Nepal’s new government and geopolitical advantages for mutually beneficial cooperation

Bishnu Raj Upreti, PhD[1]

 

1.      Introduction

Nepal, a sovereign Himalayan nation of striking diversity. Within a remarkably short north–south distance, Nepal rises from the subtropical plains of the Terai to the rugged mid-hills and onward to the world’s highest peaks, including Mount Everest. This dramatic geography, ranging from fertile lowlands to glaciated Himalayan summits, shapes not only Nepal’s climate and ecosystems but also its strategic position between India and China, making it one of the most geographically dynamic and geopolitically significant countries in the world. As of 2026, Nepal has an estimated population of around 30 million people, and area 147,516 square kilometres including Limpiyadhura, Lipulekh, and Kalapani. Nepal is a medium-sized densely populated Himalayan nation; with a population density of approximately 207 people per square kilometer of land area.

Nepal’s strategic position between India and China is closely intertwined with its rich ethnic composition, broadly shaped by two major cultural-linguistic streams: Indo-Aryan and Tibeto-Burman. The Indo-Aryan groups, largely concentrated in the southern plains and hill regions of Nepal, share deep historical, linguistic, and cultural affinities with northern India, reflecting centuries of migration, trade, and social interaction across an open border in South, West and Eastern borders of Nepal. In contrast, Tibeto-Burman communities, predominantly inhabiting the Himalayan and trans-Himalayan regions, maintain cultural and ethnic linkages with Tibet, the Northern border of Nepal and connected to China. This dual ethnic foundation not only defines Nepal’s internal social fabric but also reinforces its geopolitical identity as a bridge between South Asia and the Himalayan sphere, shaping its diplomatic balancing act and strategic sensitivity in navigating relations with both neighboring powers, India and China.

The year 2026 has ushered in a transformative chapter for Nepal’s political history, characterized by a bold departure from traditional political practice. In this paper, I will attempt to assess the new government’s overall approach and future direction in managing relations with its two major neighbors, China and India and powerful country USA. Further, in the context of changes in the regional geopolitical landscape, I will present my anticipation of the new government’s approach of cooperation with China in areas such as connectivity, trade, infrastructure, and cross border cooperation, while also properly managing Nepal’s long standing relationship with India so as to maintain mutual benefit and balance. Then I will discuss possible ways of the new government to deal with neighbors to make better use of its geopolitical advantages to further deepen mutually beneficial cooperation with neighboring countries and help safeguard regional peace, stability, and common development.

Since the formation of the new government is recent, it is too early for comprehensively assess its foreign policy practice. However, wider expectation is that the government will pursue an independent, balanced, and diversified foreign policy that ensure functional collaboration with two giant neighbors as well as other friendly countries. We are hoping that Nepal will play a role of a ‘vibrant bridge’ between our two friendly neighbors, India and China, leveraging its unique geography to turn historical constraints into strategic assets. As the regional geopolitical landscape shifts, it is important for the government to pursue a long-term vision for managing its delicate balance between China and India to ensure peace and stability in the Himalayan region.

Central to this new trajectory is the challenge of advancing pragmatic cooperation with China while maintaining the deep-rooted, multifaceted relationship with India. The government faces the complex task of accelerating infrastructure and connectivity projects with China, such as those under the Trans-Himalayan Multi-Dimensional Connectivity Network, without compromising its historical security and economic interdependence with New Delhi. This paper will analyze how the current Government intends to navigate these competing interests, seeking to identify the mechanisms through which Nepal can achieve mutual benefit and balance without becoming a theater for zero-sum competition. Furthermore, this analysis will explore how the new government can more effectively harness its geopolitical advantages to foster regional peace and stability. By positioning itself as a neutral facilitator of trade and energy cooperation, Nepal has the potential to move beyond the limitations of ‘small state’ diplomacy. The following sections will examine whether this independent policy is sustainable in the face of mounting external pressures and how Nepal can use its sovereign agency to help safeguard regional stability. Ultimately, the paper aims to provide a  of whether this new government can successfully implement balanced foreign policy to achieve stable, prosperous, and peaceful reality for the nation and the broader neighborhood.

 

2.      Past governments, Gen Z revolution to New government

 

2.1  Poor performance of past governments

Nepal faced structural governance failures in the past three and half decades. Since the restoration of multiparty democracy in 1990, Nepal has experienced recurring cycles of political instability, rampant corruption, governance failure, extremely poor service delivery and huge public dissatisfaction. These systemic weaknesses culminated first in the Maoist insurgency (1996–2006), which caused more than 17,000 deaths, billions of rupees of economic loss and unmeasurable social damages. Finally, the Comprehensive Peace Agreement (CPA) signed to reform country’s governance, economic development and social change. However, these promises again failed once the signatory of the CPA repeated the same as in the past. Consequently, the youth-led (Gen-Z) protest occurred in 2025 September 8-9 that has totally transformed the country’s political landscape.

Both phenomena (insurgency and Gen-Z revolt) stem from persistent structural deficiencies rather than isolated political events. Despite regime changes from monarchy to republic the core governance challenges have remained largely unresolved. These include elite capture of power, resources and positions, rampant corruption, systemic exclusion, extremely weak state capacity to deliver services, bureaucratic dysfunction and economic stagnation.

The 1990 People’s Movement transformed Nepal into a constitutional monarchy with multiparty democracy. However, the transition failed to restructure the state-society relationship, leaving behind entrenched inequalities and weak institutions. There were 32 successive governments formed since 1990 but none of them completed a full term. The post-2006 political transition also failed to resolve these systemic issues, leading to renewed dissatisfaction, particularly among youth.

Chronic political instability was the product of frequent government changes that prevented long-term policy planning and institutional continuity. Political actors prioritized coalition survival over good governance, fulfilling vested party interests that finally weakened state credibility and implanted political instability. uch a situation discouraged investment, delayed reforms, and eroded public trust. Consequently, Nepal experienced a failure of inclusive and equitable economic development, despite its gradual GDP growth. More than 60 percent population dependent on agriculture with very low productivity, persistent rural poverty and geographical disparity, large-scale labor out migration created economic exclusion and fertile ground for youth frustration and revolt.

