatic and military calculations has fluctuated across varying levels of favour, recalcitrance, and appeasement.

Historical overview

The significance of Nepal’s location slotted in between India and China has dominated its relations with either country since the pre-independence era. As King Prithvi Narayan Shah, noted of its geography – the small nation is a “yam between two boulders”, yielding thus the need to maintain congruently cordial relations with its imposing neighbours. The notion of viewing Nepal as India’s protectorate arguably began with the 1816 Treaty of Sugauli between British India and Nepal, which accorded the colonial power a wide latitude for exerting political interference in its smaller neighbour.

Post Independence India and Nepal signed the 1950 Peace and Friendship Treaty to formalise their historical trade and people-to-people connections by establishing the open border and free movement. India also effectively purported itself as the primary security guarantor to Nepal by requiring that it pre-approve all import of arms into Nepal through India. Additionally, it took on the responsibility of training and modernising the Nepalese Army.

During the 1960s flare up in China-India tensions, Nepal arguably began to diversify its security prospects. It bought anti-aircraft guns, surface-to-surface missiles, and assault rifles from China in 1962, and allowed the construction of the Arnika Highway linking Lhasa and Kathmandu – awarding China direct logistical access to move men and material closer to Indian territory. Kathmandu recognised the benefits of playing off the two warring parties against each other for its trade and defence interests. Additionally, the monarchy in Nepal was apprehensive about alleged Indian support for democratisation in the region.

In 1988 again, King Birendra sought to bolster the army’s capacity with Chinese small arms and missiles. Nepal was hedging its bets, and the burgeoning presence of China as a powerful regional player was being factored into strategic calculations of both Nepal and India, although a hitherto invisible divergence began to emerge among the two.

Border dispute

The chief territorial contestation over the delineation of the border is centred around the 330 sq. km Kalapani region flanked by LipuLekh and Limpiyadhura. Kalapani has been historically used by Hindu pilgrims to access the holy Mansarovar shrine, and is also a trijunction point between Nepal, India, and China. The political and religious significance of this strip of land is not lost on New Delhi.

♦  The basis for the conflict is the Treaty of Sugauli which delineates the river Kali as the marker for Nepal’s territorial claim. However, the flow of the river has been historically variable and the point of its origin is tenuous.

♦   In 2019, Nepal raised objections to India’s new map after the abrogation of Article 370, that depicted Kalapani as part of India.

♦   India inaugurated a new road connecting Darchula and Kailash-Mansarovar via LipuLekh in May 2020, and the flash-point over the dispute was re-ignited.

♦   Nepal immediately published a counter cartographic response showing Kalapani in Nepalese territory and integrated the new map into the national emblem through a constitutional amendment.

♦   The issue is currently shelved, and Prime Minister Modi has indicated that discussions will resume after the COVID 19 pandemic subsides.

Recently, however, Nepal took conspicuous steps to scale back the amplitude of its claim, apparent in its withdrawal of a high-school textbook containing the new map and PM Oli’s Dussehra social-media post supposedly including the old map. This could possibility indicate a dilution in tensions, and deferral of the discord. Despite the strong nationalistic rhetoric that is circulating in either country (largely through mainstream media), diplomatic back-channels are clearly attempting to perform damage-control.

Trade and development

The landlocked country has long depended on India as an import-export partner, and to access global commercial transport routes. There are 22 cross-border trading routes which include custom checkpoints, and road and rail connections. Nepal also uses Haldia and Vishakhapatnam ports for its transit traffic, giving it access to sea lines of communication for trade.

♦  As Nepal’s largest trading partner, India accounts for over 60% of its total trade activities. Goods like petroleum, spare parts, grains, iron, steel etc. make up the biggest volume of cross-border trade. India is also a key hydropower market for Nepal.

♦  The prime-mover of this flourishing relationship has been the vast socio-economic (and largely informal) network of businesspeople and communities across the border.

♦ Till 2016, India supplied well over 50% of Nepal’s total GDP. However, China overtook India’s 30% contribution in 2019 and accounted for approximately 40% of total foreign investment.

These developments can be assessed from two ends. First, China has adopted a policy of multi- sectoral investment in Nepal through expanding infrastructure networks, defence-related deals, development projects, and educational and cultural cooperation (through Chinese language schools and Confucius Institutes), especially under the aegis of the Belt and Road Initiative (BRI). The Trans-Himalayan Railway connecting Lhasa and Kathmandu, hospitals, airports, and extensive communication networks aim at creating seamless trade links through the Nepal- Tibet border.

