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Let’s act together

by August 8, 2016 General

Irrespective of how politics treats economics in Nepal and India, there should be efforts to genuinely make bilateral relations friendlier

Aug 8, 2016- A review of trends in Nepal-India trade and investment reveals that the main challenge is identifying constraints and recommending policies that can be implemented without going against the political fundamentals of the land. First, the need of the hour is to evaluate the sectors and sub-sectors of comparative advantage in goods and services in the two countries and formulate policies in a positive spirit. The potential of developing production networks in services and manufacturing in the two countries need to be assessed. As India moves up the value chain, some of its industries like food and agri-processing and labour-intensive activities can be shifted to Nepal. The next important step is examining issues related to informal and border trade between the two countries and find ways to remove bottlenecks and make things different and better.

Raising possibilities

In the context of improved connectivity between China, Asean and South Asia, something could be tried by bringing China closer to the economic cooperation grouping of India and Nepal. Before this is done, an in-depth examination of the potential and feasibility of India-Nepal-China connectivity and the possibility of industrialisation policies such as the establishment of special economic zones (SEZs) and industrial agglomerations should be made. However, before moving in that direction, it would be crucial to assess the impact of the current institutional arrangements for trade and investment between the two countries (such as Nepal-India trade and transit treaties and Bippa) and recommend alternatives, perhaps along the lines of India-Singapore comprehensive economic cooperation.

To take this idea further, the South Asian Institute of Management (SAIM) aims to study Nepal-India trade and investment with an analytical assessment and action plan. The underlying objective is to enhance trade between the two countries for shared prosperity and concern. This represents an important initiative to strengthen the economic relationship between the two neighbours. It will build on a positive environment, namely the rapid economic progress that India is making and its emerging role, particularly in Asia, and the comprehensive reform and peace process that Nepal has embarked upon since 2006.

The first meeting between the Observer Research Foundation (ORF) and SAIM in this regard was held in Kathmandu in November 2011. The second meeting was held in New Delhi in April 2013. The ORF, a New Delhi-based policy think tank, is a major constituent of this project. It aims to generate participation from the media, members of the chambers of commerce of the two countries, think tanks and embassy officials, among others. Most importantly, the project will encompass citizens’ views from the Indian states bordering Nepal, notably Bihar, Uttar Pradesh, Uttarakhand and West Bengal.

Pressing issues

As India-Nepal relations have been on a roller coaster in recent years, impacted by unusual political churnings, bilateral trade ties have been hit hard. Irrespective of how politics treats economics in both countries, there should be efforts to genuinely make Nepal-India relations friendlier. The open border would yield much better outcomes if they promoted it as a gateway for trade and productive mobility. In modern times, it is imperative to customise cross-border trade and transit dealings.

Anyone with a pious vision to see the region from a broader South Asian angle will lament instances like the recent ‘border blockade’ where the narrow design of politics triumphed over all sorts of finer rationale. Undeniably, the political classes in Nepal should track a different course where they will be able to secure a path of stability. As another round of political flux is in the offing with a new prime minister in place, Nepal clearly appears not to be in good shape to take on pressing issues of survival that fall in the economic and trade domains.

Heed the lessons

A poor industrial base combined with scarce local employment opportunities force Nepalis to migrate en masse to employment destinations. As the phenomenon is not reflective of healthy upward mobility, the economics of the land calls for an immediate and active interface with politics. Nepal is sitting on a pile of very rich human and natural resources, and exploring these resources with renewed thrust is the need of the hour, not passing the buck.

India has come a long way since 1991 when it first opened up its economy while facing a serious balance of payments crisis. Politically too, it was anything but in harmony. The progressive minds in the government, however, made a difference by playing above the narrow confines of authority. They thought of the nation first and moved up. The same way, Nepal needs to embark on a journey that will be for economic liberation of its masses from the vicious cycle of poverty. Nepal, a beautiful country, truly solicits the application of beautiful ideas. By moving towards the goal of political and economic parity, it will line up with a healthier trend to play in a big globalised world.

Rana is the chairman of the South Asian Institute of Management and a former Nepali finance minister; Thakur is a New Delhi-based journalist and public policy professional

Published: 08-08-2016 07:57