Similarly, social inequality and structural exclusion remain major cause of tension in Nepal. Political and administrative power remained concentrated among traditional elites and later with emerged neo-elite, while marginalized communities lacked meaningful representation in important state structures. Consequently, political tensions mounted in Madhesh and other regions.

Entire governance of the country was controlled by institutionalized corruption and patronage networks of politicians, bureaucrats and brokers. Corruption became systemic within governance structures, characterized by political appointments over merit, misuse of public resources, weak accountability mechanisms, politicization of state institutions and bureaucracy. As a result, it delegitimized democratic institutions, which became a central grievance in both the Maoist insurgency and recent youth revolt of 2025. The 1990’s political change failed not dismantle the old power structure. Instead, it continued the elite dominance. The Maoist insurgency led change dismantled the feudal monarchical institution, but the Maoists themselves emerged as neo-elite engaged in manipulating state power and resources Public perceived this situation as political change without systemic transformation and therefore need another revolt.

Even in the federal republic, the country remain with excessive centralization of power. The Maoists, who claimed themselves and the leader of state reform,  emerged as new force with old governing style. Kathmandu-centric governance weakened local government capacity and failure of their effective service delivery. The centralized bureaucracy did not go to the local government and therefore frustration, feeling of injustice and retaliation sharpen in the peripheral regions of the country.

Both the 1990 Constitution and the CPA and even the constitution of the federal republic failed to adequately address challenges faced by Nepal in terms of unemployment, exclusion, bad governance, corruption and bureaucratic and political manipulations. So, people have development disillusion with democracy, erosion of state legitimacy mounted, questions raised for radical alternative governance systems.

2.2  Gen-Z revolution

 

The roots of Gen-Z discontent: The 2025 youth-led protests in Nepal were fueled by a "deep state" perception, a mix of systemic governance failure, social media mobilization, and opaque geopolitical interests. Beyond these underlying forces, the unrest stemmed from high unemployment, pervasive corruption, and a lack of meritocracy. This represents a recurring 35-year cycle in Nepal where political transitions raise expectations that weak governance fails to meet, inevitably leading to public frustration and mass mobilization.

Frustration with the status quo: Frustration centered on a concentrated political-business elite and a culture of nepotism, famously criticized on social media via "nepo-baby", “nepo-kids” slogans. Gen-Z protesters, informed by governance standards, demanded accountability and transparency over the recycling of entrenched leadership. Tensions reached a breaking point following government attempts to restrict digital freedoms, specifically through conditional bans on platforms like Meta and X.

Other influences: The movement gained momentum through the symbolic support of figures like Kathmandu Mayor Balendra Shah and the anti-establishment stance of the RSP. Coordination was highly decentralized, utilizing platforms like Discord for rapid engagement. While observers speculate on the influence of diaspora networks and internal maneuvering, more controversial claims such as the involvement of "Tibet-origin blood (TOB)" or the use of chemical weapons such as such as Molotov cocktail and other chemicals.

2.3        Interim government and election 

In the wake of the Gen-Z protests, the formation of an interim government was framed as a stabilizing response to a widening legitimacy gap between citizens especially youth and the established political order. The protests, energized by demands for accountability, meritocracy, and an end to patronage politics, created pressure for a transitional arrangement capable of restoring public trust and preparing the ground for credible elections.

In this context, the interim setup received support and guidance from Balendra Shah, who was popular among youth protesters, and the RSP, whose anti-establishment stance resonated strongly with younger voters. This guidance included key negotiation conditions, such as dissolving parliament, negotiating exclusively with military leadership, and proposing Sushila Karki as Prime Minister. Although not formally partisan, the interim government was widely perceived as a supporter of the RSP, as most of the leaders and proponents of the 2025 Gen-Z revolt were either election candidates, central members, or cadres of the party.

The central mandate of the interim government was to ensure a free, fair, and transparent election. It worked hard to rebuild confidence of political parties to take part in the election, as there was severe mistructs that the interim government is from Gen-Z youth coming to marginalize political parties and manipulate election in the favour of RSP and the Gen-Z youth. Measures such as strengthening election oversight, coordinating with key actors, and providing opportunity for first-time and youth voters helped reduce fears of manipulation. Interim Prime Minister Sushila Karki had also made especial efforts to improve relations with political parties. The relative success of the elections under this arrangement was seen as a crucial step in re-legitimizing democratic governance after a period of intense public discontent.

2.4        Emergence of RSP as powerful party with sweeping victory:

The RSP surged to electoral prominence by channeling widespread public frustration with entrenched political elites into a reform-oriented campaign centered on its ambitious “100-point” commitments. Positioning itself as an anti-establishment force, the party capitalized on demands for transparency, meritocracy, and efficient governance, attracting strong support from urban voters and younger generations. Its campaign messaging, amplified through social media, promised a decisive break from patronage politics and raised expectations for rapid, visible change, what is called as algorithm manipulation. However, the very breadth of these commitments also potentially creates what can be described as a “commitment trap,” where the scale and speed of promised reforms could be difficult to match by the RSP government even by securing almost two-third majority in the election.

Despite its sweeping victory, RSP faces structural and institutional challenges that test its capacity to deliver. The party’s chairman, though energetic and reform-driven, is controversial with several court cases, and ministers and members of parliament of RSP are relatively inexperienced, and the organization itself is still evolving rather than functioning as a fully matured political party. Questions the RSP earlier directed at ruling governments on accountability, service delivery, governance and integrity, now return to RSP as immediate expectations from the public. At the same time, entrenched bureaucratic resistance, long-standing power nexuses, and vested interests within the state apparatus pose significant barriers to reform, potentially slowing or diluting policy implementation. Further, RSP has no province and local governments and all controlled by other parties and therefore delivering services become difficult.

