Demonetised Indian Currency in Nepal Behind Victory of Communists

Miffed with inconvenience due to demonetised Indian currency, people in Nepal voted in favour of Communist Parties.

The demon of demonetisation unleashed by India, which is still haunting the people of Nepal, is one of the major factors which influenced Nepalese voters to vote out pro-India politicians and the Nepali Congress, and bring in pro-China Communist parties of Nepal, led by KP Sharma Oli and Prachanda to rule Nepal, resulting in a political
earthquake and sending shock waves across New Delhi.

Oli-Prachanda Duo Expected to Win

Several “nationalist” politicians of the CPN-UML Communist Party of Nepal (Unified Marxist-Leninist) and CPN-MC Communist Party of Nepal (Maoist Centre) successfully leveraged the sentiments linked to the hard-earned but now worthless, demonetised Indian currency with the people of Nepal, to boot out pro-New Delhi politicians of the Nepali Congress.

KP Sharma Oli of CPN-UML, an overtly pro-China politician who is expected to to be the next Prime Minister of Nepal, along with his partner Pushp Kamal Dahal Prachanda, have together won 116 out of 165 directly elected seats of the parliament.

The Nepali Congress is left with only 23 seats, while the RJP (Rastriya Janata Party) and FSFN (Federal Socialist Forum Nepal) got 11 seats and 10 seats respectively, and one seat each was won by five regional parties.

CPN-UML and CPN-MC combine also captured power in six out of seven provincial assemblies where elections were held simultaneously.

The duo of Oli and Prachanda are expected to get two-thirds majority in parliament, after the proportional representation elections results are announced in the next few days, thus giving them a free hand to turn Nepal into a comfortable home for the Chinese Dragon.

Nepali Congress leaders Shekhar Koirala, Nabindra Raj Joshi, Mohan Basnet, Minister
for Information and Communication in Deuba government, along with several stalwarts, lost elections. Prime Minister Sher Bahadur Deuba’s wife and former lawmaker Arzu Rana Deuba also lost the polls in Kailali

Demonetisation, An Electoral Issue in Nepal

The people of Nepal, a small landlocked nation on the foothills of the Himalayan mountain range, sandwiched between two giants – India and China – are still suffering from the pangs of demonetisation of the Indian currency.

This is because the Reserve Bank of India (RBI), the central bank, has till now, more than a year after the announcement of demonetisation, not exchanged the old Indian currency for the new.

The Reserve Bank of India has till now refused to exchange Rs 78.5 million demonetised Indian currency with the Nepal Rastra Bank, the central bank of Nepal.

An estimated more than 20 billion Indian rupees in old demonetised currency is still in possession of the people in this small nation, with a population of 29 million and per capita income of USD 2,500 per year.

We have raised the issue at all levels in the government of India – Ministry of Foreign Affairs and the Reserve Bank – several times, but they are not responding. Two teams from India have  visited Nepal. The people of Nepal are losing faith in India and the Indian currency.

Chinta Mani Siwakoti, Deput Governor, Nepal Rastra Bank

Assurance About Exchanging Old Notes Not Fulfilled

High level sources in the government of Nepal said:

Prime Minister Sher Bahadur Deuba, and the President of Nepal had raised the issue on their visits to India with Prime Minister Narendra Modi and got only assurances.

“Finance Minister Arun Jaitley also gave assurance (to exchange demonetised currency) during the  meetings, which is yet to be fulfilled”, an official in Nepal said on the condition of anonymity.

The blame game has begun in the corridors of power in New Delhi since the debacle in Nepal will undermine India’s interests.

The Indian embassy in Kathmandu had foreseen the earthquake coming, with diplomats sending several SOS messages to the top leadership in New Delhi, saying that this apathy is turning the people of Nepal against India, and will further increase the influence of the Dragon in the region.

Small Farmers and Workers Hit by Note Ban

More than 10 million Nepalese citizens work in India. The Indian currency is widely accepted and used in the remotest corner of Nepal.

“More than two-thirds of the total trade of Nepal is with India, and at least one-fourth of the total currency used in Nepal was the Indian rupee”, as traders do not want to exchange currencies and pay charges, said a high level source in the Nepal Rastra Bank.

Big traders and businessmen exchanged the demonetised Indian currency in black market in India, but millions of poor and small farmers and workers with their life savings, and living in remote areas, are still left with small amounts of demonetised Indian currency, which has now become a worthless piece of paper.

Citizens of Nepal and Bhutan can carry up to Rs 25,000 outside India, as per the law mandated by the RBI, and Nepal has been requesting India to exchange this full amount for each citizen of Nepal.

Bhisma Raj Dhungana, executive director, forex department of the Nepal Rastra Bank (NRB) said:

We had initially accepted the proposal of the team led by Deepali Pant Joshi, executive director of Reserve Bank of India, to exchange Rs 4,500 per person during the visit to Nepal in March 2017.

Nepal has reiterated, “the new Indian currency of Rs 500 and Rs 2,000 denomination will not be allowed in Nepal till this issue is resolved”, Mr Dhungana added.

Complicating the issue further, the Nepal police have caught several Indian nationals trying to sell demonetised Indian currency in Nepal at a throwaway price in anticipation that India will exchange old Indian currency with Nepalese citizens.

The RBI, the central bank of India, did not respond to several emails and phone calls to the Governor, Urjit Patel and Jose J Kattoor, Chief General Manager, communications department.

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(The writer is a New Delhi-based freelance journalist. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same. )

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