Nepal’s Prime Minister K.P. Oli’s recent visit to Beijing underscores his preference for strengthening ties with China, but it also reveals the delicate balancing act Nepal must maintain between its two powerful neighbors. Historically, Nepal has shared a unique relationship with India, characterized by open borders, deep cultural ties, and significant economic interdependence. Oli’s repeated decision to prioritize Beijing over Delhi for his first bilateral visits diverges from tradition and signals a shift in Nepal’s foreign policy approach, though not without consequences.

India’s hesitancy to engage directly with Oli, reflected in its decision not to invite him to Delhi recently, stems from past disputes, including the contentious 2015 economic blockade and territorial disagreements over areas like Lipulek, Limpiyadhura, and Kalapani. Oli’s efforts to counterbalance India’s influence by fostering closer ties with China were seen in his signing of trade and transit agreements during the blockade, reducing Nepal’s dependency on India for maritime access. However, this move also led to lingering bitterness in India-Nepal relations.

While Oli’s inclination toward China appears strategic, it risks overlooking the practical realities of Nepal’s heavy reliance on India for energy, trade, and access to essential goods. The 2015 blockade demonstrated that China’s assistance in times of crisis was limited. This should serve as a cautionary tale for Oli as he seeks to deepen relations with Beijing. Similarly, India must also reflect on its approach and consider building goodwill with Oli and his Communist Party to maintain influence in Kathmandu. Given that regimes in Bangladesh and the Maldives are perceived as less inclined to support Indian interests, ensuring Nepal remains within its fold would be a strategic advantage for New Delhi.

Oli’s visit to China also comes with significant risks. The United States and India have warned Nepal against signing Belt and Road Initiative (BRI) execution frameworks due to concerns about potential debt traps. The Nepali Congress, a key coalition partner, has advised Oli against committing to such agreements unless they are fully grant-based. Failure to secure favorable terms with China could damage Oli’s credibility both domestically and internationally. Conversely, disregarding the advice of the Nepali Congress could upset key stakeholders and jeopardize his position as prime minister.

China, while seemingly supportive of Nepal’s economic development, has shown reluctance to convert loans into grants, such as the $220 million loan for Pokhara International Airport. Although Beijing may defer repayment deadlines, its unwillingness to offer outright financial relief suggests limited flexibility. This, combined with Oli’s perceived over-reliance on China, could backfire politically, as his earlier popularity stemming from the 2015 trade and transit agreement wanes in the face of current domestic and international skepticism.

As Oli navigates this complex landscape, he would do well to consider Nepal’s critical dependence on India and the limitations of relying on China alone. Similarly, New Delhi should seize this opportunity to recalibrate its engagement with Nepal, fostering ties that involve all stakeholders and recognizing the strategic importance of keeping Nepal within its sphere of influence. For both nations, the stakes extend beyond bilateral relations, influencing the broader regional balance in South Asia.