The sustainability of RSP’s success will depend heavily on how it navigates governance: the inclusiveness and transparency of its decision-making, the merit-based selection of leaders, and its ability to balance idealism with pragmatic policy execution, as well as balancing geopolitics. Compounding these challenges is a broader social environment marked by skepticism and a “negative social psyche,” where public patience is limited and criticism is amplified rapidly through digital platforms. Social media, which contributed significantly to the party’s rise, now imposes a constant burden of scrutiny and pressure. Whether RSP can transform electoral momentum into durable institutional reform will determine if its breakthrough represents a lasting political shift or a transitional moment in Nepal’s evolving democratic landscape. Their lack of experiences in foreign policy and geo-political and geostrategic issues could also impedes them to balance key geopolitical actors. 

3.      Foreign policy of Nepal

Nepal’s foreign policy is guided by the vision of safeguarding sovereignty and territorial integrity and promoting national interests through effective diplomacy, and a mission to maintain friendly relations with neighbors, regional countries, major powers, and the wider international community while actively engaging in the United Nations and other forums, safeguarding the rights of Nepali citizens abroad, and enhancing the country’s global image. To achieve this, the Ministry of Foreign Affairs formulates and implements policy, manages diplomatic relations and representation, conducts development diplomacy, negotiates agreements, coordinates high-level visits and diplomatic missions, and provides consular, passport, protocol, and non-resident Nepali (NRN) services, all while ensuring the security, interests, and international standing of Nepal. This requires avoiding geopolitical alignment, diversifying economic partnerships, and ensuring that all engagements contribute to national capacity rather than dependency.

Nepal’s geopolitical position between major powers requires a carefully managed foreign policy rooted in neutrality, sovereignty, and balanced engagement. Nepal’s foreign policy is anchored in five key principles. First, non-alignment, which should be applied consistently across security, economic, and diplomatic domains. Second, all decisions must reflect sovereign judgment, free from external pressure. Third, Nepal should maintain balanced engagement with all major partners, ensuring no single country dominates its foreign relations. Fourth, transparency is essential to build public trust and avoid misinformation. Finally, civilian authority must guide all foreign policy decisions, ensuring democratic accountability.

3.1  Foreign policy the new government

In the 14^th point of the RSP’s 18-point national commitment document under the heading of ‘International Diplomacy and Foreign Relations’ approved by the cabinet, it was mentioned as ‘transforming Nepal “from a buffer state into a vibrant bridge” and adopting balanced foreign relations. The spirit was to shift Nepal’s geopolitical role from a buffer between powers (India–China context) toward becoming a “bridge” facilitating cooperation and connectivity. However, political party leaders, former foreign ministers and former ambassadors sharply criticized arguing that Nepal has never officially defined itself as a “buffer state”, and using such controversial term carries sensitive geopolitical implications.

A new government led by the RSP is expected to anchor Nepal’s foreign relations in a doctrine of non-alignment and placing national sovereignty above all agreements. It is expected to pursue “cooperation without alignment,” welcoming economic, technical, and humanitarian cooperation while rejecting any military or strategic bloc involvement. Foreign engagement is expected to structure sector-wise, covering infrastructure, disaster management, health, education, and technology, to reduce ambiguity, while all agreements would require parliamentary oversight, civilian leadership, transparency, and prior national interest assessments. The government is expected to maintain balanced relations with key partners like India, China, and the United States through a diversified multi-partner approach, while ensuring each agreement includes a clear neutrality clause. Overall, this approach positions Nepal as a neutral bridge and cooperative hub that engages widely but aligns with none, treating balance as an active and carefully managed strategy.

Operationally, RSP government is expected to implement an independent and diversified foreign policy by applying non-alignment consistently across defense, trade, and diplomacy, while legally prohibiting any foreign military presence. It has to expand and diversify trade, aid, and investment partnerships to avoid overdependence, ensure all agreements remain transparent and institutionally coordinated, and balance connectivity initiatives in both northern and southern corridors while strengthening domestic capacity. Further,  government would promote Nepal as a neutral venue for international dialogue and peace diplomacy. Greater reliance on multilateral platforms such as the United Nations, BIMSTEC and other regional international forums would help reduce bilateral pressure, while a long-term national doctrine and broad political consensus would ensure continuity and stability in foreign policy.

As a relatively new force in Nepal’s politics, the RSP is stepping into a high-stakes governance, tasked with navigating a complex geopolitical landscape where the interests of major global powers (especially India, China and USA) frequently intersect. It is not yet fully known how they will operationalize conceptual elements of Nepal’s foreign policy.

The RSP is expected to blend genuine concerns of global power with modern economic ambitions in its foreign policy. While their public commitment remains as a ‘buffer state’, which was widely criticized in Nepal. The RSP government knowingly or unknowingly stated ‘buffer state’ concept and aims to move from buffer state to vibrant bridge between two giants’ neighbors India and China. By proposing a vibrant bridge between India and China the RSP aims to transform Nepal into a dynamic transit point for trilateral economic cooperation between India and China.

Although Prime Minister Balendra Shah has faced criticism for undiplomatic or "populist" comments in the past, when he was a Mayor, his transition into the premiership he has already demonstrated more matured, no-frills diplomacy. One example of his maturity is his decision to brief 17 foreign ambassadors of countries of importance for Nepal collectively, rather than holding fragmented, individual meetings, suggests an intent to restore institutional dignity and maintain a strictly balanced, non-aligned stance of Nepal. However, critiques say that the PM did not outlined his foreign policy parameters in this meeting, which was necessary. Nevertheless, the government appears committed to correcting past weakness.

