How India-Nepal trade faces potential threat if political crisis drags on in the Himalayan nation
Nepal's political turmoil has prompted India to increase border security, fearing cross-border smuggling and security threats. The instability also threatens bilateral trade, impacting supply chains and exports. India is adopting a wait-and-watch approach while monitoring the situation closely, concerned about potential shortages of essential goods in Nepal. Past political unrest has hampered trade between the two nations, highlighting the vulnerability of their interconnected economies.
New Delhi: Nepal's ongoing political turmoil has left India in a cautionary mode, with alerts being sounded in the border states. The Bihar Police, Uttar Pradesh Police, and the Sashastra Seema Bal (SSB), have been asked to keep a constant vigil along the border by the Central agencies.
There are fears that the Gen Z protests that forced Prime Minister KP Sharma Oli’s government to crumble could potentially lead to cross-border smuggling of drugs and arms, and pose security challenges for border areas in India. Pakistan’s intelligence agency, the Inter-Services Intelligence (ISI), has reportedly been using the Nepal border to facilitate the infiltration of terrorists into India.
India and Nepal share 1,751-km-long unfenced border. A high alert has been put in place along this porous stretch. Police teams and SSB personnel are carrying out joint patrols, while security forces are keeping a close watch on all cross-border activities.
Wait-and-watch approach
However, the political crisis doesn't only pose security challenges but a prolonged chaos could hit bilateral trade between the two neighbours as well. India is adopting a "wait-and-watch” approach as trade experts have alerted that prolonged instability could affect supply chains and exports, Livemint reported.
An official was quoted as saying to the newspaper that India was keeping a close watch on the situation and is in constant contact with the export promotion councils to assess any potential risks. Another official underlined that maintaining a smooth flow of trade is important, along with sustained engagement with Nepal to protect the long-standing trade partnership.
In Uttar Pradesh's Bahraich, almost 200 trucks carrying petroleum products, LPG cylinders, cement, and food grains to Nepal were left stranded. Only a few tankers with essential supplies were permitted to cross into the neighbouring country under Army protection.
The disruption can cause a challenging situation if it drags on, as there will be potential shortages and delays in essential goods reaching Nepal’s markets.
How does the bilateral trade stand
India and Nepal are key trading partners. India exported goods worth $7.32 billion to Kathmandu in FY25. Imports from Nepal into India stood at $1.2 billion. In FY24, India's exports to Nepal were worth $7 billion while imports were pegged at $0.831 billion. Petroleum products, vehicles, machinery, electrical equipment, and food items are mostly exported by New Delhi.
What's the potential threat
As Nepal is landlocked, the Himalayan nation relies on road transport for the majority of its trade with India. Therefore, it is crucial that these roads don't face any hinderance during transportation.
"Any disruption in transport routes, customs operations, or cross-border logistics could delay shipments, impacting both Indian exporters and Nepali consumers who rely on these goods,” Ajay Srivastava, co-founder, Global Trade Research Initiative (GTRI) told Livemint.
A prolonged political unrest will spell mounting woes and if it spreads to other cities, road transport could be affected and trade go for a toss.
Some time back, political unrest in Nepal led to protests and road blockades. There were disruptions at border points such as Raxaul-Birgunj and Sunauli-Bhairahawa. This slowed or halted the movement of goods, and delivery of key supplies between the two countries was badly affected. Perishable goods, pharmaceuticals, and industrial supplies, are extremely sensitive to delays. Therefore, traders are praying that the political uncertainty in Nepal ends soon.