If Nepal is to survive and thrive in this new era, it must stop playing the intermediary and start building genuine partnerships – especially with those who share its vulnerabilities
For too long, Nepal has harboured the adolescent fantasy that it can play India and China against each other, extracting economic favours and diplomatic gestures from both while remaining immune to the region's storms. The digital and security realities unleashed by the latest India-Pakistan conflict have shattered that illusion. As drone strikes, cyber operations and digital surveillance spill across borders, Nepal finds itself not as a clever broker but as a vulnerable bystander, exposed to the crossfire of technological and ideological battles it neither controls nor fully understands.
The recent escalation between India and Pakistan has not only brought the threat of physical conflict to Nepal's doorstep but has also catalyzed a regional tech Cold War. India's deployment of Aadhaar-linked facial recognition systems to monitor millions in Kashmir is no longer just a domestic affair. These systems are now being exported as "counterterror solutions" to Nepal and Sri Lanka, with governments in both countries eager to bolster their security infrastructure in the face of rising cross-border radicalisation. For Nepal, adopting such technology is a double-edged sword: it promises better control at borders and urban centres, but it also means surrendering a degree of digital sovereignty to India, whose data protocols and security priorities may not always align with Nepal's interests.
Pakistan, meanwhile, has responded by mandating local data storage, a move that has crippled the South Asian ambitions of Indian fintech giants like Paytm and PhonePe. The result is a digital iron curtain slicing through the region, fragmenting what was once a loosely integrated digital marketplace. Bangladesh's startup ecosystem, heavily reliant on Indian venture capital, is reeling as funding dries up and cross-border partnerships freeze. Bhutan's much-celebrated blockchain-driven carbon credit market has stalled, and Indian servers or financial rails cannot be accessed. In Myanmar, the promise of digital connectivity through regional platforms has been replaced by anxiety over surveillance and cyber-attacks as the military regime tightens its grip on information flows.
For Nepal, these developments are not abstract. The country's recent decision to adopt India's RuPay system over China's UnionPay has lowered remittance costs. The Maldives, reportedly under Indian pressure, has banned Chinese 5G gear and opted for Reliance Jio's infrastructure, a $200 million surrender of digital sovereignty that sets a precedent for the region. Once a hub for Huawei's regional operations, Sri Lanka now leases its undersea cables to India's National Security Council. The message is clear: technological choices are inseparable from political alignments in South Asia's new security environment.
This is not just about economics or convenience. The digital front is now a primary theatre of conflict. Wars are no longer fought with tanks and missiles alone; they are waged through algorithms, data flows and cyber espionage. As India weaponises its tech stack and China retaliates with its digital firewalls, South Asia's dream of a unified digital marketplace is fracturing into Balkanised fiefdoms. The cost is staggering: $14 billion in lost e-commerce growth, a generation of innovators trapped between superpower crosshairs, and the slow erosion of trust in cross-border digital cooperation.
For Nepal, the stakes are existential. Our dependence on Indian ports, networks and payment systems is a fact of geography and economics. But our digital dependency is a choice – one that comes with risks. The current crisis should be a wake-up call for Kathmandu's policymakers. It is time to end the self-defeating fantasy that Nepal is an indispensable actor able to extract perpetual concessions from New Delhi and Beijing. The reality is that both powers see Nepal less as a partner and more as a buffer, a conduit, or, in the worst case, a liability.
If Nepal is to survive and thrive in this new era, it must stop playing the intermediary and start building genuine partnerships – especially with those who share its vulnerabilities. The threat of Islamic fundamentalism, which has already scarred communities in Sri Lanka and India and is a growing concern in Myanmar and Bhutan, does not respect borders. Non-Muslim countries in South Asia – Nepal, Bhutan, India, Myanmar and Sri Lanka – must recognise that their security is intertwined. This is not a call for exclusion or hostility but for pragmatic coordination. Joint intelligence sharing, harmonised cyber laws, coordinated border management and shared early-warning systems are no longer optional – they are urgent necessities.
Recent regional forums, such as the BIMSTEC National Security Chiefs' Meeting, have shown that such cooperation is possible. But Nepal must do more than attend meetings and issue platitudes. It must invest in its cyber infrastructure, demand reciprocal data protections from partners and participate actively in regional security networks. The days of hiding behind non-alignment as a shield are over. Neutrality is not a strategy if it means isolation or paralysis.
There is also a cultural reckoning at hand. For years, Nepal's political class has used the "India card" and the "China card" as tools for domestic leverage, stoking nationalist sentiment while avoiding hard choices. This adolescent phase must end. With its invisible borders and instantaneous threats, the digital age demands maturity, clarity and courage. Nepal must articulate its digital strategy – not as a pawn in someone else's game, but as a responsible actor with its interests and red lines.
The path forward will not be easy. There will be pressure from Delhi and Beijing, and the temptation to revert to old habits will be strong. But the alternative is to watch Nepal's sovereignty – digital and otherwise – erode, one server, one payment system, one security protocol at a time.
The current crisis is a turning point. Nepal can either cling to outdated illusions, or it can join hands with its non-Muslim neighbours to build a regional security and digital alliance that matches the challenges of our time. The choice is ours, and the clock is ticking.
Prof Peela is a South Asia and Pacific regional geopolitical and security expert
