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Modi, myopia and matter of economic ties Featured

Written by  Published in Business Wednesday, 20 August 2014 14:53

Did Modi's visit really yield an economic bolster as anticipated earlier?

The visit was limited up to the equivocal flattering from both sides, thus could bear no fruit in fostering mutual commercial relations.

Before joining hands with Nepal to harness the hydropower potential, India has to rise above its 'viceroy syndrome' mainly demonstrated in the partnership models of Chukka, Kurichhu or Tala hydroelectric projects in Bhutan.

Being an independent member of WTO, Nepal must seek an equitable treatment on the overall cross border trade regime.


By Amrit Kharel

Indian Premier Narendra Damodardas Modi's official Nepal visit (August 3-4), which was much touted to bring along an impetus of economic growth in the Himalayan land, was confined largely to formalities and mere exchange of some sweet words of praise. As Prime Minister Modi, speaking at the legislature parliament, talked about some facts of Nepal such as Buddha's birthplace, unparalleled cultural artefacts, greenery at hillsides, abundant water resources originated from Himalayas, among other features, it seemed large section was overjoyed to reciprocate the applause in almost all quarters.

PM Modi's mantra of speaking to Nepalese nice as pie was though enough in wooing the hearts of middle class buoyant Nepalese fans ranging from professionals, academia, bureaucracy and editors to business community to politicos and such, there was indeed not any single most important factor for the public to arouse in an exorbitant way. Because the gesture shown by the Indian premier was not exceptional than intended shift to feel-good diplomacy of the South Asian bighead towards smaller nations in the region in pursuit of the former's share in global leadership. India is seeking support from its neighbours and other developing countries for the status of permanent membership of the UN Security Council.

With his seamlessly and deliberately performed make-nice communication approach, PM Modi was able to garner round of applause. Nevertheless, on the Nepalese side, did Modi's visit really yield an economic bolster as anticipated earlier? The State visit of Modi, which began with a new checklist of plans to give some landmark economic deals full shape, let the matter rest at the end of the day. Inking an umbrella power trade agreement (PTA) to explore newer avenues in energy business, signing power development agreement (PDA) to accelerate the mega hydro projects including Upper Karnali and Arun III, assistance for Kathmandu-Terai Fast Track highway were the cornerstone of Modi's visit where the public had pinned its hope. Later on, the high hoped visit though bypassed such economic issues; our jolly lawmakers remained simply busy in singing praises to the skies as if all the set was a solo performance of an Indian romantic poet who offered spellbinding ode full of rhetoric, emotional and ornamental verses.

For the ordinary people with their eyes full of aspirations to see an opening of a new chapter in Nepal-India trade, energy cooperation and investment relations, the State visit could not deliver any concrete shift in policies. The visit just deferred the given power development, trading and infrastructure related bilateral agreements. Such economic agendas put into action could have made some progress in streamlining Nepal's lopsided trade and other economic relations with India. Hence, it would be somewhat hasty to count the achievements of Nepal during Indian premier's visit solely on the basis of his 'popular' remarks and intimacy he had shown, which are typical of a diplomatic politician.



Economic ties: matter of concern

Prior to Modi's monsoon pilgrimage to Nepal – the sacred home to Pashupatinath Temple – bilateral economic agendas were on top to hit the headlines. Preset major economic issues for the visit, apart from PTA, PDAs and infrastructure development, were reviewing and updating bilateral treaties including the Treaty of Peace and Friendship 1950 and relaxation of export barriers to address bilateral trade imbalance. The visit was however limited up to the equivocal flattering from both sides, thus could bear no fruit in fostering mutual commercial relations.

On the word of noted French author François de la Rochefoucauld, ''Flattery is a counterfeit money which, but for vanity, would have no circulation.'' In politics and diplomacy as well, flattery alone cannot fulfil the economic interests of particulars countries and their people in tune with the current realities. There exist a lot of economic issues unsettled between Nepal and India which could result in a multitude of possibilities once resolved with business perspective. Nepal and India could work together for harnessing the potentials in cross border trading, hydropower development, tourism, agriculture and infrastructure development, transfer of technology in the industrial segment, human resources management and so on. Even the cooperation might go well in the areas of social development such as disaster management, ensuring food security, environment conservation, climate change etc. For this, basic model should be business oriented and the negotiations should be finalised categorically in black and white, indeed getting down to the nitty-gritty of all differences.

