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How China is pumping millions to push India out of Nepal

Nepal has cosied up to China like never before, thanks to Beijing’s strategy of 'making them an offer they cannot refuse'. That presents a strategic dilemma for New Delhi

October 13, 2020 / 02:53 PM IST
Nepal’s relationship with India is based on the 1950 Treaty of Peace and Friendship that provides for an open border and right to work for Nepali nationals. (Reuters)

Nepal’s relationship with India is based on the 1950 Treaty of Peace and Friendship that provides for an open border and right to work for Nepali nationals. (Reuters)

Nepal, the world’s only declared Hindu nation until 2008 when it became a 'secular' republic with the ending of monarchy, has comprehensively turned its back on the world’s largest Hindu nation.

What was once increasing evidence of the growing imprimatur of China on the tiny Himalayan kingdom, is now a confirmed way of life. Why, Nepal’s acceptance of Chinese proposals could even shock Pakistan. Consider the following:

-Nepal received over 90 percent of total foreign direct investment (FDI) commitment from China during the first quarter of the current fiscal year  that began in mid-July, according to Nepal's Department of Industry

-Of the total FDI commitment of $95 million to Nepal, China alone pledged $88 million during the first quarter

-Since 2019, the Chinese Peoples’ Liberation Army (PLA) has agreed to provide financial assistance to the Nepali Army on a regular basis

-Kathmandu has accepted China’s proposal to make Mandarin mandatory in Nepal’s schools in an exchange for the payment of salaries to teachers

-China has revived the rail project between Nepal and China, whishc is estimated to cost over $300 million and expected to be cpomplete by 2025

-Beijing has helped open the Tatopani Port for arrival of daily goods to Nepal - once the exclusive preserve of India. India was Nepal’s primary trade partner, with more than 65 percent of that country’s trade operating through Indian ports

-In a growing sign of China’s attempt at establishing cultural connect, her livewire Ambassador to Nepal, Hou Yanqi, is the most headline-grabbing diplomat in Kathmandu. She has just wished Happy Dashain (Bijaya Dashami) to the people of Nepal

-Hou Yanqi has also conducted a study to examine why Gurkhas should, and have, joined the Indian Army in the last one century or so

Rakesh Sood, Former Indian Ambassador to Nepal, concedes that China is going the extra mile to cultivate Nepal and has the resources to do so.

"In the past, China maintained a link with the Palace and its concerns were primarily related to keeping tabs on the Tibetan refugee community. With the abolition of the monarchy, China has shifted attention to the political parties as also to institutions like the army and armed police force. Today’s China is pursuing a more assertive foreign policy and considers Nepal an important element in its growing South Asian footprint,” he told this writer.

What happens to India?

In other words, India is under threat of being eased out of the power equation in a country, with which it has enjoyed strong cultural and religious links for a better part of the last seven decades.

Nepal’s relationship with India is not just any bilateral equation – it is based on the 1950 Treaty of Peace and Friendship sought by Nepal in 1949 to continue the special links it had with British India. The treaty also provides for an open border and right to work for Nepali nationals.

There are an estimated 7-8 million Nepali nationals working in India. Indian law permits Nepalese citizens to own property in India and generations on both sides have thought nothing about walking across the international borders from Bihar’s Raxaul into Nepal’s Birgunj and from Nepal’s Siddharthanagar to Uttar Pradesh’s Sonauli for shopping or just a meal – maybe even a stroll.

Incredibly, that is now being viewed as a sign of an unequal relationship, and an Indian imposition. Unsurprisingly, Nepal has avoided taking up the subject bilaterally, even though leaders there think nothing of using it as loud domestic rhetoric.

The immediate provocation is the long-standing territorial dispute surrounding Kalapani, a path of land near the India-Nepal border, close to the Lipulekh Pass on the Sino-Indian border, which is one of the approved points for border trade and the route for Kailash Mansarovar yatra in Tibet.

India inherited the boundary with Nepal, established between Nepal and the East India Company enshrined in the Treaty of Sugauli, 1816. The Kali river constituted the boundary, the territory to its east being Nepal.

