Neighbourhood in crisis

For almost a decade, Prime Minister Narendra Modi’s foreign policy was predicated on a burning desire to establish closer ties with the US. The policy came almost unstuck when India got embroiled in a military skirmish with Pakistan, and the Modi government denied US President Donald Trump the credit for establishing peace between the two warring countries. Later, trade tensions between India and the US came to the fore, with Trump slapping 50 per cent tariffs (25 per cent as a penalty for importing Russian oil) on Indian exports. His team even accused India of being a ‘laundromat’ for the Kremlin by buying discounted oil, thereby providing it the money to finance the punishing war with Ukraine.

In between, India had wilfully ignored its immediate neighbourhood. As analysts point out, India has taken its eyes off the neighbourhood due to its great power ambitions, forgetting that to achieve this, one needs to have a secure and stable neighbourhood. India’s focus shifted towards the Indo-Pacific, the Quad – made up of the US, Japan, Australia and India – and the West.

That was an irony because Modi’s first foreign policy initiative in 2014 was potentially a diplomatic masterstroke – inviting leaders of all the South Asian nations to his oath-taking ceremony. It signalled a desire for India to act as a magnet for South Asian regional unity and development.

But that hasn’t happened. Consider the following: More than half of Afghanistan’s population has slipped below the poverty line since the Taliban returned to power; Myanmar grapples with political instability under military rule; Pakistan, Sri Lanka and Bangladesh have turned to the IMF for bailouts; and, now, mob fury has singed the mountainous country of Nepal, leading to the ouster of its government. In the midst of all this, China is expanding its influence across South Asia through deepening economic and strategic partnerships. 

Shifting focus

The shift in India’s foreign policy focuses away from the ‘Neighbourhood First’ idea, which hasn’t really helped. For instance, India’s trade with Pakistan collapsed, following diplomatic hostilities, depriving both sides of economic links that could have fostered stability. China has already benefited from the regional gap by investing in Bangladeshi ports, Sri Lankan airports and Pakistani infrastructure.

A decade on, “the neighbourhood remains a weak component of India’s foreign policy,” observes Chietigj Bajpaee, senior fellow for South Asia at the London-based Chatham House. He felt that there had been ‘a degree of benign neglect by New Delhi’.

India has often taken a unilateral approach on regional issues, remarks Kanak Mani Dixit, founding editor, Himal South Asian magazine. Citing the launch of the SAARC satellite in 2014, Dixit says Modi has ‘bypassed regional consultations’. “Courtesy requires talking with your neighbours,” he adds. “This strategic aloofness has fed resentment against India in countries like Nepal and Sri Lanka.”

Dixit notes that other rising powers, most notably China, invested in regional networks first and then turned outward. “China regionalised before it globalised. India is attempting the opposite,” Bajpaee concurs.

Pakistan’s failures

Undeniably, Pakistan’s sponsoring of cross-border terror as an instrument of state policy has been primarily responsible for upending South Asian regional solidarity. But the Modi government’s approach to Islamabad has veered between unexpected bouts of dosti – recall Modi’s unscheduled dash to Lahore to meet Nawaz Sharif in December 2015 – to an escalatory spiral of retaliation where every terror attack is now to be treated as an ‘act of war’.

To the average Indian, Pakistan is a failed state, unable to extricate itself from the army-jihadi trap. But there is a section of civil society and business community in India, as in Pakistan, which feels that if both countries apply the ‘China formula’ to their relationship – freeze the border disputes but continue trade and business ties – things might just work out. Actually, Pakistan’s failures cannot mask the inability of New Delhi to build a coherent and inclusive South Asia policy that focuses on shared interests and thereby wields greater influence in the region.

According to the World Bank, South Asia is now widely considered the least economically integrated region in the world. Intra-regional trade makes up barely 5 per cent of total trade in the region. By contrast, intra-EU trade stands at about 60 per cent.