 

4.            Government approach with immediate neighbors

 

4.1           Overall approaches of government:

Nepal must begin by firmly protecting its sovereignty in the security domain. This means clearly prohibiting any form of foreign military presence, including bases or long-term troop deployment. Military cooperation, where necessary, should be limited strictly to non-combat areas such as disaster response and peacekeeping support. Every agreement involving security components should explicitly include a neutrality clause stating that it is not directed against any third country. In addition, before entering any major agreement, Nepal should conduct a comprehensive national security impact assessment to evaluate potential geopolitical consequences.

In the diplomatic sphere, Nepal should pursue a policy of balanced engagement. High-level visits, agreements, and cooperation initiatives should be distributed evenly among major partners to avoid perceptions of favoritism. Nepal should consciously avoid joining or appearing to support any geopolitical bloc or strategic containment policy. At the same time, the country can position itself as a neutral venue for dialogue and cooperation, enhancing its diplomatic relevance. Strengthening participation in multilateral platforms can further reduce bilateral pressure and reinforce Nepal’s neutral identity.

Economic policy should focus on diversification and balance. Nepal must avoid overdependence on any single country for trade, investment, or development assistance. Infrastructure development, particularly connectivity, should be balanced in both northern and southern directions to ensure strategic equilibrium. Encouraging competitive investment from multiple partners will not only improve economic outcomes but also reduce political leverage from any one source. Over time, Nepal should aim to reduce structural dependency by strengthening domestic production and financial resilience.

Governance and transparency are critical to sustaining neutrality. All major international agreements should be subject to parliamentary review or approval, ensuring democratic legitimacy. The government must publish agreements and clearly communicate their purpose and implications to the public. This reduces the risk of misinformation and political manipulation. Coordination among key institutions such as the foreign ministry, Ministry of Defense, and National Security Council, Prime Ministers and other relevant actors must be strengthened to avoid conflicting positions that can undermine credibility.

Institutional capacity is another essential pillar. Nepal should invest in domestic capabilities, including infrastructure, disaster response systems, and technological development, to reduce reliance on external actors. Establishing a dedicated unit for geopolitical risk assessment would allow the government to systematically evaluate external engagements. Furthermore, political parties should work toward a long-term consensus on foreign policy principles so that national strategy remains stable despite changes in government. Formalizing this approach into an official doctrine would provide consistent guidance for future decisions.

4.2        Cooperation with and concerns of China

China visit of the Prime Minister KP Sharma Oli in 2018 marked a transformative era in Nepal-China relations, elevating the bond to a "Strategic Partnership of Cooperation." During Prime Minister Oli’s 2018 visit, the focus remained heavily on physical and economic foundations. A memorandum of understanding for a feasibility study of the China-Nepal Cross-Border Railway was signed. Also infrastructure and energy took center stage, with agreements ranging from the construction of the Karnali bridge at Hilsa to the establishment of a joint mechanism for trans-border power grids.

The state visit of Xi Jinping to Nepal took place on 12–13 October 2019, the first by a Chinese head of state in over two decades. It is widely regarded as a historic turning point in Nepal–China relations. During this visit, the two countries elevated their relationship to a “Strategic Partnership of Cooperation Featuring Ever-lasting Friendship for Development and Prosperity,” marking the beginning of a new era of closer political, economic, and strategic ties. One of the most important outcomes was the signing of more than 20 agreements and Memorandums of Understanding (MoUs) covering a wide range of sectors focusing heavily on connectivity and infrastructure development, including plans for a Trans-Himalayan connectivity network, feasibility studies for a cross-border railway, and improvements in roads and transport corridors linking Nepal with China. The  Xi Jinping’s 2019 visit resulted in a broad and multidimensional partnership encompassing infrastructure, economic assistance, connectivity, cultural exchange, and security cooperation, making it one of the most significant diplomatic milestones in Nepal–China relations in recent decades.

The most recent official visit of Prime minister of Nepal to China was from December 2 to 5, 2024 when K. P. Sharma Oli, during which Nepal and China significantly advanced their bilateral cooperation. This visit was a major step in strengthening economic, infrastructure, and strategic ties between the two countries. The centerpiece of the visit was the signing of a framework agreement on the Belt and Road Initiative (BRI), aimed at enhancing cross-border connectivity and transforming Nepal from a landlocked to a land-linked country. The agreement emphasized the development of major infrastructure projects, including trans-Himalayan transport networks such as railways, highways, and tunnels. During that visit, the two countries had signed nine agreements and MoUs covering a wide range of sectors including a vital Boundary Management System and a treaty on mutual legal assistance in criminal matters. Strategic connectivity was reaffirmed through updated railway studies and new tunnel construction cooperation focusing on the Jilong-Kathmandu route. Beyond hard infrastructure, the agreements touched on cultural and logistical diplomacy, such as establishing a Consulate General in Chengdu, protecting the Mount Sagarmatha ecosystem, and easing phytosanitary barriers for Nepali citrus exports.

Again Prime Minister Oli visited China from August 30 to early September 2025 to participate in the Shanghai Cooperation Organization (SCO) Summit. However, this visit was primarily multilateral in nature and focused on regional cooperation

The RSP Government’s success remains on building on the past achievements with China, as per the nation’s foreign policy. At present, the cooperation between Nepal and China is increasingly anchored in the Trans-Himalayan Multi-dimensional Connectivity Network, a key component of China's Belt and Road Initiative (BRI). Nepal aim The RSP Government has to leverage this partnership to transform from a ‘landlocked’ to a ‘land-linked’ nation through several strategic pillars. Major projects under infrastructure & connectivity discussion include the China-Nepal Cross-border Railway, the upgrading of the Rasuwagadhi-Syabrubesi road, and the development of the Tokha-Chhahare tunnel. These are designed to provide Nepal with alternative transit routes to the sea via Chinese ports. In the economic integration aspect, Nepal is aligning its local development with China’s Long-Range Objectives through 2035. This includes expanding cross-border cooperation in energy (transmission lines), telecommunications, and high-altitude agriculture to reduce Nepal's trade deficit through increased exports to the Tibetan market.

