India shares land or maritime borders with other countries of South Asia either in the Himalayas or in the Indian Ocean and has historically considered the South Asian region as its sphere of influence to maintain its security against external influence. New Delhi has considered small South Asian countries such as Nepal and Bhutan vulnerable to external pressures because of their incapacity to provide for their own security.

Keeping this in mind, India’s first prime minister, Jawaharlal Nehru, retained the hegemonic spirit of the protectorate arrangements of British India in the Himalayas as a legacy of and successor to imperial rule when he signed bilateral agreements with Nepal and Bhutan during 1949-50. India’s favorable geographic location vis-à-vis Nepal and Bhutan also facilitated its overriding influence in these states henceforth.

Gradually, India’s neighborhood policy has been shaped by security concerns emanating from uncertain atmospherics in the South Asian region precipitated by a surge in Chinese economic as well as strategic presence largely because of its neighbors’ preference for and attraction toward Beijing’s rising economic and military influence.

Recently, Indian External Affairs Minister S Jaishankar was in Kathmandu on a two-day visit and chaired the fifth Joint Commission Meeting and a memorandum of understanding between the Food Safety and Standards Authority of India and the Nepalese Department of Food Technology and Quality Control was also signed.

Meanwhile, various facets of bilateral relationship including agreements have been reviewed by experts of the two countries and a report of the Eminent Persons Group (EPG) is waiting for an Indian response. While Jaishankar conveyed Prime Minister Narendra Modi’s message to Prime Minister K P Sharma Oli that the former would receive the report soon, suspicions persist in Kathmandu that the delay is being caused by New Delhi’s apprehension over and reluctance to accept certain recommendations of the group.

India and Nepal share not only social and cultural ties historically but, more important, an open border allowing seamless movement of people to further such ties. India and Nepal have cooperated on security issues with an objective to bolster each other’s security.

Sources of insecurity to India’s territorial integrity have stemmed from insurgency in the border areas apart from the continued threat of Chinese influence. Aside from training Nepali soldiers every year, India played a part in training and equipping Nepali police. The two countries established security mechanisms such as the Nepal-India Bilateral Consultative Group on Security Issues. India has special Gurkha regiments comprising soldiers recruited from Nepal within its armed forces to bolster security ties between the two countries.

However, each has held different perceptions and approaches to addressing issues vital to the other engendering hitches in the bilateral relationship. While India cautiously guarded against the swing of the political establishment of the small country sandwiched between two great powers from tilting toward Chinese influence and continued to pour in substantial amount of aid to keep the Himalayan state within its sphere of influence, Nepal often viewed India’s policy as an encroachment into its internal affairs.

Growing China-Nepal relations under the Belt and Road Initiative (BRI) and enhanced Chinese investment in connectivity and infrastructure projects to inter-link the two countries in several sectors indicated India’s waning influence in Nepal, as India because of its suitable location vis-à-vis Nepal (which led experts to consider Nepal as more India-locked than landlocked) could have contributed to quality transportation-system, infrastructure and energy projects with less investment compared with China.

In the evolving circumstances, Modi has relied on soft power to present a positive image of India to the people of Nepal, by visiting places underlining cultural commonalities between the two countries such as Janakpur, where the Hindu god Rama’s wife Sita was born. He also focused on bilateral economic cooperation by laying the foundation for the Arun III 900-megawatt hydroelectricity project. The prime ministers of both countries launched a bus service between Janakpur in Nepal and Ayodhya in India – two historical places with common cultural connections.

Factors affecting India-Nepal relations

India has been witnessed influencing domestic politics within Nepal in order to keep it within its orbit of influence so that it could preserve its security. New Delhi in the past supported the institution of the monarchy, then redirected its support to democratic forces and was allegedly involved in undermining the rise of communist parties. While New Delhi claimed that the new constitution of Nepal was discriminating against the Madheshi population – who shared common ethnicity with sections of people within India – it was blamed for using an (unofficial) economic blockade as a pressure tactic to bring in political influence in Kathmandu which contributed to souring of bilateral relations toward the end of 2015 much like the blockade in 1989-90.

The Oli government’s decision that the Nepalese Army would not participate in the first ever joint military exercise of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) toward the end of 2018 as well as its willingness to participate in a joint military exercise with China – Sagarmatha Friendship-2 – and continued attempts at lessening Nepal’s economic dependence on India by securing port and road facilities in China unambiguously pointed to the country’s desire to balance China against India to secure independence.