Escalating trade deficit with India has long been a nightmare in Nepalese economy which accounted for two third (66.93%) of the total 567.17 billion trade deficit as of the first eleven months of the fiscal 2013/14. On request of Nepalese side to address ever increasing trade deficit through measures including relaxation of non-tariff barriers and SPS (Sanitary and Phytosanitary) standards for agro products, relaxation of Rules of Origin requirement for duty free access of Nepalese products, mutual recognition of standards, conformity assessment and accreditation, Modi's delegation gave merely some consolatory words to consider on those matters. Likewise Nepalese side's request to waive countervailing duty levied on Nepalese exports as well as quantitative restrictions on Nepalese products especially on vegetable fats, copper products, acrylic yarn and zinc oxide drew a blank with no significant response. On the other hand, India simply opinionated that trade deficit could only be bridged by development of hydropower in Nepal and export of surplus power to India. This phenomenon has visibly shown India's indifference to prevailing Nepal's trade deficit and the need of the hour is Nepal's preparedness to ensure equal footing on cross border trading mechanism, regulations, quarantine and other technicalities. Being an independent member of WTO, Nepal must seek an equitable treatment on the overall cross border trade regime. Why not Nepal does needful arrangements on a par with India to limit haphazard imports from India by enforcing quarantine regulations and quality related restrictions on substandard products?

After Modi's visit, the establishments in both India and Nepal have been highlighting the announcement of USD 1 billion soft credit line to Nepal as an unprecedented occurrence. India has though test marketed its new investment product in the sub-region which is eyed as an alternative product line to dominant western funded packages via the World Bank and ADB; this cannot persuade Nepalese public at large where hundreds of millions of concessional loans and grants poured down by the donors so far have not yielded any pragmatic changes. Nepal is in the dire need of foreign direct investment from the private sector rather than credit packages while the country is set to graduate as a developing nation from the status of least developed country by 2022. While Nepal is seeking above 8 percent annual average growth rate and minimum investment of 30 percent of gross domestic product (GDP) in fixed capital formation, the average investment of last three fiscal years remained at only 22 percent of GDP. A recent study concluded by the World Bank has found a funding gap of USD 13-18 billion between 2011 and 2020. Increased production through increased private sector investment, both foreign and domicile could only fulfil such gap.

Forward-looking relationships



Taking the energy appetite of both Nepal and India into consideration, the umbrella PTA must be signed on the ground of free market and free trade ensuring the export-import prices for electricity to be set freely based on demand-supply ratio and unrestricted export of Nepalese electricity to any country including India without the imposition of constraints such as permission, tariffs, duties and quotas. Before joining hands with Nepal to harness the hydropower potential, India has to rise above its 'viceroy syndrome' mainly demonstrated in the partnership models of Chukka, Kurichhu or Tala hydroelectric projects in Bhutan. Despite India is able to enjoy upper hand while importing the surplus power generation from Bhutan at a bare minimum price, mainstream public in Nepal is much more concerned to avoid any form of 'dependency syndrome'.

In the other businesses of mutual cooperation, Nepal must be prepared to bring in increased investment of Indian private sector and even that of third country-originated corporate bodies operating in India. Nepal's favourable climatic condition, geopolitical existence in between two rising global economies, zero-tariff facility provided by China to 7,787 Nepalese products are the convincing factors to such investors. Moreover, both China and India are huge markets for each other; they could harness larger benefits through producing and exporting several items from Nepal. Policy and procedural barriers in exporting commodities to India, primarily in the issues of quarantine, standardisation and accreditation of goods, certificate of origin, transportation access and disparity created by product specific trade policies are imperative to be resolved on bilateral consent. Nepal must look forward to crave out certain niches of competitive advantage targeting the Indian market, either it be high value agro products or commodities and services on demand in the North-Indian belt. India has for long been demanding that Nepal should be a transit for its products to be exported to China. Nepal may possibly turn into an economic corridor bridging two large economies if trilateral cooperation on developing such trading routes will be figured out shortly. Moreover, Nepal can offer the Indian outbound tourists what Nepal exclusively own – a blend of untouched nature with fresh mountain air, rainbow-like culture, religious shrines and world-famous heritages. India can assist Nepal in marketing and branding the tourism products worldwide.

Ironing out the differences, Nepalese and Indian leadership have to close each deal on an equal terms pertaining to the concerned economic issues at the earliest. Then only the 'new chapter', as stated by PM Modi, could open in real sense fostering Indo-Nepal partnership for prosperity. The deferred economic agendas including that of PTA, PDAs of mega hydro projects, relaxation of trade barriers, revision of earlier treaties should be addressed in clear-cut manner possibly during the upcoming official visit of Nepalese Premier to India, for which Indian PM had already extended invitation during his 30-hour sojourn. Unless, Nepal and India churn out underlying economic issues with utmost priority, the trade of admires will turn out to be nine days' wonder and destination will nowhere else than back to square one.

Author is an advocate experienced in the key areas of investment, business and corporate legal affairs. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.


Read 910 times Last modified on Wednesday, 20 August 2014 15:41

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