While China offers significant economic backing, its support is contingent on Nepal’s adherence to strict red lines regarding its internal security and sovereignty. Nepal is quite sensitive in the following issues and concerns of China:

a)      The One-China policy: Nepal government reaffirms that Taiwan is an integral part of China and prevents any public displays or diplomatic gestures that suggest otherwise. Nepal maintains a zero-tolerance policy toward any activity perceived as supporting Taiwanese independence. 

b)      Tibet and the 15th Dalai Lama: Nepal is well aware of China's sensitivity and firmly committed to prevent any activities against disturbing Tibet in Nepal. Nepal is vigilant against the Tibetan diaspora using Nepali land for "separatist" activities. Another emerging concern related to the Tibet is the succession of the 15th Dalai Lama. At present, some discussions are going on in the Nepali media that Dalai Lama wants to find his successor from Nepal. However, Nepal is firm that any declaration or selection process cannot happen in Nepali soil and Nepal controls any pro-Tibet groups active in finding the new Dalai Lama from Nepal and activities against Tibet and China.

c)      No use of Nepali land against China: Nepal makes categorical assurance to China that Nepali land will not be used against China by any external powers.

The PRS government has to sensitively deal with the China’s concerns, which are shaped by security priorities, regional competition, and the growing presence of both India and the United States in Nepal. From Beijing’s perspective, Nepal is not just a neighbor but a strategically sensitive country linked directly to Tibet and broader Himalayan geopolitics.

China is highly sensitive to any anti-China activities by Tibetan refugees or political groups operating from Nepali soil. China expects Nepal to strictly uphold the “One China Policy,” prevent protests, and curb any perceived separatist or international advocacy movements related to Tibet. Any instability in Nepal that weakens state control is viewed as a direct security risk to China’s western frontier.

Another major concern of China is strategic competition with India. Historically, India has had deep political, cultural, and economic influence in Nepal. China is cautious of India maintaining overwhelming dominance, especially in security and infrastructure sectors. At the same time, China tries to expand its own presence through connectivity projects, trade corridors, and political engagement, aiming to reduce Nepal’s dependence on India. However, it must balance this carefully to avoid provoking strong Indian countermeasures in a region India considers highly sensitive.

China is equally attentive to the growing engagement of the US in Nepal, particularly under the broader Indo-Pacific framework. Initiatives linked to the Millennium Challenge Corporation and other US programs are sometimes viewed in Beijing as part of a strategic effort to counter China’s influence. China concerns that increased US involvement, especially if it expands into security cooperation, could introduce external strategic pressure close to its borders.

A further concern is connectivity and Belt and Road Initiative (BRI) implementation. China sees Nepal as a gateway for trans-Himalayan connectivity, including roads, railways, and energy links. However, slow project execution, political debates within Nepal, and concerns about debt sustainability create uncertainty. China wants predictable, long-term commitments to ensure these projects align with its regional economic and strategic vision.

Political stability and reliability of partners in Nepal also matter to China. Frequent changes in government, shifting party alliances, and inconsistent policy positions complicate long-term planning. China prefers stable governments that can ensure continuity of agreements and limit external influence from rival powers.

Finally, China is concerned about Nepal’s balancing strategy. While Nepal officially pursues non-alignment, Beijing remains cautious that Kathmandu might tilt intentionally or under pressure toward India or the United States on strategic matters. China therefore emphasizes close political engagement, party-to-party ties, and economic incentives to maintain influence.

4.3           Cooperation with and concerns of India 

Nepal has traditionally followed an informal diplomatic practice whereby its Prime Ministers always make their first official foreign visit to India upon invitation. While this reflects the close and multifaceted relationship between the two countries, any deviation from this convention has occasionally created diplomatic unease. Indian Prime Minister Narendra Modi congratulated new PM Balendra Shah immediately after he was elected and expressed willingness to work with the new government, along with an invitation to visit India. Hence, PM Balendra Shah may make an official visit to India in the near future. Even though the date has not yet been finalized, internal preparations regarding the agenda have already begun on both sides and Indian Foreign Secretary is visiting Nepal soon to finalize them.

The Indian side often highlights India–Nepal relations as ‘special’, with a “roti-beti” (bread-and-marriage) relationship. India-Nepal relations are reflecting on deep cultural, social, and religious ties that go beyond formal diplomacy. However, tensions are frequently observed, particularly when India imposes blockades, encroaches on border areas such as Limpiyadhura, Lipulekh, Kalapani, and Susta, delays in constructing hydropower projects for decades, erects dams to submerge low land areas of Nepal in the southern border or restricts the supply of crucial construction materials (e.g., detonators (blasting caps) and related explosives essential for tunneling and road construction in several infrastructure projects in Nepal involving Chinese contractors). As Nepal does not produce these items, it has had to rely on India.

India’s foreign policy establishment often perceives that China is actively competing to expand its influence in Nepal. As other South Asian countries such as the Maldives, Bangladesh, and Pakistan increasingly tilt toward China, Nepal’s strategic importance for India has grown further.

The Indo-Nepal Treaty of Peace and Friendship (1950) established an open border and granted reciprocal rights for citizens of Nepal and India to live, work, and conduct business in each other’s territory. While these provisions once supported close ties, they are increasingly seen in Nepal as asymmetrical and burdensome, given the vast differences in population size and economic capacity of India. Unrestricted movement and equal access to employment and property create pressure on Nepal’s labor market, resources, and regulatory systems, making it difficult for the country to manage its economy and sovereignty effectively. Therefore, there is a strong case for amending the treaty to introduce more balanced and regulated provisions that better reflect present-day realities and protect Nepal’s national interests. However, India is reluctant.

 In the past 55 years, India has directly or indirectly imposed blockades five times, causing extreme difficulties for Nepali people through severe shortages of fuel and essential goods. These actions have contributed to mounting frustration in Nepal regarding Indian behavior. Perceptions of Indian involvement in Nepal’s internal politics, particularly in influencing government changes and contributing to political instability, are not expectations typically associated with a friendly neighbor.