Losing a huge market

“There is a strong market of 500 million people outside of India in South Asia,” said Biswajeet Dhar, a former economics professor, Jawaharlal Nehru University. He pointed to textiles, pharmaceuticals, energy and services as areas with huge potential. “We studied regional value chains for the Asian Development Bank. The complementarity was incredible,” Dhar added, noting that the “potential remains largely unrealised due to narrow political disputes”.

Trade was supposed to be one of the objectives of the South Asian Association of Regional Co-operation (SAARC) when it was formed, but any hope of a revival of the grouping has vanished into thin air. But hostilities between India and Pakistan have effectively frozen the bloc since 2016, when India withdrew from a summit in Islamabad, following a terror attack in Jammu & Kashmir.

The irony of the present situation is that Nepal was the second foreign country (Bhutan was the first) that Modi chose to visit as prime minister. The images of Modi praying at the Pashupatinath Temple went instantly viral: it was seen as symbolic of a Hindutva-centric leadership that was intent on retracing the deep religious and cultural roots between the two nations. But, now, with Nepal becoming the third country in India’s immediate neighbourhood to see a violent uprising topple its government in recent years, the Modi government’s much-hyped authorship of the ‘Neighbourhood First’ policy is seriously shaken.

Prime Minister K.P. Sharma Oli has resigned after more than 51 people died in clashes with police during anti-government demonstrations, triggered by a social media ban. A nationwide curfew was put in place, and the army had to be called to douse the situation after protesters stormed Parliament and set fire to the homes of several politicians.

Shades of Bangladesh

For many, the scenes in Kathmandu were reminiscent of the turmoil that gripped Bangladesh last year, when Sheikh Hasina was deposed, and Sri Lanka in 2022, which saw the ouster of the Rajapakse clan. Though Bangladesh and Sri Lanka are also India’s close neighbours in South Asia, New Delhi’s relationship with Kathmandu is special, because of historic people-to-people, religious, economic and strategic ties. Nepal shares a largely open border of more than 1,750 km with five Indian states – Uttarakhand, Uttar Pradesh, Sikkim, Bihar and West Bengal.

Caught unawares by the development and failing to intervene at the right moment, India is only now keenly watching the developments across the border. Reacting to the unfolding events, Modi wrote in a post on X, “The violence in Nepal is heart-rending. I am anguished that many young people have lost their lives.” Stressing that “stability, peace and prosperity of Nepal are of utmost importance”, he appealed to “all my brothers and sisters in Nepal to support peace”.

Modi’s reaction was understandable as there are rumours in Kathmandu that the violence was instigated by the monarchy, which wants to make a comeback. There were whispers that India too may not be unhappy to see the back of the China-leaning Oli, though the manner in which this happened was unnerving, to say the least.

Much like it was caught off guard by the uprising in Colombo that forced the then-president Gotabaya Rajapaksa to flee the country, analysts say India was taken by surprise by the intensity and pace of the developments in Nepal. Interestingly, Oli had to quit just a week ahead of a planned visit to New Delhi.

The trigger

What caused the recent violence in Nepal? The youth of Nepal are known to be frustrated with their political elite and the perceived lavish lifestyle of their wards. For over two years now, they have been ventilating their frustration on social media with the hashtags #nepobabies, #nepokids on TikTok. The movement gained momentum recently as these tags became popular in the more widely used social media platforms like ‘Instagram’, ‘Facebook’, ‘X’, etc. These tags were used to highlight the alienation of the political elite and their kids from the average Nepali. The imported accessories, cars and general opulence shared by the ‘nepokids’ started going viral on various social media sites for the past two months or so.

On 4 September, a rattled Nepalese government blocked 26 social platforms on the grounds of non-compliance with government directives. Interestingly, ‘TikTok’ was not banned. The Nepalese government said that the ban was for national security. For a long time, the government has been trying to put checks and balances on these apps to stop fake news, misinformation, hate speech, etc.

However, the public response was the opposite. These platforms were the only sanctums of truth for them; now, even that was being challenged. Besides, the 26 banned apps were not just a means of expression but also of earning for a large chunk of Nepali youth, who used these to either promote their small businesses or earn from content creation.