The dispute relates to the origin of Kali. The early British survey maps identified the north-west stream, Kuti Yangti, from Limpiyadhura as the origin, but after 1857 changed the alignment to Lipu Gad, and in 1879 to Pankha Gad, the north-east streams, thus defining the origin as just below Kalapani. Nepal accepted the change and India inherited this boundary in 1947.

While the slightly disputed territory did come up for mentions at various bilateral meetings, after the 1996 Treaty of Mahakali that envisaged the Pancheshwar multipurpose hydel project, the issue of the origin of Kali river was first raised in 1997.

The matter was referred to the Joint Technical Level Boundary Committee that had been set up in 1981 to re-identify and replace the old and damaged boundary pillars along the India-Nepal border.

The Committee clarified 98 percent of the boundary, leaving behind the unresolved issues of Kalapani and Susta (in the Terai) when it was dissolved in 2008. It was subsequently agreed that the matter would be discussed at the Foreign Secretary level.

Meanwhile, the project to convert the nearly 80-km track from Ghatibagar to Lipulekh into a hardtop road – also known as the Kailash Mansarovar Road - began in 2009 without any objections from Nepal.

Naturally then, when the Survey of India issued a new political map on November 2, 2019, to reflect the change in the status of Jammu and Kashmir, as two Union Territories, Nepal protested, though the map in no way had changed the boundary between India and Nepal.

For Nepal Prime Minister KP Sharma Oli, however, the virtual inauguration of this road by Defence Minister Rajnath Singh in May, was just what he needed, besieged as he was by the inept handling of Covid-19, and the clarion call by the Nepalese Communist Party (NCP) to impose a One-Man, One-Post norm that would force him to choose between NCP co-chair or the Prime Minister’s position.

Oli had won the election in 2017 by flaunting his Nepali nationalism card, the flip side of which is anti-Indianism. Not a new phenomenon, it has become quite pronounced in recent years.

Nepal’s Prime Minister vowed to restore Nepali territory and marked a new low in anti-Indian rhetoric by talking about “the Indian virus being more lethal than the Chinese or the Italian virus”.

In the meantime, Nepal has been building bridges with China. On August 1, both countries marked 65 years of diplomatic relations. Traditionally, Nepal’s diplomatic ties were limited to India due to New Delhi’s instrumentality in reinstating the throne of the Shah family in 1950 by ousting the powerful Ranas. After the demise of King Tribhuvan in 1955, his son Mahendra strongly advocated and developed ties with its northern neighbour, China.

Chinese President Xi Jinping’s message to Nepalese President Bidya Devi Bhandari was effusive: “Xi reaffirmed his commitment to growing China-Nepal relations and his readiness to work with President Bhandari to take forward the bilateral ties, deliver greater benefit to the two peoples and contribute to regional stability and development.”

Located between the two giant Asian economies of India and China, Nepal shares a long open border with India on three sides and China on the north.

The founder of modern Nepal, King Prithvi Narayan Shah, had termed Nepal’s geography as a “yam between two boulders”.

Kathmandu moved closer to China, during strained ties with India in 1975, 1989 and 2015. However, amid Nepal’s high dependency on India for its third country trade and transit through the Kolkata port, the potential to develop ties with China was minimal. Nonetheless, with the dawning of the 21st century, Nepal made remarkable changes in strengthening relations with China.

In 2005, China was reportedly the only country to have helped the King of Nepal in fighting against the guerrilla Maoists by supplying arms and ammunition after the US, India, and the UK imposed sanctions.

Tryst with democracy

After a ten-year-long civil war, Nepal became a democracy in 2008. The new government led by Prime Minister Pushpa Kamal Dahal or 'Prachanda' of the Communist Party of Nepal (Maoist) chose to deepen ties with Beijing, and for the first time, a newly elected prime minister of a democratic Nepal paid his first official visit to China — ostensibly to attend the closing ceremony of the Beijing Olympics — rather than to India as per the existing tradition.