The new Prime Minister Shah, emerging from the Gen Z–driven political wave, has expressed a strong nationalistic position since his tenure as Mayor of Kathmandu Metropolitan City. It is expected that he may seek a more equal relationship with India, including efforts to reclaim disputed territories such as Limpiyadhura, Lipulekh, Kalapani, and Susta. If he attempts to engage India through an independent and balanced foreign policy, treating India as an equal partner rather than a “big brother”, Nepal–India relations may remain contested. This is especially likely given that India’s hegemonic tendencies have often been perceived in the past when Nepali leaders raised such issues in bilateral meetings with Prime Minister Modi. Nepal expects that India will recognize the sentiments of the Nepali people and avoid behaving in a dominant manner.

King Birendra had proposed that Nepal be internationally recognized as a peaceful, neutral state, free from military rivalry and external interference. Over 100 countries, including China, eventually endorsed Nepal’s “Zone of Peace (ZoP)” proposal (1975) for normative (supporting peace), strategic (balancing influence), and diplomatic (low-cost signaling) reasons. However, India did not endorse the proposal.

India’s concerns in its relationship with Nepal are rooted in geography, security, economics, and strategic competition. Because the two countries share an open border and deep historical ties, India tends to view developments in Nepal not as distant foreign policy issues but as matters directly affecting its internal stability.

One of mutual concerns of two countries is security along the open border. The nearly 1,800 km India–Nepal border allows free movement of people, which is unique globally. While this facilitates strong social and economic ties, it could also promote cross-border crime, human trafficking, smuggling, and the potential misuse of Nepali territory by terrorist or anti-India groups and vice versa.

Another major concern of India is the growing influence of China in Nepal. India has traditionally considered Nepal within its strategic sphere due to proximity and cultural ties. However, China’s increasing investments in infrastructure, connectivity, and political engagement such as through the BRI are viewed by India as a strategic challenge and a shift in Nepal’s geopolitical alignment.

India is further concerned about water resources and river management. Nepal’s rivers are crucial for flood control, irrigation, and hydropower downstream in India. India, often creates disputes or delays in implementing water related projects agreed by two countries. Controversies are also over dams, embankments, and water-sharing such as those related to the Koshi, Gandak, and Mahakali rivers can create tensions.

Nepal’s concerns in its relationship with India stem from asymmetry in size, economic dependence, historical experiences, and sensitivities around sovereignty. While the two countries share deep cultural, economic, and people-to-people ties, several recurring issues shape how Nepal views the relationship.

A central concern is sovereignty and perceived interference. Many in Nepal believe India has, at times, influenced Nepal’s internal politics, whether during constitution-making, government formation, or major policy decisions. This perception has created a strong desire in Nepal to assert independent decision-making and prevent Indian pressure in domestic affairs.

Another major issue is the experience of economic blockades and trade disruptions. Nepal is heavily dependent on India for transit access to global markets, fuel, and essential goods. Events such as the 2015 India–Nepal border blockade reinforced fears in Nepal about overdependence on a single country. Such disruptions are seen not just as economic challenges but as threats to national resilience. Nepal is also concerned about unequal economic relations and trade imbalance. Imports from India far exceed exports, creating a persistent trade deficit. Many Nepali policymakers argue that non-tariff barriers, limited market access, and structural dependency hinder Nepal’s economic growth and industrialization.

Finally, Nepal is cautious about maintaining a balanced foreign policy, especially between India and China. Nepal seeks to avoid being seen as falling under any single country’s influence. However, efforts to diversify partnerships are sometimes interpreted by India as strategic shifts, creating diplomatic friction.

 

4.4           US-Nepal relations and concerns:

US–Nepal bilateral relations are historically longstanding, and the US has supported Nepal’s development across multiple sectors for decades. However, tensions among political forces in Nepal intensified when the US State Partnership Program (SPP) was proposed as a bilateral partnership between a US and Nepal. The program focuses on disaster response and preparedness, humanitarian assistance, military training and capacity building, as well as cooperation in leadership, aviation, cyber, and medical sectors, and is implemented through joint exercises, training exchanges, and technical support. Jointly promoted by the US Department of Defense and the State Department, the SPP faced strong objections from major political parties after intense debate, leading the Government of Nepal to formally reject the proposal three years ago. Despite this, several high-level US officials continue to visit Nepal regularly, and one of the undeclared agendas is often perceived to be persuading the government to reconsider the SPP.

At the same time, Nepal has already accepted the Millennium Challenge Corporation (MCC) compact, a major development assistance program funded by the MCC. In Nepal, the MCC compact is valued at approximately $500 million (around NPR 66 billion), with an additional contribution of about $130 million from Nepal. The program focuses on two primary sectors: electricity transmission through the construction of over 300 km of high-voltage transmission lines and substations to improve domestic power supply and enable cross-border electricity trade, and road maintenance, targeting around 300 km of strategic roads using modern maintenance systems. Although the MCC also faced political contestation, it was ultimately ratified by Nepal’s Parliament, reflecting a cautious but pragmatic acceptance of US-supported economic cooperation.

In Nepal’s context, the SPP and the MCC compact differ significantly in both purpose and political sensitivity. The SPP represents a security-oriented, ongoing partnership led by the US Department of Defense, emphasizing military training, disaster response, and defense cooperation, which makes it highly sensitive in geopolitical terms. In contrast, the MCC is a time-bound (five-year) development initiative focused on infrastructure and economic growth. While both initiatives generated political debate, the SPP is widely perceived as affecting sovereignty and security perceptions, whereas the MCC is primarily associated with economic development. Given Nepal’s strategic location between China and India, any form of military cooperation with the US is inherently sensitive. Therefore, any reconsideration of the SPP would only be politically viable if it were strictly limited to non-military domains such as disaster management and humanitarian assistance, with full transparency and clear alignment with Nepal’s long-standing policy of neutrality.

