The Economy Diplomacy Is a Key To Enhancing Nepal - India Relation
Gopal Krishna
Agrawal is the
National Spokesperson on Economic Affairs for ruling Bhartiya Janata Party of
India. How does he see Nepal-India economic relations? How can this relations
be enhanced? Mahavir Paudyal and Kosh Raj Koirala spoke to him on Nepal-India
economic ties and other aspects of bilateral relations while he was in
Kathmandu last week.
We are working on making Nepal-India relations much better than what it is today. Nepal is very important country for India’s international relations. This is why Prime Minister Narendra Modi visited Nepal right after assuming office in 2014. We find so many common issues with regard to economy between Nepal and India. Thus we can have a very good business and economic relations. Economic relations are much important for these countries because economic relations are becoming more important between and among the countries across the whole world. Economic issues can be more easily identified and they are as easier to resolve because they are based on give and take and mutual benefits. There will be few contentions in business relations than would be with political relations. You say so but Nepal has had huge trade deficit with India.
I was recently speaking
on foreign direct investment issue here in Nepal. Across the world, every
country is looking to attract more FDI. FDI is one of the criteria which
decide what will be the future of country’s economy. It is important for
capital formation and building of infrastructures. India has been successful in
attracting huge FDI over the last few years. We have been able to get 62
billion dollars of FDI, which is the highest FDI across the world. But a
country cannot raise FDI rate simply by asking others to come and invest. Most
of such investments come from the private sector. And private investment comes
to those places where you have strong regulatory bodies. They look into
which regulatory set ups are there that can come to their aid when something
goes wrong with business. Foreigners are ready to invest in India because we
have strong and autonomous set ups in many of the fields such as banking,
capital market, insurance, telecommunications etc. For each of these sectors,
we have a separate regulatory body to boost the confidence of the
investors.
Thus the more you build
autonomous and independent regulatory institutions the more it will raise
confidence of foreign investors. And the more you will be able to attract FDI.
I think this applies to Nepal as much it does to India.
The
importance of FDI is obvious but how can Nepal reduce trade deficit with India?
One of the ways would be if the two countries maintain relations with
industrialists with both sides, instead of focusing on only
government-to-government relations. It’s better for Nepal and India to
organize bilateral economic conclaves at a reasonable frequency so that they
can discuss issues and find solutions. Private sector bodies of Nepal can
have direct contact with Indian investors through Indian business
organizations. If they talk with each other directly, many things can be
settled. The government of Nepal can also communicate their policies directly
with the Indian industrialists. If Nepal establishes direct contact with Indian
industrialists, it would know their concerns and also find out the factors that
have hindered investment in Nepal. The government will also come to know
directly what their concerns are and how those concerns can be addressed.
Equally important is to incentivize the investment. Creating Special
Economic Zones, cluster development models, integrated supply chain models with
global suppliers etc are some incentivizing factors. They have done a lot
for India. Such ideas might be as useful for Nepal.
Many Indian investors
are willing to invest in Nepal. Nepal has a lot of hydro potentials. After the
success of Arun III more companies are interested to come to Nepal and
invest. Indian companies are also interested to invest in tourism,
education and many other sectors. Private education industrialists can set up
their institutions in Nepal. If two countries have good business
relations it will directly contribute to minimizing tensions, if any, on
diplomatic and political fronts. Economic diplomacy can become a key tool
in further enhancing Nepal-India relations. This is what is happening
globally. Leaders across the globe are now more focused on economic issues.
Through economic cooperation and considerations it is easier to build better
diplomatic relations.
The
demonetization drive was criticized by some sections at one time. How has it
helped Indian economy?
You cannot look into any initiative in isolation. When our party took over,
there was a problem with regard to tax compliance and large part of business
transaction was not being channeled through financial institution
mechanism. There was a need to push transaction through digital banking.
We had to establish the audit trail of business transactions. And there was a
need for identifying the concerns of liquidity and the issue of shifting the
informal sector into formal sector. Several other steps together with
demonetization helped into creating an ecosystem whereby we are moving informal
sector into formal sector. The GST could not have been as successful if
we had not made concerted efforts to moving towards digital economy and digital
banking. Cumulatively, demonetization has created an ecosystem that has greatly
helped minimize corruption. We have been able to establish audit trail of all
transactions. The government has deregistered around four hundred
thousand companies found in money laundering. Because of these steps, we now
have more transparent and corruption-free eco system and it’s easier to do
business in India. Most of all, tax compliance has increased, thanks to audit
trail.
Demonetization
has affected a lot of Nepalis. The government of India has refused to exchange
Indian currency possessed by many Nepalis.
I think this is for Reserve Bank of India to decide. Central banks of Nepal and
India should work to resolve issues related to Indian currency in
Nepal.
One of
economic issues in India at the moment is depreciation of Indian rupees against
US dollars. This might have direct bearing on Nepali economy for our currency
is pegged with Indian currency.
Rise of petroleum price and depreciation of Indian rupees against dollars are
two issues facing us at the moment. There are global factors behind it. This
could have been addressed by direct intervention by the central bank but the
government has decided it is not yet time for intervention for domestically we
are in better situation. Our GDP grew by more than 8.2 percent. Inflation
is well under control. It is 3.6 percent at the moment. Our foreign exchange
reserve is more than 24 billion dollars, which is very healthy. Our current
account deficit is well within the limit. And we are getting a lot of
FDI. Depreciation is largely driven by external factors. Our domestic factors
do not require us to act for immediate strong measures.
Exporting
ginger to India from Nepal has rarely been a hassle-free undertaking. Now and
then Nepal-bound containers are held up in Kolkata port.
You should not take one or two sporadic incidents and make a judgment. The
intention of the Indian government is very clear. Our focus is on smooth
trade between the two countries and establishing even better connectivity for
this. We are developing connectivity infrastructures including with Nepal
to enhance trade relations. India has put BBIN in priority for the same
purpose. The government is open to resolving all kinds of issues.
Media reports sometimes create completely different perceptions. We need to
read them critically. We have good trade relations even with countries with
which India does not have so special relations. We have special relations
with Nepal. There is no reason why we cannot have smooth trade with the
neighbor with which we have a special relations.
One of
the persistent concerns of your party has been regarding Hinduism in Nepal. One
of the former Nepali prime ministers recently said India imposed blockade on
Nepal in 2015 because Nepali leaders failed to address India’s concern related
to Hindu state.
I think it is unwise to link what you call blockade with Hindu concern. Indian
government has consistently denied blockade. Yes, India showed some concern for
people of Tarai but at the same time India has always maintained that it’s up
to Nepal to do whatever is best for Nepal. The opinions of general people
should not be equated with opinions of the government. As for Hindu
state, we had always appreciated Nepal as a Hindu state because over 85 percent
of Nepalis are Hindus. India is also a Hindu dominated country. So there
have always been positive sentiments among Indians regarding Hindu state status
of Nepal. But that too, like I said, is the public opinion. India
is a secular country. We cannot say what should be the status of Hindu religion
in Nepal. It’s for Nepal to decide. The government does not have any
position on this. What individual leaders say are individual opinions.
They should be understood as such.
