Posted by: nepali kanchoo December 7, 2011
Login in to Rate this Post:
0 
? 
?
Relations between the two countries sank to a low point in 1988 when Kathmandu signed an agreement with Beijing to purchase weapons soon after a report that China had won a contract for constructing a road in the western sector to connect China with Nepal. India perceived these developments as deliberately jeopardizing its security. India also was annoyed with the high volume of unauthorized trade across the Nepalese border, the issuance of work permits to the estimated 150,000 Indians residing in Nepal, and the imposition of a 55 percent tariff on Indian goods entering Nepal.
In retaliation for these developments, India put Nepal under a virtual trade siege. In March 1989, upon the expiration of the 1978 treaties on trade and transit rights, India insisted on negotiating a single unified treaty in addition to an agreement on unauthorized trade, which Nepal saw as a flagrant attempt to strangle its economy. On March 23, 1989, India declared that both treaties had expired and closed all but two border entry points.
The economic consequences of the trade and transit deadlock were enormous. Shortages of Indian imports such as fuel, salt, cooking oil, food, and other essential commodities soon occurred. The lucrative tourist industry went into recession. Nepal also claimed that the blockade caused ecological havoc since people were compelled to use already dwindling forest resources for energy in lieu of gasoline and kerosene, which came mostly via India. To withstand the renewed Indian pressure, Nepal undertook a major diplomatic initiative to present its case on trade and transit matters to the world community.
The relationship with India was further strained in 1989 when Nepal decoupled its rupee from the Indian rupee which previously had circulated freely in Nepal. India retaliated by denying port facilities in Calcutta to Nepal, thereby preventing delivery of oil supplies from Singapore and other sources.
A swift turn in relations followed the success of the Movement for the Restoration of Democracy in early 1990. In June 1990, a joint Kathmandu-New Delhi communiqué was issued pending the finalization of a comprehensive arrangement covering all aspects of bilateral relations, restoring trade relations, reopening transit routes for Nepal's imports, and formalizing respect of each other's security concerns. Essentially, the communiqué announced the restoration of the status quo ante and the reopening of all border points, and Nepal agreed to various concessions regarding India's commercial privileges. Kathmandu also announced that lower cost was the decisive factor in its purchasing arms and personnel carriers from China and that Nepal was advising China to withhold delivery of the last shipment. The communiqué declared that Kathmandu and New Delhi would cooperate in industrial development, in harnessing the waters of their common rivers for mutual benefit, and in protecting and managing the environment.
In retaliation for these developments, India put Nepal under a virtual trade siege. In March 1989, upon the expiration of the 1978 treaties on trade and transit rights, India insisted on negotiating a single unified treaty in addition to an agreement on unauthorized trade, which Nepal saw as a flagrant attempt to strangle its economy. On March 23, 1989, India declared that both treaties had expired and closed all but two border entry points.
The economic consequences of the trade and transit deadlock were enormous. Shortages of Indian imports such as fuel, salt, cooking oil, food, and other essential commodities soon occurred. The lucrative tourist industry went into recession. Nepal also claimed that the blockade caused ecological havoc since people were compelled to use already dwindling forest resources for energy in lieu of gasoline and kerosene, which came mostly via India. To withstand the renewed Indian pressure, Nepal undertook a major diplomatic initiative to present its case on trade and transit matters to the world community.
The relationship with India was further strained in 1989 when Nepal decoupled its rupee from the Indian rupee which previously had circulated freely in Nepal. India retaliated by denying port facilities in Calcutta to Nepal, thereby preventing delivery of oil supplies from Singapore and other sources.
A swift turn in relations followed the success of the Movement for the Restoration of Democracy in early 1990. In June 1990, a joint Kathmandu-New Delhi communiqué was issued pending the finalization of a comprehensive arrangement covering all aspects of bilateral relations, restoring trade relations, reopening transit routes for Nepal's imports, and formalizing respect of each other's security concerns. Essentially, the communiqué announced the restoration of the status quo ante and the reopening of all border points, and Nepal agreed to various concessions regarding India's commercial privileges. Kathmandu also announced that lower cost was the decisive factor in its purchasing arms and personnel carriers from China and that Nepal was advising China to withhold delivery of the last shipment. The communiqué declared that Kathmandu and New Delhi would cooperate in industrial development, in harnessing the waters of their common rivers for mutual benefit, and in protecting and managing the environment.