KATHMANDU, OCT 27 - The signing of the revised trade treaty between Nepal and India on Tuesday has generated optimism. The treaty came into effect from Tuesday after the commerce ministers of both countries signed it.

The revised treaty comes with a longer time duration offering predictability in bilateral trade. An outcome of two years of exercise, the revised treaty assures removal of all forms of non-tariff barriers on Nepali exports to India. Enhancement of Nepal’s trade related capacities and recognition of the quality certificates issued by Nepali laboratories after their upgradation are other features.

Non-tariff barriers have been a major bottleneck in boosting Nepal’s exports to its largest trading partner. These barriers have mainly been qua-lity-related. As per the revised treaty, both sides will grant recognition to the quality certificates issued by the competent authority of the exporting country based on ‘assessment of their capability.’

However, experts caution about the possibility that India may accept quality certificate of Nepali goods only after Nepali laborotaries upgrade their capacity to match the Indian standard. “The moot point is, if India supports the building of such infrastructure within a short period, Nepal will benefit soon,” trade expert Ratnakar Adhikari said. He suggested that Nepal ask India not to impose standard-related restrictions until such infrastructure is in place in Nepal.

India’s decision to consider wai-ver, on request from Nepal government, of any additional duty that may be levied over and above countervailing duty is a welcome change. But Indian Commerce Minister Ananda Sharma did not make any specific commitment to remove additional duty on garments.

Adhikari voiced suspicion over implementation of provisions regar-ding removal of special additional duty and countervailing duty. According to him, extension of treaty for seven years from five would not necessarily guarantee policy predictability. 

The treaty has scrapped duty refundable process (DRP), allowing Nepali importers to import Indian goods in Indian currency without paying excise duty to India. The scrapping of DRP might have negative impacts on the domestic industry. “Indian goods will be cheaper in Nepal,” said Binod Chaudhary, industrialist and lawmaker. It may also check the high inflation in the country, according to experts.

Is the new treaty a milestone in bilateral trade like the 1996 treaty?  Experts say Nepal has to enhance su-pply-side capacity if it wants to reduce the ballooning trade deficit with India, which stands at Rs. 108 billion. Despite getting more concessions from India, the onus to benefit is on Nepal.

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