Economic stagnation

As it happens, the causes behind the protest were economic and political stagnation and the emigration of youth to do menial jobs in foreign soil. The fact that just three politicians – K.P. Sharma Oli of CPN (UML), Sher Bahadur Deuba of Nepali Congress and Pushpa Kamal Dahal (Prachanda) of CPN (MC) – have been occupying the PM’s post for about 30 years further fuelled frustration among the youth, who saw it as a game of musical chairs.

It all began when a 36-year-old, Sudan Gurung, founder of an NGO called ‘Hami Nepal’, engaged in humanitarian relief work, gave a call on ‘Discord’ (a niche platform, popular among gamers) and got permission to organise a protest in Kathmandu on 8 September. This outfit organised the banners, posters, dos and don’ts for the protest through Discord. The protest was categorically defined as peaceful. Students were asked to bring books, bags and water bottles with them. All parties and their student wings were asked to refrain from participating. However, the word of the protest got out from this small circle through TikTok, which later on reached an even larger audience of the banned apps through VPNs.

How did the protest turn violent?

On 8 September, thousands flocked to Kathmandu, Pokhara, and Chitwan. The Kathmandu protest continued till the next day in Maltigarh Chowk. From there, they marched towards New Baneshwar, chanting ‘K.P. Chor Desh Chodh’ (K.P. Sharma Oli, leave the country).

Here, students claim that while they were marching, the police suddenly opened fire on them. The government claims there were anti-social elements within the march, who forced police to open fire.

This generated the chaos that has been widely reported. The mob dispersed into 5-6 groups. Some ran towards the Parliament, forcing their way through its gates and walls. Others started clashing with security personnel.

Way forward for Nepal?

The army has now taken charge. An interim government has been formed, which is expected to hold fresh elections with the co-operation of all political parties in March next year.

The students wanted a clean and able administrator. The initial choice for Prime Minister included Balendra Shah, the Kathmandu mayor and a rapper to boot, Kulman Ghising, an electrical engineer credited with solving Nepal’s power load-shedding crisis and Sushila Karki, former chief justice of Nepal. The choice has now fallen on Karki, an anti-corruption crusader who studied at Benares Hindu University.

A lot will depend on the outcome of the March election. Otherwise, Nepal is likely to continue its almost unbroken history of political instability. Like Bangladesh, the demands of the Nepalese youth are similar – a better and corruption-free democracy, as also, breaking up the hold of the entrenched political elite. The primary agitators are similar – teenagers, students, young adults. The outcome is also similar – ouster of the incumbent, targeting of politically affiliated, general lawlessness, arson, etc.

However, while the Bangladesh protests simmered for months, Nepal’s came to a head in a few days. The Bangladesh protest turned political midway through – it was initially against student quota, but about a month later, it turned into a movement against Sheikh Hasina and her perceived closeness to India. It has also facilitated the revival of Islamic fundamentalism, evident in the student wing of Jamaat e-Islaami recently won the Dhaka University students’ union election. Nepal protesters, on the other hand, favour India and perceive Oli as China’s puppet.

High stakes

Whatever happens in Nepal, the stakes are high for India. Any instability in the country is a cause of concern because of Nepal’s strategic location. The Western Theatre Command of China sits right across Nepal. Indeed, as military strategists fear, the route to the Indo-Gangetic plains comes straight through Nepal. Given the Himalayan nation’s strategic location, both India and China are vying for influence in the country, leading to accusations that the two are meddling in the internal affairs of Nepal.

Kathmandu depends heavily on Indian exports, especially oil and food, with India-Nepal annual bilateral trade estimated at $8.5 billion. However, Nepal has drawn closer to China in recent years because of Beijing’s infrastructure investment. China has, in recent years, boosted economic interactions with the Himalayan nation by pumping millions of dollars into projects, ranging from roads to hydro-power plants.

