Kathmandu, August 2

Nepal and India are going to review the ‘Nepal-India Treaty of Trade’ by October 2016 for another seven years. In this scenario, experts have suggested the government to negotiate with India for removal of provisions of quantitative and qualitative restrictions on Nepali goods in the Indian market.

They have suggested the government to capitalise on the high-level political commitment of the Indian government to reduce the trade gap with its neighbouring countries by providing preferential market access.

Indian Prime Minister Narendra Modi, during his visit to Nepal in August last year, had made a commitment to do his best to reduce the ballooning trade gap with South Asian neighbours.

“Since Nepal is an immediate neighbour and a small landlocked country we must urge India for a favourable trade treaty, which is going to be reviewed in the near future,” opined Finance Minister Ram Sharan Mahat during a programme organised by the Ministry of Commerce and Supplies (MoCS) to seek a way forward to narrow the ballooning trade gap, in the Capital, today.

“Nepal needs to be competitive first to increase exports, and reducing trade and transit related costs would be one of the major components to make our industrial products competitive,” he said. Finance Minister Mahat also suggested Nepal cannot give preferential treatment to primary products of India in Nepali market.

In the programme, Minister for Commerce and Supplies Sunil Bahadur Thapa said that Nepal needs to sign favourable trade and transit treaties with neighbours India and China with whom much of the country’s trade takes place. “Fifty-two percent of Nepal’s exports and around 60 per cent of imports are with India,” he said. “But the country’s exports to India constitute only one per cent market share of southern neighbour.”

“The Prime Minister’s Office and Foreign Ministry of both countries must form an eminent persons group (EPG) at the earliest to review the trade treaty as per the decision of the meeting between the prime ministers of both countries during Indian Premier Modi’s first visit to Nepal,” said Thapa. He added that MoCS is preparing to send a letter to India to amend the treaty six months prior to it expiring as per the provision of the existing treaty. “The EPG will suggest both countries about the points that need to be revised.”

Other trade and transit experts have also suggested the MoCS to sign a favourable trade treaty like that of 1996 with India. Posh Raj Pandey, international trade expert, said that Nepal should focus on its own supply side constraints that have been hindering productivity like labour relations and lack of electricity supply, among others. The country first has to create a conducive environment for foreign direct investment that will enhance both productive capacity and export led growth, he opined.

National Planning Commission Member Swarnim Wagle opined that trade deficit itself is not always harmful if we can link imports to economic growth. Enhancing competitiveness and attracting investment are fundamentals to cope with the burgeoning trade deficit.