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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