While it’s evident that the Himalayan nation has high trade deficit with its neighboring nations, recent reports confirm that the case happens to be the same for the country even with many other countries, globally.

Recent statistics by Nepal Department of Customs confirmed that out of 140 nations that Nepal has trade relations with, the Himalayan nation is enjoying trade surplus with only 28 and is facing a widening deficit with other 112 countries.

Out of the country’s total gross trade deficit of over Rs 222.9 billion, the highest volume was found with neighboring India and China, followed by France.

Over the last three months, Nepal made close to Rs 249 billion trade with India with Rs 236.1 billion in imports and Rs 13.16 billion in exports.

Whereas, it was Rs 53.11 billion in imports and Rs 560.4 million in exports in its trade with China.

When it comes to France, the statistics show Rs 14.26 billion in imports and Rs 352.2 million in exports.

Likewise, Nepal is facing a negative balance of trade with other countries such as UAE, Thailand, Switzerland, Indonesia, Canada, Malaysia, Argentina, Ukraine, Saudi Arabia, South Africa, Italy, Vietnam, South Korea, Australia, Turkmenistan, Taiwan, Japan, Singapore and Hong Kong, among others.

On the positive side, the Himalayan nation is enjoying surplus in trade with US, where exports were found exceeding imports resulting in Rs 668.3 million in profits for Nepal for trade worth Rs 3.19 billion.

Other countries that showed positive trend for Nepal trade include Finland, Austria, Maldives, Norway, Estonia, Afghanistan, Morocco, El Salvador, Uruguay, Lebanon and Cyprus.

Also Read:

• Nepal Scales Up in Global Logistic Performance Index 2018
• Growing Expenditures & Nepal’s Economic Status: An Analysis
• Gold Imports Trigger Concern Over Trade Deficit
• Birgunj – Trade Gateway to Nepal
• Bharatpur: Nepal’s Center of Trade
• Alerts on Trade, Human Rights and Security

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The news comes as a serious concern for Nepal as the country’s imports through sea route majorly happens via the Kolkata Port.

“We are worried. Almost all of Nepal’s imports are routed through this port. The collapse of the bridge is definitely going to impact movement of goods,” stated Eaknarayan Aryal, Consul General of Nepal in Kolkata.

Post his visit to the site, Aryal said the chairman and traffic manager of the port are holding meetings on ways to minimise the impact to the trade traffic.

The collapse of the bridge is leading to the closure of trade traffic for a long period via the Diamond Harbor Road, the route that hosts the Majerhat bridge.

Another key part associated with the bridge is the Kolkata Dock Complex, which witnesses nearly 1,300 trucks for entry and exit per day.

Speaking in detail about the situation, the Kolkata Port Trust (KoPT) official says that the collapse will have impact on the movement of goods.

“KoPT has dealt with 80,000 containers only for Nepal in 2017-18. This is supposed to go up to 1 lakh this year. There may be some problem in the movement of traffic. However, we are working with the police and local administration to find alternative routes,” says KoPT Spokesperson.

While KoPT is the nearest port for Nepal helping the country in import of goods such as cars, electronic items, general items of routine use, most of the goods are also traded through Bihar and cross the Nepali border at Birgunj.

Vegetables, handicrafts and forest produce are some of the Nepali imports via the Kolkata Port.

While the Spokesperson also clarifies that the trade between Kolkata and Nepal also has rail connectivity as an alternative route.

“Much of our cargo to Nepal goes through the rail route. On an average, we send a train load of goods to Nepal every day. Fortunately, any part of the bridge did not fall on the rail tracks and rail services are running now normally,” says the Spokesperson.

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Towards addressing the gaps arising out of India’s skyrocketing imports against Nepal’s sluggish exports, Nepal has reportedly requested preferential treatment for its agriculture exports and integration of its manufacturing units to Indian value-chain.

Nepal and India discussed this at a joint committee meeting held in New Delhi during August 9-10, 2018, to review the Indo-Nepal Trade Treaty.

Nepali delegation led by the Joint Secretary at the Nepali Ministry for Industry, Commerce & Supplies Ravishankar Sainju and Indian officials discussed complete removal of preferences and reciprocity in trade of agricultural and manufacturing products as part of the review process.

