- Political Instability: The collapse of Pushpa Kamal Dahal’s government due to a failed confidence vote and the subsequent alliance shift in Nepal’s Parliament highlights ongoing political instability.
- Economic Challenges: Nepal’s economic woes, including high migration rates and poor infrastructure, are exacerbated by political instability, affecting sectors like tourism and overall economic health.
- Return of KP Sharma Oli: KP Sharma Oli’s return as Prime Minister brings challenges of ensuring political stability, economic growth, and balancing foreign relations with China and India.
- Foreign Policy Dynamics: Nepal’s strategic position requires a balanced approach to relations with China and India, with Oli’s previous tenure indicating potential shifts in foreign policy priorities.
Pushpa Kamal Dahal (Prachanda) lost his confidence vote in Parliament, resulting in the collapse of the alliance between his party, the Maoist Centre, and the Communist Party of Nepal. This has led to the fall of Prachanda’s government. KP Sharma Oli’s Communist Party has now allied with the Congress Party of Nepal, which holds the most seats in Parliament. Despite this, the Prime Minister will come from the Communist Party, making it noteworthy that while the Congress Party has the highest number of seats, the Prime Minister’s position has been given to the Communist Party.
Interestingly, the dissolved alliance between the Communist Party and the Maoist Centre was only formed in May. Just two months later, they had to face a confidence motion, which they failed to secure. Consequently, the alliance collapsed within just two months.
The Pratinidhi Sabha, the name of the Nepali parliament, has 275 seats. The Congress Party of Nepal won the most seats in the most recent parliamentary election—89 seats. KP Sharma Oli’s Communist Party, with 79 seats, came in second place. With just 32 seats, the Maoist Centre Party led by Prachanda obtained the third-highest number of seats.
There are various reasons for the persistent political unrest in Nepal. This instability is the third that has occurred since the last legislative elections in 2022. The Communist Party’s partnership with the Maoist Centre Party is one important factor. Due to the existence of two powerful leaders who were unwilling to budge from their viewpoints on important topics, the alliance found it difficult to find solutions. Political analysts think that these leaders’ personalities kept them from reaching a consensus, which is why the administration fell apart after only two months in office.
Another reason is the historical tendency in Nepali politics for coalition governments to share power mutually. However, this was not the case with the recent alliance. Experts suggest that Prachanda did not want KP Sharma Oli to be the Prime Minister, further contributing to the instability.
Furthermore, it seems that the political ideologies that underpinned Nepali politics during the 2006 democratic transition are beginning to fade. The recent collaboration that the Communist Party and the Maoist Centre formed appeared to be more of a convenience agreement than a philosophical one. The political unrest in Nepal has intensified as a result of this change.
Nepal’s condition has worsened as a result of the continuous political unrest there. The political unrest is also hurting other industries. Political stability, which Nepal presently lacks, is seen to create economic stability in contemporary geopolitics. The state of the nation’s economy is terrible generally, and its dollar reserves are depleting.
In picture: Parliament of Nepal
One of the greatest problems stemming from this economic instability is the migration of Nepalese citizens. In 2023, an estimated 1.6 million people left Nepal, leading to a significant loss of young, skilled labour. This exodus is problematic as Nepal’s young democracy has much potential, but the country is now heavily reliant on remittances. Nepal received almost $11 billion in remittances, which has become the largest source of its GDP, indicating that the country’s indigenous economic potential is compromised.
Tourism, one of Nepal’s major economic sectors, has also not reached its potential due to poor infrastructure. For instance, Nepal has only one international airport, limiting access for tourists who wish to explore its diverse geography and natural beauty. The country’s mountains and plains attract many, but inadequate infrastructure hampers tourism’s contribution to the economy.
The Return of KP Sharma Oli
Now that KP Sharma Oli is back in power as Prime Minister of Nepal after three years, he faces several major challenges. The foremost expectation from any government, especially in a democracy, is to ensure political stability. In Nepal, trust in the democratic process is low because no government has completed a full five-year term since the country became a democracy in 2006. This instability has negatively impacted various sectors and led to public disillusionment.
Oli must address this by ensuring his government remains stable. Beyond political stability, economic stability is a critical challenge. Nepal’s economy is struggling, and Oli must implement policies to foster growth and stability.
Another significant issue is foreign policy, particularly the relationship with China and India. Oli’s previous tenure saw a shift towards China, which strained relations with India. Given Nepal’s strategic importance to India’s “Neighborhood First” policy, this shift was a source of disappointment for India.
Diplomatic Waters: The Necessity of a Balanced Foreign Policy for Nepal’s Prosperity
The challenge for Oli now is to balance relations between China and India. Nepal cannot afford to choose sides due to its economic conditions and geopolitical position. A pragmatic approach, fostering good relations with both neighbours, would be beneficial. Ensuring a balanced and neutral foreign policy is crucial for Nepal’s long-term interests.
Since 2021, there has been an interesting turn in Nepali foreign policy. KP Sharma Oli’s policies regarding historical disputes with India, such as Lipulekh, Kalapani, and Limpiyadhura, initially created differences and disappointment in India-Nepal relations. However, after the Congress Party came into power in coalition with the Maoist Centre under Sher Bahadur Deuba, the relationship began to improve. Deuba’s tenure saw efforts to mend ties with India, including high-profile visits. Pushpa Kamal Dahal, formerly from the Maoist Centre party, was expected to lean towards a leftist agenda and potentially strain relations with India. Surprisingly, during his tenure, he maintained a decent relationship with India. Moreover, he actively supported multiple projects between India and Nepal while serving as Prime Minister.
Now that KP Sharma Oli is back in power, the clear question remains: will he maintain a good relationship with India or continue an anti-India policy? It’s important to understand that Nepal’s current situation is vastly different from that of 2021. The country is facing a multitude of crises, especially economic ones. Maintaining a balanced relationship with India would greatly benefit Nepal. India can invest in Nepal and provide crucial partnerships that would aid Nepal’s development.
If KP Sharma Oli continues to follow his 2021 policy and adopts an anti-India stance, it may not benefit Nepal. What Nepal needs now is a pragmatic and balanced foreign policy. Prioritizing politics over pragmatism would not be ideal for Nepal. It would be better for Nepal, India, and even China if Nepal maintains a policy that fosters cooperation between these two giants of Asia for regional prosperity. Finding a middle ground and navigating diplomatic relations carefully would be crucial for Nepal’s stability and development.
(Views expressed are the author’s own)
Parag Gilada 
Balaji Subramanian