The signing of the trade and transit agreement with China in March 2016 (of which the protocol was signed in April 2019) followed by becoming one of the signatory countries of the Belt & Road Initiative (BRI) in May 2017 were of strategic importance to Nepal. These treaties directly serve as the transitional gateway for Nepal to improve its political position in China-Nepal-India geopolitical complex and its state of International trade and economy. These two agreements succeeded within the short period of couple of years drastically heightens the diplomatic relationship between Nepal and China. Meanwhile, it even challenges the Indo-Nepalese bilateral relationship that privileged India to maintain ubiquitous foothold in the economy and internal political affairs of Nepal.
As of now, complete reliance on India to allow passage for the landlocked Nepal to conduct its third-country trade and import critical energy resources has advantaged India with trade passage monopoly over Nepal. Such advantage has allowed India to also maintain substantial influence in the domestic political and economic affairs of Nepal to its benefit. On such ground, Kathmandu’s attempt to unilaterally pursue certain foreign and domestic policy ambitions unsuitable to the interest of New Delhi have even been met with unpleasant responses from the Southern regional giant. The responses primarily refer to the imposition of border blockades orchestrated against Nepal in the periods of 1989 and in 2015. Furthermore, the context of Nepal’s international trade scenario that has historically oriented towards India has also not remained economically beneficial for this Himalayan state. Such argument founds on the fact that Nepal suffers an average of 80% trade deficit in the last five fiscal years with India as it reportedly conducted an average of 60% of its total trade volume with the South Asian giant in the same fiscal years. While internal lackluster within Nepal ranging from unfavorable policy environment till infrastructure adequacy is partially to blame for Nepal’s trading incompetency, there are also certain arguments that acknowledge Nepal to have a very limited comparative advantage with India mostly in agricultural trade. It ultimately signifies the gradual need for Nepal to diversify its scope of trading partners in order to improve its international trade position.
At first and foremost, achieving the trade and transit agreement with China as part of the 10 pacts agreement package importantly allows Nepal to use ports in China to conduct its third-country trade and import critical resources. It emancipates Nepal from the need to completely rely on Calcutta and Vishakapatnam based seaports in East-Coast India for such purposes. In addition, the subsequent agreement between Nepal and China on the construction, management, and maintenance of the Xiarwa boundary river bridge in the Hilsa of Northwest border of Nepal (see agreement no. 2) further visualizes the distant potentiality for Nepal to directly import petroleum commodities from the gulf oil fields via West China. Such conceptualization founds on the aspiration of the China government to build corridors to connect West-China border cities with the Persian Gulf as part of the Silk Road Economic Belt (SREB) initiative to also open inland transshipment alternative for China’s energy supplies. And, with the potential to extend the inland connectivity from the Kashgar city of West China until Hilsa border via the 219 National Highway of China and Xiarwa bridge, the very alternative inland avenue for oil importation also remains feasible for Nepal. Most importantly, this diversification of avenues for procuring critical oil resources shall grant necessary geopolitical mileage for Nepal to take unfettered political-economic pathway that entirely suits its national economic well-being. Meanwhile, the subsequent pledges in second BRI forum and during auspicious visit of President Xi in 2019 by both governments to incorporate Nepal into BRI under the banner of Trans Himalayan Multidimensional Connectivity Network (THMCN) substantially improves the chances of such Trans-Himalayan connectivity of great strategic nature.
Nevertheless, the idea of diversifying Nepal’s trading avenues and routes away from being virtually dependent on India does not pertain to obviating India as a trading partner per se. Instead, this platform of BRI rather assists Nepal to more intensely engage with both Indian and Chinese economy to graduate its international trade context from being Indian dependent to Trans-Himalayan Interdependent in order to improve its trading platforms and avenues.
Last but not the least, the trade benefits for Nepal by engaging in the BRI can especially be pictured in terms of potentiality for generating Tri-country multipurpose tourism economy involving the regions of Tibet, Nepal, and the Uttar-Pradesh (UP) & Bihar respite with historically significant religious-cultural heritage and natural sceneries. Besides, the concept of aspiring Nepal as the gateway for the inland trade between China and South-Asia (see pp.21-23 of the issue link) also holds ample opportunity for Nepal to venture into trade assistive service industries to support its ascending service economy.
Analytical Perspective on Economics 