The review of Indo-Nepal trade treaty is the result of concerns raised by trade experts of Nepal over widening trade deficit between the two countries.

“Unilateral dependence with India in trade is risky for Nepal and the country needs to diversify its trade,” say the experts.

The current trade treaty calls for a review of the agreement for every seven years with one of the contracting parties mandated to give a prior notice of three months requesting the same.

However, Nepali delegation could not do so in 2016 owing to disruptions in the southern belt caused by the massive earthquake disaster.

Let’s hope the renewed trade treaty will open more avenues for effective and well-balanced Indo-Nepal trade mechanism.

Also Read: Indo-Nepal Trade Treaty 2018 & Review of the Past!

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While one is on border security measures as part of the 3^rd India-Nepal Coordination meeting scheduled for August 08, 2018, the other meeting on August 09, 2018 is about reviewing the existing trade treaty between the two countries.

Border Security
A seven-member Nepali delegation led by the Inspector General of Nepal Armed Police Force Shailendra Khanal has already arrived in New Delhi to take part in this three-day meeting from August 8-10, 2018.

According to the Indian Home Ministry, the meeting will throw light on key issues pertaining to border security, such as exchange of information on crimes and criminals, regular mutual visits of officials, coordination on field level and training of armed personnel of both the countries.

Speaking on the sidelines of the meet, Khanal stressed on the need for enhancing security coordination through activities such as joint patrolling, frequent border-level meetings and combined training of armed forces.

Review of Trade & Transit Treaty
Meanwhile, officials of both nations are also gearing up for preparation meeting for the long-awaited review of the Nepal-India Trade and Transit Treaty on August 09, 2018.

A seven-member Nepali delegation led by the Nepal Industry Ministry Spokesperson Rabi Shankar Sainju is traveling to India as Nepal’s representation in this Joint Secretary level meeting.

As part of the meet, Nepali side will be highlighting issues such as handling of Nepali-bound cargo at Indian ports, usage of Indian seaports and assisting Indian businessmen in the production business, widening trade deficit between the two countries, among other issues pertaining to Indo-Nepal bilateral trade.

Port Operations: Nepal will be presenting a proposal pertaining to the transshipment modality for Nepal-bound cargo from India’s Visakhapatnam port.

“If the transshipment modality is implemented at the new port, it will also reduce the number of documents required to transport Nepal-bound consignments at the Indian port,” says Sanju.

The delegation will be pitching for the launch of an Electronic Cargo Tracking System (ECTS) for Nepal-bound containers, alike what Nepal did in case of Kolkata port four months ago.

“We will be requesting the Indian side to implement the modality on a trial basis for a month,” adds Sanju.

As part of the meeting, Nepali delegation is also planning to urge India to give them access to other Indian seaports such as Dhamra Port of Odisha and Mundra Port of Gujarat, among others.

Assisting Indian Businessmen: Nepali team is also keen on pitching for assistance to Indian investors in their investment process in the production sector. Officials feel that this would curtail the widening trade deficit between the two countries.

Provisions related to enhancing bilateral trade and finding solutions to rules of origin put forth by the Indian Government are among other key issues to be discussed under the review of the Trade and Transit Treaty over the next three months.

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As per the department’s records, the country displayed a decline in trade balance worth Rs 103 trillion during the review period. When compared, the import figures stood at Rs 10 trillion and the export figures at Rs 74.32 billion.

Over the passage of time, the imports shot up by 23.82 percent in comparison with a 10.46 percent jump in experts.

During the period of mid-July 2017 and mid-June 2018, the country’s ‘export-import ratio’ was 1:14.9 indicating an import spend of Rs 14.9 against an export earning of every Rs 1.

Explaining the situation, former Commerce Secretary Purushottam Ojha says factors like supply constraints and underlying non-tariff barriers with trading partner countries like India have been responsible for Nepal’s poor exports.

It is important to note that India is Nepal’s only biggest trading partner with the total trade of 65 percent.

Ojha feels that Nepal experiences challenges over exporting products such as vegetables, aromatic plants and herbs to India.

