Nepal’s new government intends to balance relations with China and India in order to pursue prosperity.

KATHMANDU (Reuters ): According to representatives of the ruling coalition who spoke to Reuters, Nepal’s new administration, which is being led by a former Maoist rebel leader, would attempt to strike a balance in its relations with China and India for the economic development of one of the world’s poorest nations.

Pushpa Kamal Dahal, who continues to go by the name Prachanda, unexpectedly won the backing of the opposition Communist Unified Marxist-Leninist (UML) party as well as five other minor organisations to replace his previous coalition and become prime minister on Sunday. A hung parliament was the result of the elections last month.

Khadga Prasad Sharma Oli, the head of the UML and a former prime minister of Nepal, is said to support China.

Nepal is one of the South Asian nations where China and India are vying for influence. Based on their strong historical connections and long open border, India has traditionally regarded 30 million-person, Hindu-majority Nepal as a natural ally.

According to Narayan Kaji Shrestha, a prominent member of Prachanda’s Maoist Centre party and a likely cabinet minister, “We’ll preserve ties of equi-proximity with both our neighbours.”

Inflation control, maintaining reserves, increasing capital expenditures, reducing the trade deficit, and lowering interest rates must all be our top priorities right away.

Prior to the oath-taking of new ministers, several party officials who spoke on the record on the condition of anonymity supported Shrestha’s position.

Nepal has received billions of dollars in aid and investments from Beijing and New Delhi, and it has a wealth of potential to produce hydroelectric electricity.

One of the first world leaders to wish Prachanda, who has served as prime minister twice previously, was Indian Prime Minister Narendra Modi. India is the largest trading and economic partner of Nepal.

Modi stated on Twitter that “the special connection between India & Nepal is founded on deep cultural links & warm people-to-people relationships.” “I look forward to cooperating with you to further solidify this connection,” she said.

In a tweet, a representative of the Chinese embassy in Kathmandu congratulated Prachanda on his new role.

According to analysts, the $40 billion economy of Nepal, which is recovering from the COVID-19 epidemic, requires rapid attention from the new administration, which must win back the confidence of businesses and investors while increasing output.

Over 8% inflation is the highest level in six years. Along with declining foreign exchange reserves, Nepal is becoming more dependent on imports of essential products.

Yuba Raj Khatiwada, a former finance minister who served under Oli, advised Prachanda to concentrate on expanding agriculture and industry to replace imports and exports of goods like cement.