Nepal’s historic parliamentary and provincial elections have opened a new window of political, economic, and geostrategic opportunity. A new generation of Nepalese now seeks greater political stability, quality development, and good relations with its two neighbors, China and India. The future of the country will also depend on its ability to escape its landlocked condition by developing trans-regional connectivity and reviving its links with the Bay of Bengal.

As part of its Neighborhood Watch discussion group, Carnegie India hosted Sujeev Shakya for a conversation on the challenges facing Nepal’s next government and options for India to continue engaging and supporting its northern neighbor. Shakya is the CEO of Beed, an international management consulting and financial advisory based in Kathmandu, and runs the Nepal Economic Forum. 

Discussion Highlights

  • Popular Vote for Stability: Participants discussed Nepal’s massive electoral process, which included the first-ever provincial elections under the new federal constitution, and the first parliamentary elections since 1999. The discussion focused on the importance of political stability for the country’s long-term developmental agenda. While the Left Alliance appears to be the most popular option to ensure this, there will be significant challenges for the Communist Party of Nepal (Unified Marxist Leninist) and Communist Party of Nepal (Maoist) to fully integrate and deliver on their common agenda, participants said. Power-sharing struggles and the temptation to, once again, amend the new constitution, could also bring back instability to the country, participants added. Some participants also observed that the Madhesi quest for greater autonomy and constitutional stakes seems to be on the backburner, having suffered from both partisan fragmentation in the Terai and from persistent opposition among the more conservative wings that continue to dominate all major national parties in Kathmandu.
  • New Generation Takes Over: The discussants also looked at the rise of a new generation in Nepal, one of the world’s youngest countries, with 60 percent of the population under the age of 40. For the first time under the new constitution, and in addition to the local elections held earlier this year, the country will have 550 elected representatives to seven new provincial assemblies, participants said. This will lead to greater political decentralization and the emergence of a new class of decisionmakers with significant regional autonomy across different governance sectors. India, China, multilateral organizations, and developmental partners will have to expand their outreach programs beyond Kathmandu to target this new generation of younger Nepalese politicians and entrepreneurs, they added. 
  • Development: Participants also noted that there is a growing debate in Nepal about the issues of sustainable use of resources, long-term development, and the overall quality of economic growth. The country’s central location as part of a larger ecosystem that connects the Tibetan plateau, the Himalayas, the Gangetic plains, and the Bay of Bengal, requires a deeper dialogue that must transcend political borders, discussants asserted. Some of these issues, they added, could be addressed during the upcoming BIMSTEC summit, which Kathmandu is expected to host in early 2018.
  • Geostrategic and Connectivity Challenges: While sandwiched between India and China, participants observed that Nepal is growing in geostrategic significance. They explained that Beijing is making new inroads into the country through a massive public diplomacy program that targets Nepalese youth, scholars, and journalists. Recent agreements on trade, and a first-ever joint military exercise, reflect China’s rising profile in the country. They added that since Kathmandu already signed on to the Belt and Road Initiative, especially to reduce its reliance on India, China is likely to soon offer massive investments in key transportation, hydro, and energy infrastructure projects. Chinese President Xi Jinping is also expected to visit Nepal soon, discussants said, which would be the first ever such high-level visit to the country. These developments will put greater pressure for India to deliver more on economic assistance and other key investments. Participants also discussed the possible reasons behind India’s reluctance to support any type of trilateral connectivity projects with China through Nepal but noted that, unlike in the past, New Delhi is now finally focused on developing cross-border rail, road, and energy linkages to increase interdependence. Rather than seeing connectivity with China as a threat, some participants also noted that India should be willing to explore the possible economic advantages of an India-Nepal-China corridor. 

Carnegie India’s Neighborhood Watch offers a platform for young analysts to interact with visiting experts from South Asia and informally discuss developments in India’s regional neighborhood.