Simultaneously, the increasing nationalist sentiment against India in the Nepalese government and the general populace has caused a depreciation in the people-to-people connections that traditionally regulated economic and cultural exchanges. The deepening ideological divide and pugnacious rhetoric has driven Nepal towards branching out its alliances to offset the perceived slights by India.

In 2015, this situation came to a head. On the heels of the promulgation of Nepal’s Constitution, Madhesi protesters imposed an undeclared economic blockade on bilateral trade in essential goods like petroleum, food grains, and medicines. The Madhesis are a marginalised community living along the border and have enjoyed direct and proxy support from India for many decades, and hence the blockade was largely seen to be sustained by India.

These events did little to assuage the extant anti-India opinion among large sections in Kathmandu who believed even more firmly that India was playing an interfering role in Nepal’s internal affairs to further its own strategic interests. Prime Minister Oli effectively leveraged this sentiment to win the election for his leftist party. In sum, the trust deficit between the two countries, exacerbated by domestic politics, as well as by external players like China, should be a subject of growing concern to Indian polity.

China’s economic footprint

In contrast to the people-to-people connections that have traditionally dominated Indo- Nepal ties, China sees Nepal in more capital-to-capital terms. Not only is it an untapped market for Chinese products distributed at minimal transportation costs, it is also an important piece of the puzzle that makes up the Chinese plans for a Trans-Himalayan Multi-Dimensional Connectivity Network under the BRI. The China-Pakistan Economic Corridor, the Sino-Nepal transport networks, the China-Myanmar Economic Corridor etc. essentially envelop India in layers of Chinese supply chains and infrastructure linkages. Though its motives are overtly driven by ‘mutual commercial interest’, Beijing is not opposed to leveraging this vast infrastructure for non-economic purposes – namely for military use.

For Kathmandu, the choice is not a difficult one. China is willing to offer ready financing required for boosting its domestic productivity and development; and the political strings attached are not too different from those of economic dependence on India. Shipping goods to (and through) China not only allows it to release itself from its ‘India-locked’ economic location but could also prove to be more profitable given the stepped-up transport networks.

Military synergy

Despite the fluctuations in other variables in the bilateral relations, the synergistic relationship shared between the armed forces on either side of the border has remained somewhat of a constant.

♦  The Nepalese Chief of Army Staff traditionally holds the honorary rank of General of the Indian Army, and vice versa, and he customarily makes his first foreign visit to New Delhi.

♦  More than 32,000 Nepalese Gorkha soldiers serve in the Indian Army, and GoI also administers pension disbursement, welfare and assistance programmes for ex-Gorkha soldiers in Nepal.

♦  Exercise Surya Kiran is a biannual battalion-level Indo-Nepal military exercise held to strengthen interoperability, disaster response, and counterterrorism capabilities, especially in the Himalayan terrain. More than 300 troops participated in its 2019 iteration.

Indo-Nepal ‘military diplomacy’ has paid huge dividends in regional stability, capacity building, modernising the Nepalese army, and also diffusing non-military tensions when other routes of negotiations have been exhausted. In 2015, for example, the political stalemate over India’s undeclared economic blockade became an intractable issue. During the peak of the crisis, the Nepalese CoAS General Chhetri undertook a six-day visit to India for his investiture as an honorary Indian Army General, where he called on the then Defence Minister and Home Minister, and held informal talks with other cabinet ministers. Following General Chhetri’s interlocution with the political elite in India, the blockade was finally lifted, bringing immediate reprieve to the Nepalese population.

Sino-Nepalese defence relations

Adjunct to bankrolling infrastructure projects and economic activity in the last 5-10 years, China has undertaken substantial steps in fostering security cooperation with Nepal. The 2005 arms deal worth USD 1 million, and the 2008 defence agreement that closely followed indicates an increasing shift in Nepal’s northward bearing in matters of security and military competences. The frequency of capacity building exercises, transfer of military equipment, training and tours in each other’s defence establishments, and information sharing has been visibly stepped up under the ‘Strategic Partnership of Cooperation’. In 2017, the Nepalese Army and the PLA announced the institution of the annual Sagarmatha Friendship joint military exercise – the first instance of Nepal conducting military exercises with any country aside from India and the US. Kathmandu and Beijing have closed the distance in terms of regional security arrangements to regard each other as long-terms partners with shared strategic goals. In other words, this signals a departure from the traditional dynamic of Nepal operating under India’s security umbrella.

