India-Nepal trade seems to be a one-way affair

The relationship between Nepal and India is very special and unique. Our interdependence is not a mere creation of mother nature, it is also the result of the inter linkages between our peoples dating back to prehistoric days. We share many common cultural and historical traits, values and concerns.

India’s economic progress in recent days is well recognized all over the world especially in Nepal. We, as a true neighbour and friend, are happy to see India becoming a major economic power. We in Nepal feel that we can and should benefit from the rapid economic progress and prosperity in our neighbourhood. It is also in India’s interest that her neighbours prosper. Here I would like to repeat the words expressed by Rt Hon’ble Prime Minister of India Dr Manmohan Singh during his recent visit to Bangladesh, “India will not be able to realize is own destiny without the partnership of South Asian neighbours.”

Here I should be honest; Nepal has not been able to realize its true potential. We the private sector of Nepal are optimistic about the future. We feel Nepal is now entering into a phase of wealth creation and accelerated development. Changes of epic proportions are taking place.

Our prime minister has taken the drafting of the constitution and conclusion of the peace process as the first priority, and we agree to it as a functional democracy only can ensure all round development of the country. He has already made initiatives like the formation of a Board of Investment and declaration of 2012-13 as Nepal Investment Year as requested by the FNCCI. In his initiatives, the FNCCI could also conclude a tripartite agreement with the government and trade unions which we hope will pave the way for sustained industrial peace in Nepal. He has also created a special economic cell in the Prime Minister’s Office and assured the private sector to meet every month.

Indian investment abroad is growing by leaps and bounds. According to reports, during the last fiscal year, Indian companies invest about US$ 44 billion abroad. We in Nepal would like to have some share of this outbound Indian investment. Nepal’s investment rules are quite progressive. We allow up to 100 percent ownership in almost all areas. Tax rates are lower by South Asian standards. Import and export rules are liberal. We call on Indian friends to look at Nepal as a potential destination for investment.

Here I would like to mention that major Indian companies like Surya Nepal (a subsidiary of ITC), Nepal Lever, Dabur Nepal, Everest Bank and Nepal SBI Bank, to mention a few, are extremely profitable companies in Nepal. We feel that areas having potential for investment in Nepal include energy, infrastructure (fast track road, railway, airport), tourism (religious, health, adventure), mining and minerals, Information and Communication Technology, agriculture (high value agriculture products, food processing), health and education sector, herbs and herbal products. You can very well invest in these areas.

Nepal has unparalleled hydro power potential. But currently she is suffering from an acute power shortage. Nepal’s power potential can be harnessed when infrastructure like transmission lines can be developed, which will create a win-win situation for both nations in the short and medium terms.

Already, there has been a commitment of large scale investment by the likes of GMR, Sutlej, Bhilwara and TATA Power. And we also acknowledge that in this process, there has been teething problems in initiating these projects. But I am sure that these hindrances and obstacles will be removed. The FNCCI in collaboration with the government is developing a profile of 50 viable projects for investment, which could be marketed to potential investors. All these, I hope, will certainly boost the interest of foreign investors like you to invest in this fertile land of opportunity.

India is the biggest trading partner of Nepal commanding an almost two-thirds share of the total trade. However, the trade seems to be a one-way affair. Nepal’s imports from India are more than six times greater her exports. The trade deficit of approximately US$ 3 billion is unsustainable. Nepal, in fact, is overstretched in managing exchange and payments for imports from India. We have to find ways and means to correct this imbalance. We need to develop new products and services that have a ready demand in India and also work on removing barriers coming in the way of increasing exports from Nepal.

I recall the role we played in getting the historic Nepal-India Trade Treaty in 1996. It was the joint recommendation of the FNCCI-CII Joint Economic Council submitted simultaneously to the then Prime Ministers PV Narasimha Rao and Sher Bahadur Deuba that paved the way for the treaty. As a direct result of that treaty, many Indian companies made investments in Nepal, and trade from both sides grew many fold.

But recently, the momentum seems to have slowed. It is time we took the initiative once again. After all, it is the business community that makes trade and investment happen. Using this occasion I call on the governments of both countries to use the existing mechanism of the private sector to present to the two governments an economic strategy plan within the next six months. The private sectors of the two countries have been traditionally working together. We very much cherish the memory of working with ASSOCHAM and enjoy working with FICCI within the regional framework.

We may have our share of problems and issues. But as our Rt Hon’ble Prime Minister Bhattarai has put it, “Once there is trust, we are sensitive and empathize with each other, the most difficult issues can be resolved.” That’s why those who sail through these struggles will be the ultimate winners.

Excerpts from the speech given by FNCCI President Suraj Vaidya at a business luncheon organised by Indian private sector bodies during the prime minister’s recent Delhi visit