“Although the Nepal-India Trade Treaty revised in 2009 talks about improving cooperation for trade, it has not happened in practice,” says Ojha.

Some Trends in the Nepal’s Trade Business during FY 2017-18:

• It is noteworthy that Nepal has trade relations with 153 countries but was rewarded with a trade surplus from only 27 countries during the period
• The country profited from its relations with Turkey with a surplus of Rs. 1.93 billion, followed by United Kingdom at Rs 336.71 million
• The country has the biggest trade deficit from its business with India, marked at Rs 689.85 billion. While the country received Rs 42.46 million from its exports to India, it spent Rs 732.31 billion on its imports
• The country spent the most on fuel import accounting to Rs 175 billion, followed by mills & machinery at Rs 115.30 billion, iron & steel at Rs 112.11 billion, vehicles at Rs 77.82 billion and electronics & telecommunications at Rs 69.81 billion
• Essentials such as mate, spices, coffee and tea earned Rs 8.49 billion for Nepal
• Articles such as carpets, apparel, yarn and iron & steel stood as the top five exports from the country

DoC records depict increasing dissatisfactory trade with countries like Indonesia, Vietnam, China and Thailand.

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As part of the meeting, both the sides discussed ways to control movement of fake or banned currency notes, curb criminal activities, among others across the Indo-Nepal border areas.

The Indian side proposed nine different proposals pertaining to the control of human trafficking, illegal trading of animals, among others.

Meanwhile, Nepali officials have put forth 11 proposals covering issues related to the construction of makeshift bridge on the Mahakali River, curbing of illegal drug trade, ensuring collaboration at times of disasters and financing damage or other related infrastructure building projects across the border areas, among others.

Discussion on the construction of four makeshift bridges unilaterally on the Mahakali River was one of the key elements at the meeting.

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Addressing the key challenges, Nepal is keen on placing trade barriers on top of its meeting agenda as a solution to long-standing issues in bilateral and third country trade between the two countries.

Trade-Related Concerns

Nepali officials are more likely to raise issues pertaining to the railway service agreement, inter-bank transaction, bulk cargo, quarantine check, along with export concerns on agriculture, medicinal and garment products, among others as part of the discussion.

Nepali trade consignments of agricultural and medicinal products have been facing challenges owing to the lack of needed certification.

Nepali officials are also planning to pitch for a flexible policy for quarantine certification.

“We will be urging India to set up an integrated quarantine check system to facilitate exports of Nepali agro products to India,” says Rabi Shankar Sainju, Spokesperson, Ministry of Commerce Nepal.

According to Sainju, Nepal has been facing sever challenges with regard to quarantine certification despite the presence of its quarantine labs at major customs points across the Indo-Nepal border.

“However, lack of experts at the quarantine labs is one of the major setbacks that Nepal has been facing in trading agro products,” Sainju adds.

With regard to cargo shipment, Sainju informed that the ministry has already started working on the implementation of the electronic cargo tracking system.

“Importers have already started installing the system on a voluntary basis, and the ministry has planned to launch the system as a pilot project soon,” informed Sainju.

According to the Ministry, India has also agreed to Nepal’s request to allow the bulk cargo system at another three entry points: Jogbani-Biratnagar, Rupaidiya-Nepalgunj and Sunauli-Bhairahawa.

“The Indian side said it had started official procedures to review Nepal’s proposal,” noted the ministry.

Easing trade, Nepal is also planning to request India to ease cross-border banking services for the traders, and also introduce a compliance for the same.

While Nepali officials keen on holding the meeting as planned, the Indian officials are yet to confirm the same, says Sainju.

Last hosted in New Delhi in June 28-29, 2016, the IGC meeting under the Nepal-India trade treaty aims to resolve various trade-related concerns and enhancement of bilateral trade between the two countries.

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Nepal’s export of juice, textiles, jute and cardamom, among other commodities to India received pressure and have shown a decline in the recent months due to changes in tariff structure in India’s GST that placed strict measures on imports, thus making exporting costlier for Nepal.

With this situation in place, cattle feed entered the race to stand out as one of the major contributors to Nepal’s export to India.

