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Nepal: PM’s Visit to China, Terai Agitation and Poor Economic Performance- Update No. 330

Note No. 762                                      Dated 12-Apr-2016

By Dr. S. Chandrasekharan

The devastating earthquake of 2015 in Nepal, followed by tardy progress in rehabilitation and reconstruction, the continuing deadlock over the new Constitution and poor economic performance in the current fiscal year should be cause for concern on the situation in Nepal.

The Terai continues to be restive.  The absence of mutual trust between the ruling groups and the Terain leaders, the failure to move ahead with the political mechanism thus driving the Terains into desperation. There is thus the risk of escalating violence in the south.

The only silver lining is said to be Oli’s successful visit to China where an over effusive joint statement was made and ten agreements in all were signed between China and Nepal during the PM’s visit.

PM Oli’s Visit to China:

There was palpable euphoria over Oli’s visit to China.  The fifteen point joint communique

 touched upon connectivity, trade and other issues besides support for the new constitution.  The language was described by one analyst as “enthusiastic.” 

The ten agreements that were signed included transit and transport between China and Nepal, development of an international airport in Pokhara, feasibility studies on free trade agreement between the two countries, exploration of oil and gas and understanding the banking relations between the two countries etc.

This successful visit to China is seen as a “rebuff” to India and a lesson for indulging in an economic blockade.  The Nepalese media is full of articles as how the blockade has ended up in diluting the Indian influence in Nepal.  There is a renewed talk of revising the existing treaties between India and Nepal.  There is also talk of a possibility of Nepal importing over 30 percent of its fuel needs from China, a Highway connecting  Tibet with Nepal through  Kimathanka, the lowest point in the Himalayan range between the two countries and there was even a suggestion of a possible underground highway through the base of the Himalayas!

If the intention of both Nepal and China was to make India take notice of the bon homie between the two countries, it seems to have had the desired effect.  There was considerable but unjustified concern shown by many of the Indian analysts and Indian strategic experts over the visit.

To me, it appears that Indian analysts were unduly worried about increasing connectivity between China and Nepal. In the near and medium term China will not be able to replace India in the matter of trade and transit.  It will not be economically sustainable too.

On the other hand, an opening from Tibet to Nepal would help India too.  Mao had foreseen that Tibet could best be sustained from India rather than from mainland China.  It will be good for India too.  Of all the analysts, only Kanak Mani Dixit saw the possibility of India standing to benefit from the development of trans Himalayan linkages. In the evolving rapid economic relationship between China and Nepal, the possibility of both China and Nepal being “Nepal locked” cannot be wished away as a fantasy.

The Terain Leaders Need an Introspection:

As expected, the Oli government has not made any substantive move to evolve a political mechanism over the restructuring of the provincial boundaries.  Given the attitude of Oli generally towards the Terains, it is most unlikely that any progress will be made.

Besides Rajendra Mahato chairman of the Sadbhavana Party threatening the government periodically of a bigger Singha Durbar centric agitation, nothing seems to be moving.  Another seven point memorandum was given by the UDMF (United Democratic Madhesi Front) to the government.  The Oli Government remains unmoved. 

There is no doubt that the constitution is flawed.  There is perceptible anger among the marginalised societies, particularly the Terains.  There is despair, discontent and disillusion.  Violence may flare up once again.

At this point, the Terain leaders should make an honest appraisal of what they had achieved in the current agitation.   All they have got was what was promised and willing to be delivered by Sushil Koirala’s administration soon after the promulgation of the new constitution.  In the process over 55 lives were lost unnecessarily. By blocking the traffic in the No man’s land, they brought a bad name to India too.     Indian persistence of a ‘lasting and inclusive constitutional settlement” in Nepal is not going to bring in any change of heart of Oli and company. (Why bring this in the joint statement PM Modi with the EU is still not clear to me unless we in India have no self confidence in ourselves!)

Is it not better to go ahead with the present configuration than bring districts like Morang where historically the Pahadis have dominated?  Is it not better to make Janakpur the capital (instead of Biratnagar) of the newly designated Terai province that would bring economic benefits to the entire region?  These are points that need to be calmly analysed.

What Terai needs is unity.  What it needs is a leader with a stature who can command some respect. Repeated threats of agitation is not going to improve the situation or alleviate the distress of a large number of frustrated Terains.  They should show it by being united and showing the door to UML in the next elections. 

Economic Downslide:

According to the Asian Development Bank, in this fiscal year economic growth in Nepal is expected to be the lowest and inflation highest in South Asia.

Delayed implementation of reconstruction programmes, extended trade and transit provisions and an unfavourable monsoon are expected to drag down the economic growth to 1.5 percent- the lowest in the region.  Forecast for inflation this year is a whopping 10.5 percent, the highest in the region. 

There has been no growth in service sector that used to contribute over half the total domestic output.

Agriculture that accounts for 36.8 percent of the GDP has also been hit hard.  Deficient monsoon, loss of seeds, lack of chemicals, fertilizers and agricultural machinery have all piled up on the misery of the agriculturists.  The Terai that used to be the rice bowl of Nepal is in turmoil.  Tourist sector is disrupted.

In short, the economy is in shambles.  With India being abused day in and day out and the general “glee” noted in Nepal using its China Card, perhaps Nepal could approach China.  It is said that despite Oli carrying a large delegation in his visit, only 11 delegates were given official hospitality by China!


As said earlier, the Terain Leaders should make a re- assessment of their agitation and its goals.  The Oli government should give up its anti India stand and if it does the media will follow.  India and Nepal both need each other.  India has already welcomed the two amendments to the constitution that gives proportional representation to the Madhesis both in the configuration of the constituencies and in governance.  It is time now to move on.