According to veteran Kathmandu-based journalist Yubaraj Ghimire, who has held a ringside view of political developments both in Nepal and India, this was the crucial period when New Delhi did not play its cards right.

"India never anticipated that the power vacuum after the abolition of the monarchy would be occupied by China. It was a serious bungle," he points out.

In its first act of confidence-building, Nepalese security forces had quashed rising anti-China voices among the 20,000 Tibetan refugees living in Nepal during the 2008 Tibetan unrest.

Strategically, Nepal is an important country for the stability of Tibet for two reasons. One, a large Tibetan population residing in Nepal, has been critical of the Chinese government. Therefore, China has time and again sought Nepal’s support for its one-China policy to which Nepal has responded positively. Second, a stable relationship with China has helped Beijing in stopping Tibetans from fleeing through the China-Nepal border into India.

Nepal on its part, has been seeking to get access to the Chinese ports for its third-country trade, especially after an alleged border blockade by India in 2015.

In 2017, Nepal formally joined the Belt and Road Initiative (BRI) under which China is developing airports, building roads and dams. Among others, the $2.5 billion trans-Himalayan railway connecting Tibet to capital Kathmandu is one of the most ambitious projects undertaken by the Chinese government under the BRI.

China has also agreed to grant access to its Tianjin, Shenzhen, Lianyungang, and Zhanjiang ports and three other dry ports which will relieve Nepal from overdependence on India.

In 2019, President Xi became the first president to visit Nepal after a gap of 23 years since Jiang Zemin's visit  in 1996. China also signed a Treaty on Mutual Legal Assistance in Criminal Matters (MLACM) and expressed hope for an early conclusion of the Treaty on Extradition.

For years, China has been pushing for an extradition treaty with Nepal, which will ensure the extradition of Tibetans fleeing into Nepal. The MLACM is the first step towards that.

What India can do

However, not everyone believes that things are beyond redemption for India. Former Foreign Secretary Shyam Saran, an ex-Indian envoy to Kathmandu himself and an insightful mind in diplomacy, believes that China can never replace India as Nepal’s principal ally, despite its many resources.

“India and Nepal’s people-to-people connection runs just too deep. India’s Himalayan regions have vast Nepali populations: 80 percent of Sikkim’s population is Nepalese origin. They live in large numbers in Assam, Uttarakhand and other places. So, it is not as if only Nepal’s Madheshis (people of Indian origin) have connections with this country. If you keep Kathmandu’s elite and their views aside for a moment, and talk of the common people, there are marriages not just among the royal families on both sides, but also the common people. China is nowhere in the picture.”

Indeed, a big chunk of politicians in Nepal have grown up in Indian universities. Benares was a keystone of India-Nepal ties for centuries. BP Koirala, the doyen of democratic politics in Nepal, was a resident of the city, as was Pushpalal Shrestha, one of the founders of the Communist Party of Nepal. Two former Prime Ministers of Nepal, Prachanda and Baburam Bhattarai, told this writer in separate interviews conducted a couple of years ago, of their time spent at the Jawaharlal Nehru University (JNU) and other educational institutions and old friendships that have continued over the decades with their Indian counterparts.

Is there a feeling in Nepal that despite these deep connections, India has taken the country for granted, the perennial Big Brother? Shyam Saran believes that diplomacy, particularly in the neighbourhood, involves connecting with the people.


“Sometimes, we are not as connected as we should be. We must be visible and help out in small projects, not necessarily just huge projects. Our engagement is very episodic. It calls for constant political engagement with countries like Nepal, where we have deep civilisational links,” he states.

As for getting into a rat race with China, Saran says that the "worst thing we can do is to try to match China, as far as resources are concerned. We need to get involved in small development programmes that help common people”.

Truly, these are testing times ahead for relations between the two countries as close as India and Nepal. There are fiercely pro-Indian elements in Kathmandu, who are keen to see the relationship back on an even keel. Of course, they like most others, agree that there is a huge dragon out there who needs to be contended with, if the status quo is to be restored.

Ranjit Bhushan
first published: Oct 13, 2020 02:53 pm

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