Political Change in Nepal: Regional Implication and Concerns: Sairakshit Raghupathy

Political Change in Nepal: Regional Implication and Concerns
Author: Sairakshit Raghupathy

The rise of Balendra Shah as Prime Minister represents a major shift in Nepal’s political landscape. His emergence is closely linked to widespread dissatisfaction with traditional political elites, corruption and governance failures which had dominated Nepal’s political system for decades. Youth led protests and anti-establishment sentiment played a crucial role in reshaping the political environment, allowing Shah to gain support as a reform-oriented leader. Reports highlight that his leadership is rooted in a demand for accountability and governance reform, including efforts to investigate political elites and improved institutional transparency.^[i] This transition is not only domestic in nature but also carries important regional implications particularly for India.^[ii]

Shah’s rise reflects a broader political transformation in Nepal where voters are increasingly prioritising governance over traditional party loyalties. This shift may lead to greater political stability compared to previous coalition government which were often fragile and short lived.^[iii] This also means that Nepal may adopt a more assertive foreign policy as strong domestic mandates often translate into external positioning.^[iv] A stable Nepal could enhance regional cooperation particularly in areas such as trade, energy and connectivity.^[v] However, the nature of Shah’s mandate also introduces uncertainty. Leaders emerging from strong public movements often adopt assertive position in foreign policy to maintain domestic legitimacy.^[vi]

Nepal’s geopolitical position between India and China makes any shift in its foreign policy approach strategically significant.^[vii] As noted in discussions on South Asian political trends, domestic political change in Nepal often has direct implications for its external alignments. For India, this means that Nepal may move towards a more independent and assertive foreign policy rather than one shaped primarily by historical ties.

One of Shah’s key foreign policy ideas is to treat India and China as equal partners rooted in Nepal’s long-standing pursuit of strategic autonomy. Nepal has historically been deeply integrated with India through open borders, trade and socio-economic linkages, with India accounting for nearly two thirds of Nepal’s total trade and playing a major role in employment and remittance.^[viii] At the same time, China has expanded its economic presence particularly after 2015 with investments in infrastructure, connectivity and energy projects reaching around NPR 33.4 billion under initiatives like One Belt One Road (OBOR).^[ix]

His approach reflects this changing landscape where China provides Nepal with an alternative source of investment and infrastructure allowing it to diversify partnerships reduce dependence, and increase bargaining power. The idea of equal partnership is therefore less about parity and more about leveraging competition between India and China to Nepal’s advantage.^[x]

However, despite China’s growing role, India’s structural importance remains unmatched as Nepal imports petroleum which is controlled by Indian Oil Corporation (IOC) and New Delhi has enough powers to block the open and free border which was done in 2015 as Nepal leaned more towards China. As a result, Shah’s position should be understood as a balancing strategy aimed at maintaining autonomy and maximising benefits rather than a shift away from India.^[xi]

Another important dimension of Shah’s political approach is the revival of the idea of “Greater Nepal”. This concept refers to historical territorial claims over regions that are now part of India and the existing border issues between India and Nepal have already been sensitive in recent years with disputes over areas such as Kalapani and Lipulekh highlighting how quickly tensions can escalate.^[xii] Studies on India Nepal relations note that territorial narratives and cartographic disputes can significantly alter diplomatic engagement.^[xiii]

With the promotion of Greater Nepal sentiment, it has got security implications for India as the open border remains vulnerable to misuse including Fake Indian Currency Note (FICN) smuggling by Pakistan linked networks along with drug trafficking, hawala and movement of radical elements and such sentiment could further amplify anti India narratives and create a favourable environment for these activities. For Pakistan, the rising sentiment in Nepal can be used to fuel Anti India perceptions and expand illicit networks.^[xiv]

In addition to Pakistan, external actors like Türkiye have also begun to expand their presence in South Asia through religious and cultural outreach which has indirect security implications for India. Türkiye’s Directorate of Religious Affairs, Diyanet along with affiliated NGO’s has increased funding for mosques, madrasas and religious institutions across parts of South Asia including Nepal, as part of its broader soft power strategy.^[xv]

