The success of Nepal's smart neighbourhood policy will ultimately depend on domestic capacity and policy consistency
Foreign Minister Shishir Khanal's recent visits to New Delhi (5-7 June) and Beijing (14-17 June) were more than routine diplomatic engagements. They offered the first substantive indication of how Nepal's new government intends to navigate an increasingly contested geopolitical environment and signalled the emergence of a coherent foreign policy doctrine for a changing world.
The timing of these visits is significant. The international system is undergoing a profound transition from the relative stability of American-led unipolarity to a more fragmented and competitive multipolar order. The announcement of a U.S.-Iran Memorandum of Understanding to end the 110-day conflict, the simultaneous diplomatic activism of Washington, Moscow, and Beijing, and the intensifying competition among major powers all point towards a world in strategic flux. Economic interdependence is increasingly being weaponised, supply chains are becoming instruments of geopolitical competition, and countries across Asia face growing pressure to align with competing blocs.
For Nepal, situated at the intersection of India-China competition, the central challenge is not choosing sides but preserving strategic manoeuvrability –maintaining autonomy while leveraging opportunities from all major powers. In this context, Nepal's immediate neighbours, the US-led West, and influential middle powers collectively constitute critical pillars of its economic transformation, diplomatic flexibility, and strategic resilience.
The emerging doctrine of the new government can best be understood as a three-layered framework: Active Non-Alignment as the grand strategy, Smart Neighbourhood Policy as the regional doctrine, and Smart Diplomacy as the instrument of execution.
Active Non-Alignment seeks to safeguard Nepal's sovereignty and strategic autonomy amid intensifying great-power competition. Smart Neighbourhood Policy translates that objective into Nepal's immediate geopolitical environment by recognising the realities of geography and interdependence. Smart Diplomacy becomes the practical means through which Kathmandu engages widely, aligns selectively, and decides independently. At its core, this framework rests on a simple proposition: India is indispensable, China is an imperative partner, the US and allies are diversifiers and balancers, and middle powers are strategic leveragers.
You can integrate both visits under a single section "The Neighbourhood First Imperative", emphasising that Nepal's diplomacy is not about choosing between India and China but maximizing opportunities with both.
China and India are not competing choices for Nepal but complementary strategic partners serving different national interests. India remains indispensable for Nepal's economic integration, transit access, and security stability, while China is imperative for investment, technology transfer, infrastructure development, and economic diversification. These diplomatic engagements reveal an emerging foreign policy doctrine rooted in Active Non-Alignment, a Smart Neighbourhood Policy, strategic autonomy, and economic statecraft rather than pursuing equidistance nor choosing between competing powers.
The decision to visit India first was in recognition of geopolitical reality-reaffirmed India's position as Nepal's principal economic partner and primary gateway for transit, market access, and hydropower exports. It also reassured New Delhi that the new government seeks stable and constructive engagement based on mutual interests. Security considerations further reinforce India's centrality. Political stability in Nepal and the broader Himalayan region remains closely linked to developments in India. Regardless of periodic disagreements, India remains Nepal's most consequential strategic partner.
The subsequent visit to Beijing highlighted another reality: Nepal's strategic stability through development ambitions cannot be fulfilled through a single partnership signalled a transition from geopolitical rhetoric to economic statecraft. During the visit, Chinese Foreign Minister Wang Yi reaffirmed Beijing's commitment to Nepal's development, emphasising that "a close neighbour is better than a distant relative." The message reflected China's desire to remain a reliable development partner amid an evolving regional environment. Wang called for expanding cooperation under the Belt and Road Initiative (BRI), strengthening cross-border connectivity, and creating a transparent, predictable, and rules-based business environment capable of attracting greater Chinese investment. At the same time, he applauded Nepal's continued adherence to the One-China Principle and its support for China's core interests, including Taiwan and Xizang (Tibet), highlighting the importance Beijing places on political trust as the foundation of economic cooperation.
Yet diplomatic experience also offers an important lesson. External opportunities alone cannot drive national transformation. The principal constraints on cooperation approach have often been Kathmandu's own institutional weaknesses, regulatory bottlenecks, and limited implementation capacity. The challenge, therefore, is not managing the two neighbours as a geopolitical counterweight but strengthening domestic institutions capable of translating diplomatic goodwill into tangible economic outcomes.
The success of Nepal's smart neighbourhood policy will ultimately depend on domestic capacity and policy consistency. Strategic autonomy cannot be sustained merely through balancing external powers; it requires strong institutions and effective governance. The twin visits therefore represent a smart neighbourhood policy that recognises an enduring geopolitical truth: Nepal's prosperity and sovereignty will be best served not by choosing between India and China, but by engaging both with confidence, pragmatism, and strategic clarity.
If China and India are the two pillars of external relations, the US and its allies provide diversification and strategic balance. The Millennium Challenge Corporation compact illustrates this role by supporting critical infrastructure and offering alternative sources of development financing.
However, unlike India's geographical permanence or China's long-term regional interests, Western engagement can fluctuate with domestic political changes. Consequently, the West cannot be an alternative anchor of Nepal's foreign policy but remains essential for expanding Nepal's strategic options.
An often-overlooked dimension of Nepal's foreign policy is the importance of middle powers such as Australia, Canada, Germany, Japan, Russia, Singapore, and South Korea. These partnerships provide forms of leverage that reduce overdependence on major powers and broaden strategic choices.
The significance of the foreign minister's visits lies not merely in the diplomatic messaging but in the strategic doctrine they revealed. Yet success will ultimately be measured by delivery – greater investment, expanded trade, improved connectivity, technology transfer, and job creation.
For Nepal, active non-alignment exercised through smart diplomacy and operationalised through a smart neighbourhood policy may be the country's most viable grand strategy for preserving sovereignty and advancing national interests in an era of intensifying great-power competition.
Basnyat is Maj. General (retd), Nepali Army