But Nepal is predominantly a Hindu-majority country, and communities across the border have close family ties. People travel between the two countries without a visa or a passport. Nepalis can also work in India without restriction under a 1950 treaty – one of the two countries (the other being Bhutan) in the region to have this arrangement. The unrest thus has implications for the large Nepalese diaspora in India. An estimated 3.5 million Nepalis work or live in India, but experts say the actual number could be much higher. Besides, almost 30,000 Nepalese Gurkhas are part of the Indian army under a special arrangement.

“Since the border is open, the communities enjoy a lived experience,” says Sangeeta Thapliyal, Professor, Jawaharlal Nehru University. “Families on both sides interact with each other on a daily basis”.

Nepal is also home to several important Hindu holy sites, including the Muktinath temple in the trans-Himalayan mountains. Thousands of Hindu pilgrims from India visit the temple every year.

Since 2015, when a new constitution came into force, Nepal has seen as many as nine governments, with a 10th one on the horizon. On paper, India has maintained close contacts with all of them – the Communist Party of Nepal (CPN-UML) headed by Oli, the Nepali Congress of Sher Bahadur Deuba and the Communist Party of Nepal (Maoist Centre) led by Pushpa Kamal Dahal, known as Prachanda. But this generation of leadership is detested by Gen Z.

While a fragile sense of calm has returned to Kathmandu, experts say India will have to walk a diplomatic tightrope, as there’s still widespread anger among Nepalese protesters against all three major political parties that have ruled the country.

Since the shape of the new government or leadership is uncertain, “India will be cautious”, says Thapliyal. “They don’t want another Bangladesh-type situation in Nepal.” India will have to reach out to the new administration to iron out any differences, while also engaging with young Nepalis, who are angry with their political establishment. “There are fewer opportunities within Nepal for the youth. India should actively consider increasing fellowships for Nepalese students and providing more job opportunities.”

A policy reset will do

With the SAARC regional grouping remaining dormant, it’s going to be a challenge for India to deal with the political changes and instability in its neighbourhood. In Bangladesh, New Delhi had cultivated Sheikh Hasina, the ousted prime minister. In fact, ties with the current interim administration headed by Muhammad Yunus, a renowned economist, are strained over India’s decision to shelter Hasina in the country.

Indeed, the crisis in Nepal has blown up at a time when relations with Pakistan are at a low point and Myanmar is engulfed in civil war. So, India is surrounded by turmoil on its three sides.

Coming to Sri Lanka, another nation in the neighbourhood which has seen much upheaval in recent times, here too, a corrupt political establishment, when pitched against ballooning inflation, fuel shortages and a deepening economic crisis, was forced to beat a hasty retreat. The Rajapaksa brothers, seemingly in absolute control of the island nation, were literally pushed out of the country almost overnight: images of the Presidential Palace being taken over by citizen protestors were symbolic of just how even the most powerful of regimes are vulnerable to mass agitation. Here, the Modi government, again initially blindsided – Prime Minister Modi had built a strong personal equation with the Rajapaksa family – was at least able to recover a measure of political saliency by stepping in quickly to financially assist a beleaguered economy.

While India isn’t directly responsible for the travails of the aforementioned nations, the diplomatic stand-off with tiny Maldives in 2024 was entirely avoidable. Hyper-nationalistic social media armies of the ruling party directed their ire at the Maldivian government led by Mohamed Muizzu, almost pushing Male to embrace a dangerous ‘India Out, China In’ platform.

While Muizzu’s anti-India rhetoric was needless provocation, the call for a travel boycott of the Maldives led by celebrities and netizens was a worrying example of using social media to politicise sensitive foreign policy issues only to cater to jingoistic domestic constituencies. The recent visit of Modi to the Maldives suggests a welcome dialling down of the heat, but the friction is a reminder of just why India needs to avoid excessive bombast even in dealing with the smallest of nations.