While much of this engagement is officially framed as cultural and humanitarian, security assessments have noted that foreign funded religious networks in the India – Nepal border region can create spaces vulnerable to misuse, particularly given the porus nature of the border and existing challenges such as hawala, radicalisation and illicit flows. The Indian Intelligence Reports suggest that, the Turkish paramilitary organization SADAT maintains links with the Islamic Sangh Nepal.^[xvi]

The Turkish based Foundation for Human Rights and Freedoms and Humanitarian relief (İnsan Hak ve Hürriyet Leri ve İnsani Yardım Vakfı, IHH) has spread its presence in Southern Nepal having links with Al-Qaeda and Muslim Brotherhood. They have partnered with Islamic Sangh Nepal to build influence in the border provinces of Lumbini, Koshi (Province 1) and Madesh (Province 2). The foundation’s growing footprint in districts such as Rupandehi, Banke, Parsa, and Rautahat has raised concerns, with reports indicating a surge in the number of mosques, madrasas, and guesthouses constructed in recent years.

The Pakistan’s Dawat-e-Islami is active in districts such as Kapilvastu, Sunsari, and Bara, Dawat-e-Islami is reported to have established a network of guesthouses and religious centres, which authorities suspect may be used to shelter or facilitate the movement of individuals from countries like Pakistan and Bangladesh. This adds another layer of complexity to India’s security calculus, where geopolitical competition is increasingly intersecting with identity-based influence in Nepal’s evolving political landscape.^[xvii]

The evolving landscape also has to be viewed through the wider China – Pakistan – USA competition in South Asia. China’s close strategic partnership with Pakistan and its growing regional diplomacy create a pressure environment for India, where anti-India narrative or political instability in Nepal can indirectly serve China-Pakistan objective of limiting India’s influence in its neighbourhood.^[xviii] At the same time, the US has expanded its presence in Nepal through development and governance funding.

The USAID announced nearly $60 million to strengthen democratic institutions and civil society in Nepal, while the Millennium Challenge Corporation’s $500 million Nepal Compact focuses on including the construction of a 315-kilometre, 400 kilovolt transmission line and road infrastructure upgrades. While these programmes are officially framed around development, democracy and infrastructure, they also give Washington greater influence in Nepal’s policy ecosystem at a time when China’s OBOR footprint is growing.^[xix]

For India, the concern is not that Nepal is aligned against it, but that multiple external actors are now shaping Nepal’s politics, infrastructure and public narratives, making the country a more contested strategic space.^[xx]

[i] Ellis Petersen, H. E. P., & Pokharel, G. (2026, March 8). Ex-rapper Balendra Shah set to be Nepal PM after party’s landslide election win. Retrieved from
https://www.theguardian.com/world/2026/mar/08/ex-rapper-balendra-shah-nepal-pm-landslide-election-win?

[ii] Mueller, G., & Solanki, V. (2026, April 8). Nepal’s youngest prime minister wins but faces challenges. Retrieved from
https://www.iiss.org/online-analysis/online-analysis/2026/04/nepals-youngest-prime-minister-wins-but-faces-challenges

[iii] Mainali, S. (2026, April 3). Balendra “Balen” Shah: From rapper to Prime Minister. Retrieved from
https://www.scoop.co.nz/stories/WO2604/S00035/balendra-balen-shah-from-rapper-to-prime-minister.htm

[iv] Mukherjee, S., & Ray Chaudhury, A. B. (2025, December 18). Nepal’s Gen Z uprising: a new test for India–China dynamics. Retrieved from
https://www.orfonline.org/english/expert-speak/nepal-s-gen-z-uprising-a-new-test-for-india-china-dynamics

[v] National commitment for economic reforms, good governance unveiled. (2026, April 15). Retrieved from
https://risingnepaldaily.com/news/78734

[vi] Pachhai, D. B. (2023, October 1). Domestic political factors, and it’s impact on Nepal’s foreign policy choices. Retrieved from
https://projekter.aau.dk/projekter/files/658880275/Domestic_Factors_and_Nepalese_Foreign_Policy.pdf

[vii] Shekhawat, S. (2026, March 2). Nepal elections 2026: Domestic agendas and foreign policy stakes. Retrieved from
https://www.orfonline.org/expert-speak/nepal-elections-2026-domestic-agendas-and-foreign-policy-stakes?

