Nepal is always overwhelmed by an unmanageable size of trade deficit stemming from excessive import against meagre export. Currently, the export: import ratio stands at 1:15, meaning the total import is nearly 15 times higher than the total export. Evidently export is a key component of international trade that plays a crucial role in maintaining balance of payments of a country and earning foreign currency. Nepal’s location between India and China, two economic powerhouses of the world, offers an unlimited opportunity for trade and prosperity.
Ironically, the country has sorely failed to attract foreign direct invest as anticipated and augment its trade with these neighboring countries and other nations. The little export that it makes is based largely on labour intensive items like handicrafts, carpets, readymade garments and other textiles, and indigenous artefacts. Another characteristic of its export is little value addition; it exports tea, ginger, cardamom and other agro products mainly to India. The major downsides in landlocked Nepal’s manufacturing trade are high cost of production-- 15 per cent higher than in India and China-- and equally high transportation cost to the sea ports.
But Nepal has now got a reason to be happy as India has agreed to allow the former to use its inland waterways for the transportation of goods to and from third countries via Kolkata Port. As per a news report in this daily, officials representing the two countries meeting to review the bilateral Transit Treaty have finalised standard operating procedures that will allow Nepal to operate its own ships from Kolkata Port to three different river ports near Nepal-India border, including Shahebgunj in Jharkhand, Kalighat in West Bengal and Varanasi in Uttar Pradesh, from where it has to use the land route to carry goods to and from other destinations. Besides, India has also agreed to open Sunauli-Bhairahawa and Jogbani-Biratnagar border points for bulk cargo movement by railway, in addition to the existing Raxaul-Birgunj point. The new agreement on the use of inland waterways and the addition of two more railway routes for bulk cargo movement will greatly ease the transport of items like cement, coal and chemical fertilisers for Nepali traders and cut the cost of transporting goods to and from the country. The provision is expected to give a boost to Nepali export as it will make Nepali products more competitive in the international market.
In addition to these agreements, Nepal had asked the Indian side for transhipment facility through the implementation of electronic cargo tracking system. As per the news reports, India has taken the proposal positively, transhipment by railway in particular, and agreed to update Nepal on the matter following internal discussions. The two sides also discussed Nepal’s request to give it an access to Dhamra port in Odisha and Mundra port in Gujarat. The Indian side has said that it is deliberating on the issue and would send a reply at the earliest. Connectivity has been a key issue in bilateral relations between Nepal and India. As a landlocked country, it is Nepal’s right to have an unhindered access to the sea and as a good neighbour it is India’s duty to ensure this right.