Prime Minister Girija Prasad Koirala’s recent visit to India has a special significance in view of the difficult times in Nepal. Stabilising the economy, which has been battered during the last 15 months, is a Herculean task. The growth rate of industrial sector stands at a meagre 2.15 per cent. The ceasefire by the Maoists and the government is expected to result in around 3.89 per cent growth in tourism, which is Nepal’s major foreign exchange earner. The country’s per capita domestic production is declining and the GDP has levelled at 2.30 per cent only. Economic slowdown coupled with declining revenue collection and rising expenditure has made it difficult to earmark funds for development purposes. The PM’s visit reiterates the fact that India continues to hold special place in Nepal’s developmental endeavours. Koirala’s visit following the historic political change should not be taken only as symbolic since the country expects all kinds of assistance from India.

India has announced an attractive economic aid package to Nepal to the tune of Rs 15 billion. The areas covered by the nine-point declaration include the development of infrastructure, reconstruction works, roads, transport, electricity, agriculture, education, tourism, security, and supplies. Unlike the American Marshall Plan that assisted the economic recovery of 17 European countries following World War II, the Himalayan Marshall Plan is a huge assistance project that combines grants, loans, concessions and funds for infrastructural development. The assistance includes one-time grant of Rs 1.6 billion as budgetary support, a soft credit of Rs 7.5 billion for infrastructure projects, and an increase in annual aid from Rs 1.4 billion to 2.4 billion. Equally important is the waiver of Rs 1.5 billion outstanding dues on defence purchases and agreement on rescheduling Nepal Oil Corporation’s dues to Indian Oil Corporation.

At a time when the estimated growth of agriculture sector is merely 1.69 per cent, India’s assurance to supply 25,000 metric tonnes of fertilizers to Nepal at subsidised rates is also laudable. The nature of this assistance too indicates that Koirala has heeded the advice of the seven-party alliance and refrained from signing any controversial pact. The Maoists had also warned the PM not to sign on any deal that could have long-term implications.

Nepal’s total exports in the first eight months of the current fiscal year rose by 14.7 per cent while the imports saw a spurt of 27. 9 per cent, thereby giving rise to a huge trade deficit. Nepal’s dependency on India on trade has also been increasing over the years. Trade with India has increased by 30.6 per cent. The scrapping of four per cent Additional Duty of Customs on Nepal-made goods and acceleration of the release of all funds to Nepal under the Duty Refund Procedure Scheme can be expected to bolster Nepal’s troubled foreign trade, especially with India.

India’s commitment to avail every possible support in the post-conflict phase is directed towards Nepal’s overall socio-economic development. Dr Manmohan Singh’s assurance to support projects as prioritised by Nepal hints at a need-based as against a donor-driven assistance, which is less political and more directed towards developmental activities. India’s support will not only address immediate financial requirements but also shore up Nepal’s future development activities. The strength and quality of the financial aid should be as per the requirements of the programmes put forth by Nepal.

Many commitments have been made in the past on diverse areas during the visits of statesmen from the two countries. But frequent misunderstandings during the execution of bilateral treaties have raised doubts about the impact of such agreements. Such problems can be seen in the Mahakali Treaty in 1996 that concerns the integrated development of Mahakali River, including Sarada barrage, Tanakpur barrage and Pancheshwar project. Other issues that had been on the agenda of previous state visits were also controversial. Among the contentious issues were non-discriminatory treatment of Indian teachers working in Nepal and restriction of the movement of Indian vehicles at Raxaul customs point for failing to comply with Nepal’s emission standards.

Historically, the seed for deep-rooted suspicion of the southern neighbour were sown after the signing of 1950 Treaty that seeks India’s approval for the import of arms into Nepal. Except Kalapani and Susta, there are unsettled disputes in over 100 places along the Nepal-India border. Therefore, we should learn a lesson from our past experiences for the successful implementation of the accords made during Koirala’s visit. The goodwill visit has strengthened friendly ties between the two countries and is expected to help stabilise Nepal’s economy and kick start reconstruction projects. Hence, Koirala’s visit was significant from political and economic points of view.

Pyakuryal is president, Nepal Economic Association