By N Chandra Mohan The outcomes of Nepal’s prime minister Pushpa Kamal Dahal or Prachanda’s four-day visit to India — his first foreign visit since he assumed office last December – exemplify the steady pace at which sub-regional integration is making progress in South Asia. SAARC may not have lived up to its potential but that hasn’t prevented greater connectivity between India and neighbours like Nepal, Bhutan, Bangladesh (and Sri Lanka as well) through road, rail linkages and inland waterways, power grids, fuel pipelines and border crossing facilities that will promote trade. These were indeed the thrust areas that featured in the meeting of the PMs of Nepal and India. Dahal’s visit focused on economics – rather than contentious border issues which he urged India to resolve through bilateral talks – due to the crisis the 30-million Himalayan nation is facing due to the Covid-19 pandemic, conflict in Ukraine and global economic slowdown. A post-Covid rebound in tourism and remittances may have helped Nepal but it is set for lower growth of 4.1% in FY 23 (mid-July to mid-July). There are balance of payments difficulties with reduced foreign exchange buffers to purchase essentials like food and fuel. To cope with the mounting pressures, Nepal has even approached the IMF. Obviously, greater engagement with a powerful neighbour like India, which is also its largest trading partner, will help in a big way. Also read: BrahMos Missile is 25 years old! IAF keen to get BrahMos-NG soon “Hydropower is one key area of cooperation between the two nations, so my priority should be securing India’s investment in the hydropower sector, ensuring our national interest and welfare are well-served” Dahal told Nepal’s parliament before his visit. A clutch of agreements like developing two hydro projects, Lower Arun and Phukot in western Nepal (Karnali ), were key outcomes in line with the India-Nepal joint vision statement on power sector cooperation in 2022. This envisioned joint development of power projects in Nepal, development of cross-border transmission infrastructure, bi-directional power trade and institutional cooperation. A long-term agreement allows Nepal to sell 10,000 MW of power to India over a 10-year period. Power cooperation indeed is a game changer in bilateral relations as Nepal’s hydropower potential is in excess of domestic requirements and it is now exporting electricity to India. In Nepal, during winter domestic demand for electricity increases while supply decreases while during summer demand decreases while supply increases. Till recently, this Himalayan nation was importing electricity from India to meet domestic demand. But now all of this is changing as it has become an energy surplus nation, with ambitions to sell even to Bangladesh. Currently, Nepal is allowed to sell 452.6 MW of electricity generated by 10 hydropower projects to India. This is a major item of its exports and earned Rs 12 billion (Nepalese rupees) last year. Besides power, regional connectivity initiatives include extending the first-ever cross-border petroleum products pipeline in South Asia—from Motihari in India to Amlekhgunj in Nepal — to Chitwan in central Nepal as well as constructing a new pipeline in eastern Nepal. The two leaders virtually inaugurated integrated check posts at Rupaidiha in India and Nepalgunj in Nepal. Similarly, the two leaders flagged off a cargo train from Bathnaha in Bihar to a custom yard in Nepal. A trade and transit agreement will allow Nepal to use rail linkages to access a river transportation network along the Ganga with multimodal terminals at Sahibganj and Varanasi that provide cargo connectivity through the waterways route to global markets. India must further this process of regional integration so that neighbours like Nepal have a greater stake in its rise as one of the fastest growing economies in the world. At a time adverse headwinds are buffeting global trade, India must step up its engagement with the neighbourhood. India’s external affairs minister mentioned in a recent article that the country’s approach to its immediate neighbours has been “generous and non-reciprocal” and backed by vastly improved project delivery, adding that improvements in regional connectivity or hard infrastructure have been matched by arrangements to facilitate greater flows of goods and services. Also read: India’s defence sector is embracing self-reliance in manufacturing and technology Even so, there is a warrant for unilateral trade liberalization to blunt the edge of Nepal’s and other neighbours’ resentment of only registering massive trade deficits with India which amounted to $22.5 billion in FY 23.Two-way trade between India and Nepal is $8.9 billion with a sizeable surplus of $7.2 billion in favour of India. To reduce the bilateral deficit, Dahal urged non-reciprocal market access measures, flexible quarantine procedures for Nepal’s agricultural products and simplified rules of origin for other products. Settlement of trade transactions in local currencies would also be transformative as India’s neighbours are desperately short of foreign exchange. This was another important outcome with an MOU on cross-border payments. Together with more generous lines of credit and assistance from India, all of this could make Dahal’s visit a win-win outcome for Nepal. The writer is an economics and business commentator based in New Delhi. His views are personal Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.