Challenges for India

For a country which has ambitious plans of leading the Global South and becoming a forceful voice on the global high table, the constant upheaval in the neighbourhood poses a genuine challenge. More so, because the dragon in the room and India’s biggest rival for dominance in the region remains China, a country always looking for any opportunity to fish in troubled waters, which is why India’s claim to be a vishwaguru (global teacher) needs an urgent reset.

Indeed, India’s global aspirations, including its efforts to become a veto power in the UN Security Council, also suffer from the regional deficit. An UNSC seat needs regional credibility. But when the region is in a mess and India isn’t reaching out, it weakens its case. Of course, India can perhaps rise alone – but it will be in a stronger position, only if it can rise with its neighbours.

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A long road ahead

Prime Minister Narendra Modi, while extending his wishes to Sushila Karki, the newly appointed Prime Minister of Nepal, said, ‘India is committed to the peace, progress and prosperity of Nepal’. What PM Modi aspired to is what Nepal is in dire need of. India has always been a first responder and, under the neighbourhood first policy, has always supported Nepal. Elections are announced for March 2026, and Nepal wants India to ensure that democracy is maintained and elections are held in a free and fair manner.

“We are happy that India is supporting Nepali people’s desire for change,” Ajaya Bhadra Khanal, research director, Centre for Social Innovation & Foreign Policy (CESIF), Nepal, told Business India. “In the short run, as Nepal rebuilds and holds elections, we expect India to assist. Over the longer term, improved and better economic cooperation would help Nepal. However, this is something for which Nepal will have to improve its foreign policy and domestic environment”.

India is Nepal’s largest trading partner. In 2024-25, the bilateral trade reached $8.54 billion, accounting for 63 per cent of Nepal’s total trade.

“The present government has to focus on strengthening bilateral ties with India and boost economic co-operation and infrastructure growth,” said a senior Nepalese government official. There is a need to enhance energy security and improve basic infrastructure, including at check-posts, roads, transmission lines and reconstruction of the Parliament building. We also need assistance in the upcoming elections”.

Meanwhile, K.P. Sharma Oli and Sheh Bahadur Deuba, former prime ministers of Nepal, and some other ministers are now in a safe zone and under the supervision of the Nepalese Army. In the arson that happened on 9 September, their houses were gutted. It will be a long road ahead for them to return to normal lives in Nepal.

Meanwhile, many senior officials are hoping for India to pitch in. “We look forward to India’s valuable support in the restoration of democracy in Nepal, including the strengthening of electoral processes, good governance and the rebuilding of government institutions,” Vijay Kant Karna, Nepal’s former Ambassador to Denmark, told Business India. It may be recalled that K.P. Sharma Oli was slated to visit India during the course of this month in Bodh Gaya. However, he raised objections about India-China announcing that they would resume trade through Lipulekh pass, as he said that Lipulekh was a part of India. He raised this issue on the sidelines of the Shanghai Cooperation Organisation (SCO) in Tianjin recently, too, which didn’t go down well with India, and his visit was said to have been rescheduled.

Nepal hopes there will be a real change, which the Gen Z fought for. Also, the nation would do away with corruption for the welfare of the nation.

Meanwhile, the 73-year-old PM Karki has an MA in Political Science from Benaras Hindu University (BHU), as does her husband Durga Prasad Subedi, a Nepali youth leader who led his country’s first-ever aircraft hijacking on 10 June 1973. The incident was known as the Biratnagar Plane hijack, when a Royal Nepal Airlines passenger aircraft, with 19 passengers, including Bollywood actor Mala Sinha, was taken over by Subedi, Basanta Bhattarai and Nagendra Prasad Dhungel and forced to divert from Kathmandu to Forbesganj, Bihar. The target was the R30 lakh in cash being flown by the Nepal Rashtra Bank. The money was seized to fund the Nepali Congress’s underground campaign to topple the autocratic Panchayati Raj system headed by King Mahendra and restore multi-party democracy.

The demand for a return to democracy continues for Nepal, and there is hope that elections will be held freely and fairly, with support from India and peace and progress will be maintained.

YESHI SELI