Foreign secretary Shringla's Nepal visit kindles hopes of traders in Bihar

India’s Foreign Secretary Harsh Vardhan Shringla ended his Nepal visit with a meeting with Prime Minister K P Sharma Oli and extensive discussions with Foreign Minister  Pradeep Kumar Gyawali amid strain in India-Nepal relations over boundary disputes. 

But his visit has got a rousing welcome from unanticipated quarters: traders and investors in Bihar waiting eagerly for cordiality to return to India-Nepal relations, so that trade can come back to normal levels.

Trade normalisation with Nepal is crucial to Bihar’s economy, says S Prahalathan Iyer, chief general manager, Export-Import Bank of India (Exim Bank), because tension between the two countries and the damage from Covid-19 have dealt a body blow to Bihar’s economy. 

Nepal is Bihar’s largest export destination. Disputes or problems in smooth border crossings can play havoc with Bihar’s economy and push landlocked Nepal into securing other sources of supply of commodities.

Prahalathan says Covid-19 was disastrous for Bihar’s exports to Nepal. During April-September 2020-21 (FY21), Bihar’s merchandise exports stood at $564.3 million, registering a year-on-year (YoY) decline of minus 31.1 per cent, sharper than the weakening of India’s overall merchandise exports, which registered a YoY decline of minus 21.1 per cent during the same period.

Prahalathan ascribes the decline in Bihar’s exports partly to the precipitous decline in oil prices. Against an average of $64.4 per barrel in 2019, the price slumped to $20.5 per barrel (Brent crude) in April 2020. 

Petroleum products - the largest exported item from Bihar - registered a YoY decline of minus 63.7 per cent during April-September FY21, negating the robust growth witnessed in exports of several agricultural products from the state during this period.

He concedes that the decline was also due to the overall decline in merchandise exports from India to Nepal. 

Merchandise exports from India to Nepal registered a YoY decline of minus 40.5 per cent during April-September FY21, on account of the closure of the India-Nepal border since March 24 due to the pandemic. 

Concomitantly, Bihar’s exports to Nepal registered a YoY decline of minus 45.3 per cent during this period.

“Since Bihar’s exports are highly concentrated in a few products and markets, fragilities in its largest exported item and trade disruptions with its topmost export destination led to sharp decline in its exports during this period,” he explains.

India and Nepal have an open border arrangement that is unique in the world. 

“More than one-fifth of Nepal’s imports from India are from the state of Bihar. A majority of the merchandise exports from Bihar are routed through the two integrated checkposts situated at Raxaul and Jogbani - both of which are utilised for exports to Nepal.  

“Any strain or restriction at the border could severely hamper Bihar’s overall export performance and could lead to potential loss in export revenues, says Prahalathan, adding, that blockades on the Bihar-Nepal border have invariably led to a fall in export revenues for the state. 

“For instance, in 2015-16, Bihar’s merchandise exports witnessed a YoY decline of nearly minus 47.2 per cent due to a two-month-long close-down of major border crossings in Nepal from September 24, 2015, and a devastating earthquake in Nepal in April 2015, which damaged existing transportation networks and infrastructure,” he says.

Shringla is holding discussions with Nepalese policymakers on a variety of festering issues, including boundary and geostrategic matters amid fears that the ruling regime in Kathmandu has a marked China tilt that could jeopardise Indian interests – both strategic and commercial. 

But Prahalathan says that is unlikely, given traders on both sides are too deeply invested in each other’s countries to allow a slide.

A statement from the Indian Embassy in Kathmandu said: “The Nepali side appreciated the Indian government's active facilitation in ensuring smooth and unhindered cross-border flow of trade and commerce and active implementation of development projects during this time. They also discussed the boundary matters and exchanged views on completing the boundary work in the remaining segments.” 

This is the surest indication that despite strain in relations recently, ties between the two countries are returning to normalcy.