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Nepal: Alarm Bells Start Chiming – Analysis


In 1937 Simona and Schuster wrote in their book E.T. Bell Men of Mathematics, “Mathematics is the most exact science, and its conclusions are capable of absolute proof. But this is so only because mathematics does not attempt to draw absolute conclusions. All mathematical truths are relative, conditional. 


In mid-April 2022 Nepal is seized of the fact that how the numbers in economics are not in their favour anymore and they are headed the Sri Lanka way if swift and satisfactory measures are not taken to save its economy from collapsing.

Nepal, officially called as Federal Democratic Republic of Nepal is a land locked country in South Asia, bordered by China in the north and India in the east, west and south.

Nepal with an area of 147,516 square kilometres and a population of 2.91 crores (20.9 million), has its capital in Kathmandu.

Nepal despite being a small nation has always been a sovereign nation and has never been colonised by any country. On May 28, 2008, Nepal ended the 240-year-old monarchy and declared itself a federal republic. May 28, every year is celebrated as the Republic Day in Nepal.

Two of the main sources of revenue in Nepal are the remittances sent by the Nepalis working abroad and tourism. In 2020, 35 lakhs (3.5 million) Nepalis working abroad sent back home US$ 8 billion which is more than a quarter of the country’s GDP (gross domestic product). And, in 2019 Nepal earned US$ 668 million from tourism.


The Covid-19 pandemic that hit the world in 2020, changed the financial complexion of Nepal and dwindled its income drastically.

Adding to this woe was the collapse of the KP Sharma Oli government in July 2021, which saw political instability and foreign exchange reserves depleting rapidly from US$ 11.75 billion in July 2021 to US$ 9.75 billion in February 2022 as import bills sky rocketed and the revenues drastically dipped.

This leaves Nepal in a financial quagmire as it has just enough money to pay for the import bills for the next seven months.

On April 10, 2022 Prime Minister Sher Bahadur Deuba sacked Maha Prasad Adhikari as the Governor of the Nepal Rastra Bank which is Nepal’s central bank. He had warned the national government of the impending financial disaster that awaits the country.

Nepal is important to India historically, geopolitically and militarily.

Historically, Nepal shares a rich bond with India as Nepal is the only official Hindu nation of the world and India is home to the largest number of Hindus in a nation. Many important Hindu temples are located in Nepal which are frequented by the Hindu devotees of India.

Geopolitically, Nepal is located between China and India and shares a 1389-kilometre-long border with China, thus acting as a buffer state between the two large powers of Asia. Nepal is strategic to India’s defence.

Militarily, Nepal contributes a substantive chunk to the seven Gorkha Rifles regiments that exist in the Indian Army and approximately 45,000 Nepali Gorkhas are part of this elite and brave regiment and have performed outstandingly well in any war that India has fought and in the counter insurgency operations too.

With such a critical umbilical cord that Nepal has with India, its stability is of direct interest to India.

India has time and again helped Nepal in accordance with its “Neighbourhood First” policy and in future too will help Nepal whenever the need so arises. But Nepal has to set its own house in order and seek investments more than loans, as investments only will help Nepal swingle of the financial quagmire that they stare at. More and more loans will only get Nepal to sink further akin the Sri Lanka way.

Idowu Koyenikan rightly remarked “When you do the things in the present that you can see, you are shaping the future that you are yet to see”. 

The alarm bells for Nepal have started chiming. 

*About the Writer: The writer who retired from the Corps of Engineers of the Indian Army is an alumnus of NDA, Khadakwasla and IIT Kanpur. He is a M.Tech in Structures has also done MBA and L.LB and is a prolific writer and a public speaker. He Tweets and Koos at @JassiSodhi24. The views expressed are personal.  

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