Trouble next door worsens: Maoists, royal coup have Nepal economy in tailspin

• After King Gyanendra assumed executive powers on February 1, tourist arrivals that peaked at 500,000 in 1999 are down by 50 per cent

• Air traffic from India has dried up. Indian Airlines may cancel its Varanasi-Kathmandu flight from March 27 as there are no takers and even the Kolkata-Kathmandu flight could be axed

• Revenue collection in February was only 25 per cent of the target of six billion Nepalese rupees

And the real trouble could just be beginning. According to official estimates, Nepal lost one per cent of its estimated GDP of 400 billion Nepalese rupees during the 15-day Maoist blockade last month.

From Monday, the Maoists have announced a ‘‘1,000-day blockade’’. The only hope is that this may be put off as the school-leaving certificate exams are starting that day.

But that will only postpone the pain, which seems to be converging from all directions.

Even as the country tries to put on a brave face, with Finance Minister Madhukar Shumsher Rana revising his GDP growth projections only marginally—from 4.5 per cent to 4 per cent—experts say this estimate is wildly optimistic. Last year’s GDP growth was just 3.5 per cent while the current year is shaping up to be a disaster. Even the World Bank has held back a $70-million budgetary support package to Nepal.

Apart from the obvious prospects of thousands of jobless Nepalis spilling over into India, New Delhi has other reasons to worry about the fast-shrinking Nepalese economy.

Indo-Nepal joint ventures are suffering as nobody wants to spend money on purchases any more.

A top Nepal-based CEO told The Indian Express that Nepal Lever and Surya Nepal were badly hit by the last Maoist blockade. Asian Paints took a big hit—a 50 per cent dip in sales, according to some estimates—as no one wanted to paint their houses at a time like this.

United Telecom Limited has had its licence cancelled. And with no one interested in advertising, Thomson Nepal recorded a massive dip in revenue. The beverages and liquor industry saw sales tumbling by 40 to 50 per cent. And with construction coming to a halt, the steel and cement industries have been hit to the tune of 50 per cent. Meanwhile, freight rates have doubled, from 13,000 Nepali rupees to 30,000.

While India has been arguing for the restoration of multi-party democracy, the King could drag his feet on the issue. He is yet to grant the Indian ambassador an audience. New Delhi’s reading is that the King remains defiant even while the economy is spinning out of control and political confrontations seem imminent. It has predicted that things in the Himalayan kingdom will get a lot worse before they get better.