The economic blockade by India has hurt the southern neighbor also as Nepal’s trade direction has changed in favor of third countries. Though India’s share in Nepal’s total foriegn trade is still one-half, the trade with third countries other than China has tripled, whereas the trade with India and China has decreased, according to the Department of Customs.
According to the department, the share of trade with third countries was 11 percent in the first five months of last fiscal year. This figure has jumped to almost triple, or 31 percent, in the corresponding five months of the current fiscal year of 2015-16.
Shirsir Dhungana, director general at the department, says that the sqeeze in the volume of trade with India and drop in the total trade volume have changed the trade direction scenerio. He also attributed the growth in third country trade to the use of the Birgunj dry port. “We have been able to bring the dry port into operation from November 1,” he said, adding that the government sent some 14,000 loaded trucks out of the country, and this has contributed to the third country trade. “Likewise, Tribhuvan International Airport (TIA) — another trade point for third countries — has also been operating smoothly.”
Nepal’s trade with India dropped to 54 percent in the first five months of the current fiscal year from 65 percent in the same period last fiscal year. Likewise, the trade with China has decreased to 15 percent in the first five months from 24 percent in the same period last fiscal year, the data shows.
The devastating earthquakes on April 25 and May 12 damaged the only trade route to China through Tatopani customs. To this is attributed the drop in trade with China. The other trade route with China, Kerung, has also not been fully operational due to the earthquakes and also due to lack of physical infrastructure, including roads on the Nepal side.
But the Indian economic embargo has directly hit the trade with that country. Immediately after the promulgation of the new onstitution on September 20, the Tarai-Madhes centric parties started agitations in the plains, and the southern neighbor, in order to support them, stopped cargo movement through Birgunj customs, which sees the bulk of Nepal’s total trade with India. The drop in trade with India has also hit revenue. The state coffers lost Rs 50 billion in revenue in the first five months of the current fiscal year, according to the Finance Ministry.
The embargo has in particular hit the smooth supply of petroleum products — Nepal’s major import from India. This has dropped to 32 percent, according to department data. Nepal imported Rs 110 billion worth of petroleum products from India last fiscal year, according to central bank figures. Petroleum products were almost one-fourth of the total import from India.
Trade analysts claim that the current trade direction would not be sustainable once India lifts the blockade.