According to the Nepal Rastra Bank, Nepal exported Rs 2.41 billion worth cattle feed to India in the first half of the current fiscal.

However, Nepali cattle feed producing industries state that raw materials such as oil cakes are being exported to India under the ‘cattle feed’ category.

“Export of finished products (cattle feed) may not have increased considerably, but export of raw items (mustard oil cake, among others) has increased substantially,” says Anand Bagariya, Managing Director of a feed producing company called Nimbus Holdings Ltd.

Experts feel that there would be a gradual change in Nepali exports to India owing to the non-competitive nature of Nepal’s major export items to India (in the pre-GST regime) in the new tax regime.

International trade expert and former commerce secretary Purushottam Ojha also feels that Nepali exports to India are facing challenges with regard to sustainability.

“Following the Nepal-India trade treaty of 1996, which had provided more liberal framework in trade relationship, vegetable ghee and zinc oxide, among others became major export items to the southern neighbor,” says Ojha.

In this scenario, the experts feel both the countries should focus on competitive and a balanced trade.

While Nepal has two-thirds of its trade takes with India, the trade deficit between the two countries has been widening with the decline in Nepal’s export to India being inversely proportional to rising imports from India.

A Fall in Export

Nepal’s exports to India in the first half of current fiscal 2017-18 stand at worth Rs 23.07 billion against import of Rs 352.5 billion. While the import growth from India stood at 15 per cent in the review period, export growth to India stands at 13 per cent.

Nepal’s import concentration with India is increasing as it is comparatively cheaper to import goods from India compared to other countries due to fixed exchange regime between the two countries.

However, trade experts have said that the introduction of GST in India has provided an opportunity for Nepali exporters to diversify their trade because export to the Indian market has now become less competitive.

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The 2^nd Indo-Nepal Trade Fair and Tourism Festival, being organized by the Chamber of Commerce and Industry (CCI), Kanchanpur with the help of Ministry of Commerce and Trade and Export Promotion Centre, is promoted by the Nepal Tourism Board, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Nepali Embassy in New Delhi, India.

The expo features more than 50 stalls that showcase various food items, medicinal herbs, agricultural products and handicrafts that promote the unique identity of Nepal and India, says Janga Bahadur Malla, Senior Vice-President, CCI, Kanchanpur.

In his inaugural address, the Chief Minister of Uttarakhand Trivendra Singh Rawat expressed his state’s willingness to establish and enhance Indo-Nepal tourism and trade ties.

FNCCI President Bhawani Rana also expressed hope that such fairs would promote Nepali products in the global market.

Nepali State Minister of Commerce Nar Bahadur Chand opined that the fest will strengthen both the nations.

The fair began on February 2, 2018 and lasts till February 8, 2018.

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The Government of India said this in its Gazette notification on October 27, 2017, wherein, it announced the removal of GST on supply of its services to Nepal and Bhutan in case of payments made in the Indian currency.

Though GST is not applicable on export of goods and services, it was exempted only for the payments that involve convertible foreign currencies.

With this, the cost of service exports involving cargo handling, transportation and container freight station became costlier. This turned into a burden for Nepalis, who usually transact with the Indian service providers in the Indian currency.

Following this, the Government of Nepal and the country’s private sector sought GST exemption on Indian service exports to Nepal.

In response, in the last week of September 2017, the Indian Government announced GST removal on Indian services involving transit operations such as shipment, transportation, insurance, container freight station and cargo handling charges, among others for Nepal and Bhutan.

Transit and cargo handling are among the major service imports Nepali traders get from India.

Decision Positive for Nepalis

According to Hari Bhakta Sharma, President of the Confederation of Nepalese Industries (CNI), the removal of GST would save Rs 10 billion per year on service imports for Nepali traders.

Rabi Shanker Sainju, Joint Secretary at the Ministry of Commerce Nepal, opines that the decision makes it easier for Nepali and Bhutanese traders to transact in Indian currency, which is widely circulated in both the countries.

The recent amendments to GST rules on the recommendation of GST Council of India will boost service exports from India to Nepal, Sainju added.

It’s noteworthy that the Nepal Rastra Bank also encourages Nepalis to make payments in Indian currency.

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