Aside from gaining important defence contracts and closer access to Indian territory, the converging nature of Sino-Nepal relations also have ramifications for Chinese geopolitical interests closer to home. After the incursion into Tibet in 1951, Nepal officially recognised China’s de jure rule over region. It also played an active role in disarmament operations against pro-Tibetan Khampa forces in 1974. With present-day defence closeness between Beijing and Kathmandu, especially in counter-insurgency and border protection capacities, China benefits from the diminished cross-border activities of pro-Tibet activists. It is also central to note that the nature of civil-military relations in Nepal bestows a great amount of political capital with the army and the Ministry of Defence. So, while military-to-military contacts are one side the coin, the converse is the Chinese capacity to make inroads into domestic Nepalese politics – a prospect that New Delhi must view with import and urgency.

Balancing act

As evidenced by the fluctuation of its foreign policy between appeasement, neutrality, and obstinance – sometime simultaneously, Nepal is attempting to play a balancing role in an equation of power politics, self-interest, and influence.

Kathmandu is a keystone in PM Modi’s Neighbourhood First Policy of improving economic and strategic integration in the subcontinent, especially through multilateral arrangements like the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (Bimstec). Nepal’s decision to pull out as an active participant from the Bimstec counter-terrorism joint military exercise in September 2018, viewed especially in the light of Sagarmatha Friendship 2 with the PLA, does not bode well to mitigate concerns about China’s growing presence in geopolitical calculations in the region.

Nevertheless, there are pathways for rapprochement. With the context of a growing global opposition to Chinese economic practices and a pushback against BRI, China has more incentives to come to the negotiating table. The Eminent Persons’ Group (EPG) on India-Nepal relations, or the so-called 2+1 Dialogue, could be ingresses into discussing sticking points like trade and commerce, border control, and regional stability. Open frameworks for multi-level engagement would help to delineate each side’s red lines, potential areas of compromise, and shared interests. Each side must discard a zero-sum game perspective and whittle out confidence building measures.

Where do India’s interests lie?

Nepal’s geostrategic location and potential to act a buffer zone between China and India is one of New Delhi’s biggest points of interest in maintaining amicable relations with Kathmandu. However, India must recognise that given the current scenario, it on the backfoot in multiple ways. It has bilateral contentions with Nepal over territorial claims, and its perceived interference in domestic politics have created a less-than-favourable public opinion about Nepal’s ‘dependence’ on India for its security and prosperity. India must not be seen a regional bully with little respect for the sovereignty of its smaller neighbours, lest it further alienate Nepal. With the situation along the Line of Actual Control being especially fraught, and the possibility of a winter engagement across the Eastern frontier, how New Delhi navigates its foreign policy with Kathmandu in the near future could be of immense significance for maintaining stability in the region.

The priority for New Delhi would be to make concerted efforts to mend the trust deficit with Nepal. India should be mindful of the ‘push-factors’ that have driven a wedge in various policy areas between itself and Nepal. Instead of leaving low-level discords on the back burner, like the territorial dispute, it should take an initiative for opening channels of communication, lest these issues blow up into more inflexible points of contention. Although large-scale influx of Chinese investment (and influence) benefits Nepal in the short run, New Delhi must find ways to apprise Kathmandu of inherent potential dangers. Pakistan serves as a reminder of the pervasive nature of political and economic clout concurrent with BRI and Chinese posturing in the region. Kathmandu will do well to make clear assessments of its current foreign policy and long-term ramifications.

China is able to outspend India and can pour in financial and logistical support to compete for influence in Nepal. The riposte, therefore, should not be to match the bills, rather to employ meaningful strategies for cooperation with both parties on the same page. This means being open to renegotiating existing treaties, re-engaging the social and community networks that have sustained bilateral trade, and keeping up the strong tradition of closeness between the armed forces. Of course, India-Nepal relations have the benefit of centuries-long multi- dimensional ties, a fact that can be put to use for mutually beneficial gains. New Delhi should recognise that having a vision of the long game is the best way for developing a coherent, rational, and mutually acceptable strategy with Nepal.