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Economy

Economic outlook grim amid Indian 'blockade'

KATHMANDU -- Nepal, still recovering from two devastating earthquakes, is facing an economic and humanitarian crisis as an alleged blockade of its border crossings from India causes an acute shortage of essential commodities.

     Imports of gasoline, cooking gas and other goods have slowed to a trickle since Sept. 23, when Indian transport vehicles stopped crossing the border in support of a protest strike in southern Nepal against a revised constitution. More than 40 people have been killed in violent demonstrations in the region, known as the Madhes.     

Many Nepalese people believe that India is behind the blockade and anti-India protests, like this one in Kathmandu, are frequent.

     The constitution, which took effect on Sept. 20, was approved by lawmakers following earthquakes in April and May that killed more than 9,000 people and left more than 650,000 families homeless. At least 200,000 families are still living in temporary shelters.

     Protesters from the ethnic Madhesi community, which shares cultural and family ties with India, are seeking amendments to change provincial borders and introduce proportional representation in parliament, where they believe they are under-represented.

     India has asked Nepal to address Madhesi concerns. However, Kathmandu has accused New Delhi of backing the protesters and imposing an unofficial blockade by selectively restricting the movement of transport vehicles.

     "Why is India rallying behind the four Madhes-based parties," Prime Minister K.P. Sharma Oli of the Communist Party of Nepal (Unified Marxist-Leninist) said at a public function in Kathmandu on Nov. 2. India denies the allegation, claiming that transport operators are concerned about the safety of their staff.

     "There is no hindrance to supplies from India. But Nepal needs to normalize situation as soon as possible," Indian External Affairs Ministry spokesperson Vikas Swarup tweeted on Dec. 2 after Nepalese Deputy Prime Minister and Foreign Minister Kamal Thapa met Indian External Affairs Minister Sushma Swaraj in New Delhi.

     The Nepalese government is holding tripartite talks with the opposition Nepali Congress Party and representatives from the Madhes. However, Madhesi leaders failed to turn up for scheduled talks on Dec. 2. A day later, the government announced that it would table a constitutional amendment bill to address Madhesi demands. "Let us wait for positive outcome," Thapa told reporters in Kathmandu.

     Meanwhile, ordinary people are suffering serious problems as the economy deteriorates. Road traffic has fallen substantially as drivers have become almost entirely reliant on black market fuel, while firewood has replaced liquid petroleum gas in most kitchens, and hospitals are running out of some medicines.

     The United Nations Children's Fund has warned that more than 3 million Nepali children might suffer diseases, or even die, as winter approaches without sufficient fuel, food, medicines and vaccines.     

Most gas pumps in the country have been empty for more than two months, like these in Kathmandu, forcing commuters to buy fuel from black market.

     "If the blockade doesn't stop within a month, we'll run out of medicines, especially the ones used by those with heart conditions, diabetes and depression," said Sushil Pradhan from Pratishtha Pharmacy in Kathmandu's Chhatrapati area.

     Lina Shakya, chief administrator at the Chhatrapati Free Clinic, said the community facility caters to about 200 patients daily, but had been without supplies of antiseptic liquid or cream for the past two weeks. "We are having to run to nearby private pharmacies looking for basic medicines," she said.

Daily power cuts

"We are serving limited menu items for the guests, and cooking on firewood," said Dev Dangi, a manager at Kathmandu Guesthouse in Thamel. "There's a power cut daily for six to eight hours, but we don't have sufficient diesel to run [back up] generators."

     A taxi driver said he was buying gasoline on the black market for 350 to 500 Nepali rupees a liter ($3.30 to $4.80), compared with about 100 rupees before the shortages began. "No petrol pump is operating in Kathmandu for the last two months," he added.

     Finance Minister Bishnu Prasad Poudel told the Nikkei Asian Review that "the economic situation is deteriorating so fast that we must resolve it within hours, and not days or months."

     Poudel said it was "impossible" for the government to achieve its official projection of 6% growth in gross domestic product in the fiscal year to July 2016. "We can only try not to let it go lower than 2%," he said.

     Government tax revenues have fallen by 38 billion rupees in the last four months, compared with official forecasts, while private sector losses directly related to the blockade have topped 200 billion rupees, Poudel said in an "Immediate Action Plan," released in late November. More than 200,000 workers have been laid off as businesses have stopped operating or reduced activities.     

Due to shortage of liquefied petroleum gas, the majority of the people in Nepal are using wood, agricultural residue and animal dung for cooking.

     The two earthquakes have pushed about 700,000 people below the poverty line, according to Poudel's action plan, while Nepal's central bank has projected that the current crisis will push an additional 800,000 people into poverty.

     Kenichi Yokoyama, country director for Nepal at the Asian Development Bank, said the annual economic growth rate would fall to about 1.8% if the deadlock ended soon, compared with an earlier ADB projection of 4.5%. However, a prolonged standoff could lead to a contraction of around 0.7% of GDP, with inflation rising to between 9.8% and 10.5%, compared with an earlier projection of 8.5% to 9%. Yokoyama said government spending could fall significantly, especially on capital projects.

     "The industrial sector is operating at a quarter of its capacity," he said. "The local hotel occupancy rate has fallen to about 20%, against the norm of 80% or more, thus affecting the tourism sector. Lack of fuel and construction materials have virtually stalled all development and earthquake reconstruction activities. This situation has already caused major concern on the humanitarian impacts on the earthquake-affected areas with the arrival of winter. In particular, there are about 200,000 families in temporary shelters above 1,500 meters altitude who are vulnerable."

     Chandan Sapkota, a former ADB economist, said a full recovery would be difficult even if the crisis ended soon. "After the blockade is over, petroleum fuel and cooking gas supplies will hopefully normalize," Sapkota said. However, prices for other goods and services would take "much more time" to come back to normal, he said.   

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