India has been growing at around a blistering pace of 7-9 percent over the past decade while the Nepalese economy struggles on with growths hardly peaking over 3 percent. Although there is huge discrepancy between the growth rates, it cannot be denied that the future economic prospects of Nepal are inherently tied to that of India. Even with no appreciable growth in our economy, there is no denying that we enjoy the fruits of the Indian success. Branded products ranging from Potato chips, motor vehicles, construction materials and countless other retail and industrial products are available to Nepal at very reasonable prices which would otherwise have had to be imported at higher costs from other countries. India is also virtually the only market for Nepal’s estimated 80,000 MW hydroelectric potential. Lastly, around a million Nepalese citizens are directly employed in India, thanks to lax labor agreements, in industries ranging from finance to hospitality.

Recently however, India’s growth seems to have hit turbulent waters. Growth has recently been slowing down and IMF has reduced their forecast from 8 percent to around 6.1% for 2012. An indication of bad times has been felt recently by companies and investors with the SENSEX and other large equity markets index performing badly in recent weeks. 2011 also saw a large net outflow of FDI which has been the major cause of the India Rupee losing value to the US Dollar. This is of direct consequence to Nepal which relies heavily on imports and it is likely that retail prices of many goods, including petroleum products will increase. Although one may point out that the dismal state of the global economy is to blame, this time around the problem is entirely on India’s shoulder.

India has enjoyed a successful period of growth this decade thanks to the past two decades worth of work in trade liberalization and structural reforms of their economy. Unfortunately, we are witnessing a backward trend with an end to liberalization. Unfriendly tax laws are being enacted and the battle against corruption has staggered. Large scale controversies in the economy have drawn negative attention such as India’s refusal to let in Wal-Mart and corruption scandals. On the World Bank’s index that measures the ease of doing business, India ranks 134/184 which is quite shocking considering the number of foreign businesses operating in India; a testament to India’s profitability. As long as India’s political class remains backwards and rooted to cheap vote mongering tactics, India will never be able to achieve their full economic potential.