Under Oli’s leadership, Nepal finalized the protocol of the Transit and Transport Agreement with China in Kathmandu with an objective to allow Nepal access to four Chinese ports in Tianjin, Shenzhen, Lianyungang and Zhanjiang including access to dry ports and roads facilities intended to diminish Kathmandu’s trade dependence on New Delhi.

While Nepal, a landlocked mountainous country lacking capital and technology, needed large dams and hydropower in order to industrialize and develop, India could not fulfill Nepalese expectations of developing river-water resources to produce the required hydropower to meet the needs of its growing economy. The continuing perception that the water agreements concluded with India were not advantageous to the country and India’s failure to deliver on its commitments in time led to Nepalese distrust of India’s engagement and to uncertainty over implementing the Mahakali Treaty and commencing the construction of the Pancheswar Dam project under the treaty.

India constructed the Sarada Barrage on the Mahakali River, whereas many people in Nepal considered the treaty unfair because of the allocation of too little water to the country. Similarly, India-financed projects such as the agreements to build the Kosi Barrage in 1954 and Gandak Barrage in 1959 were perceived as insufficiently advantageous to Nepal.

Nepal has not only been seeking Chinese finance and collaboration to develop its water resources, recent years have witnessed a significant rise in Nepal’s economic ties with China. India’s investment in Nepal pales in comparison to those of China, which has turned out to be Nepal’s biggest foreign investor.

Even while New Delhi extended humanitarian assistance soon after an earthquake hit Nepal in 2015, such a non-military and assistive role instead of dispelling the hegemonic perception about India drew criticisms from several quarters, because the Indian media were alleged to be insensitive and biased in their coverage of the disaster. Indicating the country’s desire to overcome the limitations imposed by India-locked geography that enhanced the country’s dependence on New Delhi, Prime Minister Oli not only signed an MoU with China to build a strategic railway link connecting Tibet with Kathmandu through the Himalayan terrain, there were indications as well that China aimed at laying down a “cross-Himalayan connectivity network” – a mega inter-linking project in the areas of aviation, trading ports, highways and telecommunications.

Some experts believed Beijing’s support in critical areas such as providing oil (during the economic blockade) not only aimed at ending India’s monopoly over Nepal’s fuel imports, it helped China forge strategic relationship with Kathmandu.

Ways forward

India has sub-regional initiatives such as the Bangladesh, Bhutan, India, Nepal (BBIN) Initiative, which could be an alternative to China’s BRI. It also has connectivity agreements such as building rail connectivity between Kathmandu in Nepal and Raxaul in India, establishing inland water connectivity for movement of people, and laying down a petroleum products pipeline from Motihari in India to Amlekhgunj in Nepal. However, India has relied more on aid and extending lines of credit to maintain its influence in Nepal rather than contributing to development of infrastructure through continued engagement and delivering the targets in time. India’s engagement in Nepal appears to be reactive rather than proactive.

Nepal as a developing economy will need investment in key areas of its growth such as agriculture, manufacturing, information technology and tourism. India must focus on these areas and assist Nepal in its development. India’s aid to the country has surged significantly but Nepal needs more investment, economic cooperation and timely completion of bilateral projects.

New Delhi can correct the trade imbalance with the Himalayan country only by pouring in more investment and assisting it in the areas of manufacture. India has an opportunity to capitalize on people-to-people contacts facilitated by its open border, suitable geographic location and historical and cultural ties (the factors that place India in an advantageous position compared with China) that exist between the two countries predominantly populated by Hindus.

India’s policy needs to be informed by the changes occurring in the societies and politics in the neighborhood and needs to be flexible enough to incorporate such changes. The social and political classes within the Himalayan states of Bhutan and Nepal seem inclined to rewrite the fate of their countries by transforming and overcoming the deep-seated psychology of being small and landlocked.

Diversification of foreign relations and opening up of opportunities of higher studies at various places other than India are changing the educated class’s perception about India’s interaction with their countries. For instance, some Nepali experts argue that India as a big power as well as a neighbor must not view Nepal as a small India-locked country but New Delhi needs to notice how the Himalayan country has been helpful in combating cross-border organized crime, the drug trade and human trafficking, and banning Nepali soil to various separatist organizations that concern India.