Prospects, Problems and Challenges arising from Nepal-India Open Border

Vidya Bir Singh Kansakar, Ph.D

None of the treaties between Nepal and India ever mentions the procedures for the regulation of the Nepal-India border. The trade agreement has specified the agreed routes for mutual trade. But there is no agreement regarding movement of the people and the agreed routes for movement of people of both countries along the border. As for trade, there are 22 agreed transit and customs posts along the Nepal-India border. The concept of open border between Nepal and India has still remained an enigma. Besides, there are several sub-customs posts. It is alleged that it is possible to have illegal movement of people and goods in collaboration with personnel deputed in those posts. There is no denying the fact that it is not unusual from the practical point of view to have illegal smuggling of goods, trafficking of girls to brothels in Indian cities, trafficking in narcotic drugs, arms and ammunition and movement of criminals and terrorists. In principle, both Nepal and India have positively agreed to control such illegal activities along the border, but there is lack of an effective and practical approach. So far as smuggling from Nepal to India is concerned, Mr. Sriman Narayan, the former Indian ambassador to Nepal, had once described it as smuggling by the Indians, to the Indians and for the Indians because of the craze for foreign goods in India and the import of Chinese goods (Sriman Narayan, 1970: 84). Inder Malhotra, a noted Indian Journalist, has remarked," Nepal's economic needs should be treated with maximum understanding and generosity even if India has to suffer losses here and there, provided no grave damage is done to the Indian economy. India's unwillingness to adopt such attitude has been due to the diversion of import and export between Nepal and India in which a particularly unsavory group of Indian businessmen in Nepal have been the main promoter as well as beneficiaries of the various rackets. If allowed unchecked, the activities of these ugly Indians may do incalculable damage to Indo-Nepal relations" (Malhotra, 1970:6).

Since the start of Nepal's foreign trade with the third countries, Indian business and industrial enterpreneurs started pouring into Nepal to benefit from the provision of foreign trade, because of the high demand for foreign manufactured goods in India and restriction on the import of foreign goods from abroad as well as very high import duties. Nepal became safe haven for the Indian business community to import foreign goods, which had a high demand in India, and to smuggle them to India. In the process of industrialisation in Nepal, Indians came in the forefront for investment by taking advantage of facilities such as foreign exchange to import machinery and raw materials, excise and tax exemption and foreign exchange bonus for the export of goods manufactured in Nepal. But the government's attempt to develop industries received a setback, because most of the Indian industrialists indulged in misappropriation of foreign exchange by importing second grade machinery and excessive raw materials to sell them in India. Recent incidents of the import of Indian carpets and garments into Nepal and their re-export to third country as Nepal's own products have rendered incalculable damage to the carpet and garment industries of Nepal.

It will be no exaggeration to state that this is due to the existence of massive corruption in the government bureaucracy, ad hoc policies, rules and decisions based on them, and lack of monitoring and evaluation. Moreover, there is no denying the fact that customs on both sides of the border are involved in corrupt practices. Despite the provision of access to market India for a large number of Nepalese manufactured goods with reduction in customs tariff as agreed under the trade agreement between Nepal and India, the problem lies with the non-tariff barrier, such as harassment to the Nepalese exporters by customs personnel and police patrols on the ground that they have not received any directives from the central government, or the items have more foreign components than stipulated in the treaty, and so on. . Nepal has been charged with dumping of Nepalese goods into India. As a result the extension of the trade treaty has not taken place. It is in the state of stalemate due to the demand of the Indian government that the provision of the quantum of foreign component included in Nepalese manufactured goods must be reduced. Despite the export of Nepalese manufactured goods as per the trade agreement, the trade deficit of Nepal with India has remained several times high and India has not shown any indication to reduce the trade deficit of Nepal with India. India has agreed to extend the present trade treaty for another three months only.

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