India's $3-billion investment might be gamechanger for Nepal

India's $3-billion investment might be gamechanger for Nepal

The two sides recently reached three agreements - two in the energy sector and one on country's line of credit - and another landmark power trade agreement.

Picture for representation purpose only. (Source: Reuters) Picture for representation purpose only. (Source: Reuters)

Within just six months at the helm, Prime Minister Narendra Modi injected over $3 billion of investments into Nepal, a possible gamechanger in Nepal-India relations that may entirely change the economic landscape of the Himalayan nation.

The two sides recently reached three agreements - two in the energy sector and one on country's line of credit - and another landmark power trade agreement. Tapping Nepal's hydropower resources is a major focus in the deals signed.

Mired by decades-long armed conflict that totally devastated Nepal's economy, the size of which is a mere $62.384 billion, the Himalayan nation needs huge investments in infrastructure development, fighting poverty alleviation and illiteracy and food security.

The latest Indian initiative under Modi started with the signing of the project development agreement on September 19 of the 900 MW Upper Karnali hydropower project in west Nepal between Investment Board Nepal and country's GMR-ITD Consortium.

The second and third were country's soft loans of $1 billion for various Nepali infrastructure projects and the project development agreement of Arun III between the Investment Board Nepal and Satluj Jal Vidyut Nigam of India on the sidelines of the 18th SAARC summit in Katmandu last week.

Both Upper Karnali and Arun III will have a generation capacity of 900 MW each and the projects will cost over $2.4 billion at present market rate. This is probably the biggest investment coming in Nepal within a short span of time from one country.

This has also rekindled hopes that the much touted and ambitious Pancheshwar Multipurpose Project, which was initially signed some 17 years ago between Nepal and India, is all set to take off.

The 6,720-MW project will cost over $6 billion and the two sides are ready to set up the Pancheshwar Development Authority within a couple of months.

While inaugurating the India-funded trauma centre in Kathmandu November 25, the country's prime minister thanked the prime minister of Nepal, the political parties and officers of Nepal for removing obstacles and speeding up work which had been held up for the last 25 to 30 years. He said he felty satisfied because "a happy Nepal gives India a reason to smile".

Nepal and India have been discussing building the Upper Karnali project for 30 years and Arun III for six years.

"It is only possible due to the charismatic leadership of Modi," Chirinjivi Nepal, economic advisor to Nepal Prime Minister Sushil Koirala, told IANS.

With the signing of the power trade agreement with India and two project development agreements with GMR and Satluj, many foreign investors are keen to invest in Nepal's hydropower sector, the obvious market of which is India, said Nepal.

The wavelength between Modi and Koirala also played a very crucial role to move ahead, he said.

Apart from these projects, several other pending projects between Nepal and India are moving ahead, giving bilateral relations a fresh impetus.

There have been positive reactions from civil society, political fraternity and media since Modi started taking a "lead neighbourhood first" in his foreign policy mantra.

A recent editorial in The Kathmandu Post stated: "The August (2014) visit, the first by an Indian prime minister in 17 years, proved effective in getting rid of the resentments that had accumulated over the last decade, and in establishing a foundation for greater economic cooperation. Modi is expected to take up where he left off last time."

But, the daily stated, the question was whether the hardcore anti-India nationalism prevailing in some political classes in Nepal would let these projects go ahead because the hardliner Maoist faction has been upping the ante against the Upper Karnali and Arun III.

"There is no chance to look back. We are waiting for more good from India. Regression is over," Nepal said.