The main objections to the SPP, particularly from communist parties and critical analysts, centered on several interconnected concerns. These included fears of gradual military alignment through joint training and engagement, potential erosion of national sovereignty through external influence on security policy, and the risk of civil–military imbalance within Nepal based on past coordination challenges between the government and the army.

In addition, there were significant geopolitical concerns, especially regarding Nepal–China relations, as China viewed the SPP as a possible extension of U.S. strategic influence in the region. US sees BRI as geo-political concern. There were also apprehensions about Nepal–India relations, as India could interpret such engagement as a weakening of the Nepali Army’s traditional ties with India or as an entry of US military presence into its strategic sphere. These overlapping domestic and external concerns ultimately led Nepal to formally reject the SPP in June 2022, driven by fears of military alignment, sustained political pressure, and the need to carefully manage relations with both China and India.

In Nepal’s highly sensitive geopolitical environment, any initiative that even indirectly resembles military alignment quickly becomes politically contentious. This makes the original form of the SPP particularly risky, given its high geopolitical cost and limited immediate necessity. By contrast, the MCC and BRI, despite controversy, has remained broadly acceptable because its tangible economic and infrastructure benefits are seen to outweigh associated political risks, especially when accompanied by safeguards ensuring transparency and national interest.

Another significant issue in Nepal–US relations is the Indo-Pacific Strategy (IPS), under which much of the US development cooperation framework is positioned. Although this linkage exists at the policy level within the US government, it is less openly discussed in Nepal, where public and political sensitivity to strategic alignment remains high.

The US concerns in its relationship with Nepal are shaped by a combination of geopolitical, political, and developmental factors. One of the primary concerns is strategic balance in the context of China’s rising influence. The US views Nepal as part of a broader Indo-Pacific strategic space and closely monitors how Chinese investments, infrastructure projects, and political engagement may affect Nepal’s external alignment. While the US does not expect Nepal to take sides, it prefers a Nepal that remains open, democratic, and not overly dependent on any single external power.

Security cooperation and transnational threats also remain areas of concern. Although Nepal is generally stable and peaceful, the US remains attentive to issues such as human trafficking, financial crimes, and the potential misuse of open systems for illicit activities. Stability in Nepal is therefore considered important not only domestically but also for broader regional security dynamics.

Development effectiveness and economic reform constitute another major priority. Through initiatives like the MCC, the US seeks to support Nepal’s infrastructure development, energy connectivity, and economic growth. However, delays in implementation, political controversies, and administrative challenges surrounding such projects remain concerns, as the US emphasizes transparency, accountability, and timely execution.

Finally, the US places significant emphasis on human rights and the rule of law. Issues such as transitional justice following Nepal’s armed conflict, press freedom, minority rights, and judicial independence are regularly raised in bilateral dialogue. Continued progress in these areas is viewed as essential for sustaining a strong, credible, and long-term partnership between Nepal and the US.

The new RSP government must address all these issues and concerns in a way that achieves a win-win solution without frustrating India or China.

 

5        Challenges of the government:

The new government of the RSP faces a complex set of challenges as its transitions from a conglomeration of frustrated mass to a governing force. Below is an elaboration of the primary obstacles the party must navigate to remain effective in Nepal's current political climate.

5.1 Mismatch between public expectation and state capacity

One of the most significant hurdles for the RSP is the ‘trap of raised expectations’ here the party’s reformist rhetoric has created high expectations among ordinary people in Nepal, which it must deliver on with immediate results. While the public expects swift, transformative changes in governance and service delivery, the party is constrained by a rigid state bureaucracy and limited financial resources. This mismatch poses a political risk; if the party cannot deliver tangible improvements in the short term, the very enthusiasm that propelled them into power could turn into public disillusionment, as the slow pace of state machinery often clashes with the urgency of their political promises.

5.2 Structural impediments and institutional governance

The RSP must also contend with significant structural impediments within Nepal’s federal architecture. Because the party is a relatively new entrant, it lacks a presence in the National Assembly (Upper House) and across the provincial and local governments. This creates a functional ‘bottleneck’ where the party’s central policy initiatives may struggle to find traction at the local level or pass through a legislative body controlled by established rivals. Navigating this institutional gap will remain a struggle until the next general election offers an opportunity to expand their footprint across all tiers of government.

5.3 Political non-cooperation and coalition dynamics

In Nepal’s highly competitive multi-party system, the RSP may face persistent non-cooperation from traditional political actors who view the new party as a threat to the established status quo. Implementation of some of the provisions of the manifesto of the RSP requires amendment of some constitutional provisions, which requires support of the upper house or even the provincial assembly, which is quite difficult for the new government as the RSP is absent at the provincial and local levels of government. Further, some of the RSP’s signature anti-corruption or administrative reform measures may face strong internal resistance, legislative stalling, or bureaucratic foot-dragging by stakeholders loyal to the older political parties.

5.4 Balancing geo-political sensitivities

On the international front, the RSP is tasked with the delicate act of balancing the geopolitical sensitivities of Nepal’s neighbors and the interests of global powers. In an era of increasing competition between India and China, China and US, and even other regional powers, the party must move beyond populist slogans to implement a sophisticated, non-aligned foreign policy. The challenge lies in convincing these external stakeholders that the RSP’s ‘vibrant bridge’ and ‘Nepal first’ approach is not a threat to existing bilateral interests, but rather a pragmatic shift toward development-centric economic diplomacy. Failure to manage these perceptions could result in external pressures that destabilize their domestic governance agenda.

5.5 Potential conflict between government and party (RSP)

The working style, perspective and ambition of the two senior most leaders of RSP, i.e., Chairperson and Prime Minister are clearly different and sometime even opposite in nature. Hence, it will have to ensure political stability managing the intra-party conflict and differences that avoids political rivalry between the Chairman Mr. Rabi Lamichhane and the senior leader and Prime Minister Mr Balendra shah.   

