The Indian assumption that Nepal will eventually yield to its pressure tactics might be correct. Sixty percent of imports into Nepal originate in India (which is excluding the third-country trade via Kolkata). Our currency is pegged to the Indian rupee; India enjoys disproportionate influence over the Nepali political establishment; and the open, porous border and our shared culture and heritage make it impossible for any other country to match Indian clout in Nepal. India also calculates that given its extensive economic ties with China (worth US $72 billion in 2014), the Middle Kingdom won't jeopardize one of the most important bilateral ties in the world over 'small fries' like Nepal. That is not all. The Indian political establishment seems to believe that the agitating parties in Tarai belt are fighting for a just cause.The question, then, is: Are Indian interests in Nepal best served through the sort of muscular diplomacy that has been in display of late? And can it afford to take its dominance in Nepal for granted? In our view, the answer, in both these counts, is a definite No. Given the potentially endless levers of power at its disposal in Nepal, India could have easily chosen less confrontational ways to put pressure on Kathmandu. Sooner or later, it would have had its way. In fact, never in the history of modern Nepal has any regime in Kathmandu been able to survive without India's blessings. The only person who dared go against India openly was Pushpa Kamal Dahal. Predictably, he was ousted from office within nine months of becoming prime minister, with India's covert sanction. But by choosing to so blatantly interfere and trying to corner the small, helpless, and effectively Indo-locked country, India might have irreparably harmed its interests in Nepal.
For the first time since the 1990 political change, the Kathmandu establishment is giving a serious thought to 'diversifying' its economic linkages, which, in Nepal's case, invariably means increasing trade with China and in the long run, connecting with the outside world through greater use of Tibetan passes. This is now a real prospect. If the Kathmandu establishment asks for it, Beijing—ever so keen to cultivate Kathmandu establishment to tamp down on Free Tibet activities—will be bound to extend some kind of material help to Nepal. Such offer of help to a beleaguered neighbor will be hard to interpret as 'interference' in the Indian 'sphere of influence'. Ominously for India, a tiny opening for greater Chinese involvement in Nepal could soon open a floodgate for the entry of Chinese traders and investors. After the ouster of pro-China Mahinda Rajapaksa in Sri Lanka—and the consequent rise in India's influence in the island state—China has been searching for another partner to establish a stronger foothold in South Asia. Nepal, bitterly shunned by India, fits the bill perfectly. International relations, India should be well aware, make for strange bedfellows. And not just China, other powers will also be happy to step in the vacuum left by India. It's hard to understand why India has become so ready to risk its primacy in Nepal.
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