India and Nepal have nurtured a relationship described as a “roti beti ka rishta” since its inception, with people on both sides fostering strong connections, while also skilfully manoeuvring the complexities of being positioned between two dominant countries, much like a “yam between two boulders”. However, this is not a constant belief, as each regime change brings a new narrative. On July 12th, former Prime Minister Pushpa Kamal Dahal alias ‘Prachanda’ lost a vote of confidence, ceding his position to KP Sharma Oli of the Communist Party of Nepal (Unified Marxist-Leninist) (CPI-UML) and forming a coalition government with backing from the Nepali Congress party, led by its president Sher Bahadur Deuba. Oli’s ascension to power raises concerns about India-Nepal relations, given his perceived pro-China stance. This may destabilise the political balance in the Himalayan region and challenge India’s interests. Despite Oli’s pledge to maintain neutrality, China’s growing influence over Nepal’s politics could undermine his government’s independence, potentially making China’s priorities overshadow Nepal’s aspirations. The ongoing indecision and lack of progress in resolving the border dispute between India and Nepal risks fuelling animosity and hostility, potentially creating a more toxic environment for diplomatic engagement and cooperation.
The border dispute and its ramifications
The return of Oli as Prime Minister is likely to revive the border conflict issue, bringing it back to the forefront of Nepal’s political agenda. Despite assurances from both sides to resolve the dispute through diplomatic means, uncertainty lingers over the likelihood of a compromise, as neither nation has shown a willingness to budge from their entrenched positions. Oli had earlier sought to assert Nepal’s rightful ownership of the disputed territories, endeavouring to provide a strong foundation for the country’s claim to the areas. In a book release event, ‘Conspiracy Surrounding Nepalese Water Resources’, he reiterated that “there cannot be any dispute that the territories including Kalapani belong to Nepal because the Sugauli Treaty signed between Nepal and East India Company clearly mentions that the territories on the west of the Mahakali River belong to Nepal.”
On November 2, 2019, India released a map showing Kalapani in Uttarakhand, upsetting Nepal, which claims it as part of Darchula district. In May 2020, Nepal published an updated map, leading to a diplomatic standoff. India criticised Nepal’s move as an “unjustified cartographic assertion”. However, this dispute extends to other areas as well, such as Limpiyadhura, Lipulekh, and Susta. On May 15, 2015, the Lipulekh agreement was deemed arbitrary, as stated in point 28 of the 41-point statement, since Nepal was not considered by either country in the decision-making process. Nevertheless, Nepal’s hedging policy between India and China has disproportionately benefited China. India’s reliance on quiet diplomacy, while ignoring political shifts in Nepal, has fuelled anti-Indian sentiment and perceptions of paternalism, exacerbating border issues. Coupled with it is the fervour of Oli’s nationalism, which could become an impediment to a preferable relationship with India over China.
The Potentiality of a China Tilt
Beyond land-link aspirations, China-Nepal ties are also focusing on strengthening their military cooperation. Elevating from a comprehensive to a strategic partnership for development adds intrigue. In 2018, Prime Minister KP Sharma Oli signed MoUs in China to enhance military cooperation, covering training, equipment for disaster management, and peacekeeping apparatus. China increased training slots for Nepal Army officers, while Nepal sought help establishing a defence university. Therefore, the shift from political to politico-military could become a double whammy for India.
After COVID-19 restrictions eased in 2023, a Chinese military delegation led by Major General Yue Ande visited Nepal on August 16, reviving the Sagarmatha joint exercises and offering military training seats. This year, on March 9, 2024, Major General Zhang Baoqun led a Chinese military delegation to Nepal, touring military institutions and discussing proposals with Army Chief Prabhu Ram Sharma. This visit closely followed a January trip by Sun Haiyan, reflecting the intricate political and military relationship between China and Nepal. The Zhang Baoqun delegation later strengthened ties by advancing armoured personnel carrier (APC) procurement and proposing an ammunition plant.
Signing the Belt and Road Initiative (BRI) between Nepal and China has been a game changer. The project has outlined its financial structure of receiving funds from Asian Development Bank investments involving Chinese contractors, Chinese-funded initiatives with Chinese implementers, and Nepali-funded projects employing Chinese companies, incorporating both grants and loans within a cooperative framework. Nepal’s decision to join the BRI has sparked widespread concerns and scrutiny, as critics question the country’s willingness to engage with China’s debt-trap diplomacy, a tactic deemed detrimental to national sovereignty and economic stability. Yet, in 2019, Oli reaffirmed his support for China, claiming the BRI aligns with Nepal’s national interests and dismissing debt trap concerns. Furthermore, the proposal for awarding the Phukot Karnali and Tamor hydropower projects to Indian companies drew sharp criticism from Oli, presaging his future foreign policy decisions and suggesting a more assertive stance on issues related to national sovereignty and regional cooperation.
Last year, the Finance Minister’s private secretariat revealed that China will finally deliver on its 15-year-old promise, made in 2008, to provide Rs 80 billion in financial support for Nepal’s infrastructure development projects. Moreover, the prompt overture by Chinese Premier Li Qiang to Oli’s new government suggests his inclination to deepen China-Nepal ties, which may foreshadow a revaluation of their current cooperation framework.
Earlier, Nepal rejected aligning with the Global Security Initiative (GSI), which could lead to a tumultuous relationship with India. However, the Maoist regime, which remained in power for a few years, deliberately increased the Chinese military presence, ambiguously supporting the GSI.
One of the aims of the Chinese GSI is the prioritisation of defence diplomacy and henceforth safeguarding its national interests, which could be averse to India’s security interests in the border region. As a result, India may see Nepal’s indirect alignment with China as part of a larger Chinese strategy to encircle India with allied states, diminishing India’s strategic influence in South Asia.
Conclusion
The Indian Government has recently boosted its budget allocation for neighbouring countries, with Nepal’s share receiving a significant increase of Rs 150 crore, bringing the total to Rs 700 crore, as part of India’s ‘Neighbourhood First’ Policy initiative. This boost aims to revive the Upper Mustang region through bilateral aid, stimulate economic interactions, and emphasise India’s commitment to strengthening regional ties and economic cooperation with Nepal. India, on the other hand, must expedite its past commitments to Nepal, including developing three inland waterways and the Raxaul-Kathmandu broad-gauge railway link, so that this will become a harbinger of hope for future obligations. Taking sides will eventually lead to strangulating Nepal’s position as a buffer or neutral state. Moreover, there are questions of inclusivity in the BRI domain, as nothing has kicked off as of yet. Additionally, Nepal has expressed its aversion to taking loans and wants to switch to taking grants. However, there hasn’t been anything of the sort on the platter from China’s side. Therefore, India should take a chance and increase its line of credit (LOC) in various development projects, garnering a shift towards non-BRI projects.