6        Future direction for the new government

 

The new government would pursue Nepal’s foreign policy framework, especially managing relations with two giant neighbors, allowing the country to benefit from India and China while avoiding controversies like those surrounding security arrangements and even politically sensitive issues. Nepal will have to take a clear position that ‘accept cooperation, but reject any alignment’. This means Nepal would actively welcome economic, technical, and humanitarian support that contributes to national development, while firmly avoiding any form of military or strategic bloc association that could undermine its neutrality or trigger geopolitical tensions.

The new government would firmly uphold complete non-alignment in security matters by avoiding any participation in military alliances or strategic containment policies, while strictly prohibiting activities in Nepal’s soil against our neighbors, and foreign military bases and permanent troop presence on its soil. This principle must apply equally to all partners, including the US, India, and China, and other countries to preserve sovereignty and prevent geopolitical entanglement.

Similarly, RSP Government would adopt a sector-based approach to foreign cooperation, dividing engagements into clear areas such as economic and infrastructure development, disaster and climate resilience, and human capital development. By signing individual agreements for each cooperation area. Nepal would acquire support from multiple partners while minimizing political and strategic risks.

The new government would ensure civilian control & transparency. All foreign agreements would be subject to strong civilian oversight and transparency, ensuring parliamentary approval and full public disclosure. This means no hidden memorandums or military-led negotiations without civilian control, ensuring accountability and preventing the kind of confusion and mistrust seen in past controversies.

The new government would ensure that every international agreement should explicitly state that it is not part of any military or strategic alliance and must avoid linkage to broader geopolitical strategies such as the Indo-Pacific Strategy or any military dimensions of other initiatives. This helps reassure major neighbors like China and India and reinforces Nepal’s neutral stance.

New government would pursue a balanced, multi-partner approach by engaging multiple countries in key sectors such as hydropower and infrastructure, encouraging competitive cooperation rather than dependence on a single partner. This strategy reduces vulnerability to external pressure and strengthens Nepal’s bargaining position while maximizing development benefits.

The new government would ensure that all international agreements must pass through parliamentary approval or formal review before becoming valid, ensuring democratic oversight, legitimacy, and alignment with national interest. Likewise, it would maintain balanced and carefully managed relations with major partners, i.e., India, China, and the US, avoiding favoritism toward any side while preserving strategic autonomy. Similarly, military cooperation would be strictly limited to non-sensitive areas such as disaster relief and participation in the UN peacekeeping missions, with no involvement in strategic, combat, or alliance-based activities. The government would clearly communicate the purpose and content of international agreements and proactively counter misinformation to build public trust and prevent controversies similar to past disputes.

7        Conclusion

The new government, with a nearly two-thirds majority, must act cautiously amid a shifting geopolitical environment and high public expectations. As outlined in its manifesto and 100-point action plan of the government, it should prioritize inclusive economic growth through rural infrastructure, agricultural modernization, improved connectivity with India and China (including rail links), job creation, reduced reliance on remittances, effective revenue management, and better use of natural resources.

Equally important is strengthening inclusion and social justice by ensuring equitable access to state resources and initiating reforms to address the aspirations of Gen-Z protestors. Combating corruption must be a central priority through stronger and independent anti-corruption institutions, digitalization of public services, and strict accountability. The formation of a corruption investigation committee is a positive step, but implementation is key.

A major challenge lies in effective decentralization, as the absence of provincial and local governments led by the ruling party may hinder service delivery. The government must therefore build functional coordination, empower subnational governments, implement fiscal federalism, and strengthen local capacity.

Institutional reforms are equally critical, including improving internal party democracy, regulating political financing, strengthening parliamentary oversight, reforming the electoral system, and enhancing rule of law institutions and bureaucracy. Nepal’s post-1990 experience shows that political change without institutional reform leads to instability, as seen in both the Maoist insurgency and recent Gen-Z movements.

Long-term stability depends on transitioning toward inclusive governance, institutional continuity, accountability, equitable development, and balanced foreign relations. While it is early to assess fully, the government appears to be pursuing a pragmatic and balanced foreign policy focused on strategic autonomy and non-alignment, while asserting national interests more confidently.

Nepal is likely to maintain balanced relations with both India and China, advancing economic cooperation with China, particularly in connectivity and infrastructure, while sustaining its deep-rooted ties with India in trade, labor, and socio-economic integration. Transparency and trust building with both sides will be essential.

By leveraging its geopolitical position as a bridge between South and East Asia, Nepal can promote regional cooperation, strengthen connectivity, and position itself as a hub for trade and energy transit. With consistent governance, policy stability, and institutional strength, Nepal can pursue a model of cooperative neutrality that supports national development, regional peace, and shared prosperity.

 

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[1] Bishnu Raj Upreti, from Nepal holds PhD in Conflict Management (2001) from Wageningen University in The Netherlands. Dr. Upreti spent a decade in the Netherlands for higher study and UK for research and teaching (at University of Survey and University of London) and research collaboration with Swiss universities. Dr. Upreti has heavily engaged in academic, multi- country- multi years, multi partner's collaborative research in Europe, Asia, Africa and Latin America. Dr. Upreti specializes in conflict management, collaborative and partnership research, public policy and human security issues. Dr. Upreti has written and edited 104 books; more than 5 dozen peer reviewed Journal articles and more than 500 articles in magazines, newspaper and book chapters. Dr. Upreti infrequently quoted in conflict, peace and public policy issues of Nepal in national and international media. Dr. Upreti serves as chair, member, and advisor in many international and national academic, research and development organizations.  Dr Upreti is the immediate past Executive Chairman of the Policy Research Institute, a highest government of Nepal Think Tank.  Dr. Upreti was the Coordinator of the Expert Committee formed by the Cabinet of the Government of Nepal to study the disputed Nepal-India border issues.