Nepal seeks more Indian investment to reduce trade imbalance

Nepal government is proposing to attract Indian investment in the Nepal-Indian Trade Treaty itself as two sides sit for a comprehensive review of bilateral trade in New Delhi starting Thursday, reports The Kathmandu Post.

According to the report, Nepali side will focus more on Indian investments to balance trade between the two countries during the meeting scheduled for August 9-10.

Quoting government officials, the report said trade deficit with India could be addressed if Nepal gets more investments from India. The officials are of the view that without bringing investments from India, import substitution and bringing down the alarming trade deficit with southern neighbour is not possible.

Trade Treaty Review Technical Committee Chairman Ravi Shanker Sainju said, “Indian investment in Nepal will also allow us to get easy access to Indian value chain and market.”

With the rising trade gap between the two countries, Nepal seeks India’s cooperation to reduce its trade imbalance.

In the first 11 months of the last fiscal year, Nepal’s exports to India stood at Rs 42.34 billion while imports from India were Rs 731 billion.

Nepal has not received major Indian FDI in manufacturing sector since long, the report said. In the early 90s, it was manufacturing sector that saw huge investments from Indian MNCs like Dabur, Asian Paints, Unilever who entered Nepal to set up joint ventures (JVs), or wholly owned subsidiaries.

While manufacturing sector still accounts 20 percent of the total Indian FDI in Nepal, energy sector is where majority of Indian investments came in the last decade.

Former Finance Secretary of Nepal Rameshore Khanal sees merit in the government proposal.

“Nepal needs to be plugged into Indian value chain in order to reduce the huge trade deficit, create employment and ensure sustainable growth,” Khanal said.

Nepal and India agreed to review the existing bilateral trade treaty during a secretary-level meeting of India-Nepal Inter Government Committee (IGC) on Trade, Transit and Co-operation held earlier in April.