[viii] EXPORT-IMPORT BANK OF INDIA. (2025). Deepening India-Nepal Economic Ties: From Trade to Development Cooperation. Retrieved from
https://www.eximbankindia.in/sites/default/files/2026-01/WP_144%20India%20Nepal%20Economic%20Ties%20%28Web%29.pdf

[ix] A Handbook for Edition Indian Investors investing in Nepal. (2024). Retrieved from
https://www.indembkathmandu.gov.in/storage/pdfs/A%20Handbook%20for%20Indian%20Investors-%20Investing%20in%20Nepal%202024.pdf

[x] Johny, E. (2024, March 28). Foreign policy strategies of Nepal between China and India: bandwagon or hedging. Retrieved from
https://link.springer.com/article/10.1057/s41311-024-00560-1

[xi] Acharya, S. (2025, March 6). Nepal’s hunt for oil: energy sovereignty or risky gamble? Retrieved from
https://fpif.org/nepals-hunt-for-oil-energy-sovereignty-or-risky-gamble/

[xii] Nayak, S. (2023, May 23). India and Nepal’s Kalapani border dispute: An explainer. Retrieved from
https://www.orfonline.org/research/india-and-nepals-kalapani-border-dispute-an-explainer-65354#:~:text=Neighbours%20India%20and%20Nepal%2C%20who,China%20an%20opportunity%20to%20interfere.

[xiii] Mahar, N. S. (2023, December 22). NEPAL-INDIA POLITICAL RELATIONS: A COMPREHENSIVE ANALYSIS OF HISTORICAL DYNAMICS, CONTEMPORARY CHALLENGES, AND FUTURE PROSPECTS. Retrieved from
https://www.nepjol.info/index.php/pdmdj/article/view/67833/51708

[xiv] K. Timalsina, S. (2019, November 11). Nepal-India open Border: use and misuse. Retrieved from
https://www.ijisrt.com/assets/upload/files/https:ijisrt.comIJISRT19NOV172_.pdf

[xv] Ashok, A. (2021, February). Turkey’s Adventurism against India: Perceived Threats and Challenges. Retrieved from
https://claws.co.in/wp-content/uploads/2025/01/IB-270_Turkeys-Adventurism-1.pdf

[xvi] Pandya, A. (2025, September 10). Turkey Targets Nepal as Part of Its Growing South Asia Strategy. Retrieved from
https://www.meforum.org/mef-observer/turkey-targets-nepal-as-part-of-its-growing-south-asia-strategy

[xvii] Bharat Shakti. (2025, July 15). Intelligence Agencies Flag Rising Activity by Turkish, Pakistani Networks Along India-Nepal Border. Retrieved from
https://bharatshakti.in/intelligence-agencies-flag-rising-activity-by-turkish-pakistani-networks-along-india-nepal-border/

[xviii] Nepal’s geopolitical crossroads: balancing China, India, and the United States. (2023, September 20).
https://asiasociety.org/policy-institute/nepals-geopolitical-crossroads-balancing-china-india-and-united-states

[xix] Ranjan, A. (2025, February 24). The MCC, the BRI and Nepal.
https://www.isas.nus.edu.sg/papers/the-mcc-the-bri-and nepal/#:~:text=In%20September%202017%2C%20Kathmandu%20signed,so%20with%2012%20interpretative%20declarations.

[xx] Bhole, O. (2026, March 20). Nepal’s new political generation and the India-China contest for influence.
https://www.9dashline.com/article/nepals-new-political-generation-and-the-india-china-contest-for-influence

Disclaimer : Mr. Sairakshit Raghupathy is a Research Officer at the Deccan Centre for International Relations. The views expressed are those of the author and do not reflect the views of the Deccan Centre for International Relations.