India, traditionally the biggest foreign investor in Nepal, has slipped to third place in terms of Foreign Direct Investment (FDI) commitments.
In the last fiscal year, India pledged investments worth Rs1.94 billion, behind China (Rs 6.21 billion) and the United Kingdom (Rs 2.07 billion), according to the Department of Industry (DoI). The southern neighbour had stood second behind China for two years in the previous three fiscal years.
DoI Spokesperson Rudra Bahadur Malla said it was probably for the first time India came third in terms of FDI commitment to Nepal. “However, I don’t have exact information,” he said.
The fall in Indian FDI pledges comes in the wake of last year’s earthquakes and Indian trade embargo on Nepal. Industrialists attributed the fall to “Nepal’s negative attitude towards the Indian investment”. “Strong narrative prevails among the Indians that their investments are not taken positively in Nepal,” said Pashupati Murarka, president of the Federation of Nepalese Chamber of Commerce and Industries (FNCCI). “We are unable to convince the Indian private sector that Nepal welcomes their investments.”
The decline in Indian investment has also been attributed to deteriorating business environment in Nepal, particularly in the last fiscal year, when Nepal was rocked by two devastating earthquakes followed by protracted unrest in the southern plains. “Even we are reluctant to make new investments when we consider the business environment,” said Murarka. “In such a situation, it is really hard to convince our Indian counterparts that Nepal is FDI-friendly.” He added that a majority of the Indian investment is in the real sector whose performance is continuously declining in Nepal.
However, Chinese investment is growing in Nepal, thanks to their rising interest in infrastructure, hydropower and hospitality sectors. Also, Chinese companies have been awarded contracts of civil works, hydro-mechanical and electronics of various hydropower projects. Chinese companies are also enjoying contracts in the telecommunications infrastructure sector.
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