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Last March, the author of this article was sitting at the Everest Cafe; in Kathmandu, talking to one of Nepal's very senior journalists, amidst subsequent waves of pro-monarchy protests that had engulfed the country in recent months. In casual conversation, the journalist mentioned the Rashtriya Swatantra Party (RSP) and its dwindling fortunes under Oli’s Prime Ministerial regime.

Cut to the present times, Nepal has given one of the most historic mandates to the RSP since the inception of democracy in the country: for the first time in the hill country, any party has gotten an absolute majority in a very difficult representation system, and just two seats short of a two-thirds supermajority. The election has also been historic for the Prime Ministerial candidate from RSP, Balendra Shah, and Kathmandu’s ex-mayor, who became the first Madhesi person to sit in the Prime Minister's chair. 

Born out of chaos, post-Gen-Z protests occurred in September 2025, Nepal’s unelected government, led by former chief justice Sushila Karki, has also done an impressive job of delivering elections in the earlier decided timeline, unlike in Bangladesh.

In the volatile neighborhood, elections and the return of stable democracy are obviously a sigh of relief for New Delhi. Nevertheless, in Nepal, the winners are new to foreign policy and diplomacy, and their implications will be important to unpack from Delhi’s side. 

Since the inception of the democratic movement in Nepal with the establishment of the Nepal Congress in 1950, India has been supportive of it. At times, future prominent leaders of Nepal have studied in Indian Universities and then returned home with a strong democratic enthusiasm.

During the monarchy’s time, when these leaders faced persecution, they took shelter in India. During the civil war, India played a critical role in bringing the mainstream political parties and the Maoist rebels together, culminating in the 12-point understanding in Delhi (2005) and the 2006 Comprehensive Peace Agreement.

After the end of the bloody civil war in Nepal and the agreement between all parties to abolish the monarchy, it pushed for an inclusive constitution that addressed the rights of the Madhesi people in the Terai region. 2015 marked a critical juncture in India-Nepal relations, when the Madhesi agitation over Nepal’s constitution drew India into the fray. Since then, India-Nepal relations have been driven more by a sectoral, compartmentalised approach than by a holistic one.

The situation has been complicated by political instability and the musical chairs of politics among three main political parties: Nepal Congress, Communist Party of Nepal (UML), and Communist Party of Nepal (Maoist). To even complicate matters, the head of CPN UML and 2015 Prime Minister KP Sharma Oli’s populist anti-India rhetoric surely helped him win the elections, but ruptured India-Nepal relations.

At the same time, Nepal's joining the Belt and Road Initiative also alerted India. Nevertheless, the political instability has undermined many good diplomatic efforts on both sides and fuelled each other’s insecurities time and again. It also needs to be mentioned here that to err is human, and humans run states and diplomacy.

So, between neighbours in the future as well, there will be issues that may feel contentious, but both sides need to understand that making a populist political rhetoric out of it will not help. Shishir Khanal in one interview has also clearly mentioned that his party will try to find diplomatic solutions to the contentious issues rather than making it an overt political confrontation, which is a very welcoming step. 

It is also critical here to mention that for Balendra and RSP, this is going to be a difficult time geopolitically beyond the neighborhood, given the war in West Asia, and a significant chunk of the diaspora of both India and Nepal works there in different sector will surely ask leaders to work together in the tough times. 

The mandate for the RSP is a sign of a generational change in Nepal's politics. It shows that the people want to move on from the cycles of instability and political rhetoric that have defined the country's recent past. India should see this change as less of a strategic puzzle and more of a chance to fix a relationship that has been strong in the past but has been strained by political mistakes on both sides. A leadership that is new to foreign policy may also be less rigid in its ideas about diplomacy, which could make it easier to deal with difficult issues in a more practical way. For Kathmandu, governing with such a strong mandate will also mean finding a balance between what people want and what is possible given the geography and the fact that the economy is linked to other countries. India is still Nepal's most important trading partner, and Nepal's political stability is just as important for India's own neighborhood policy. 

In this situation, the new government's success will depend in part on how well it can keep working with New Delhi while also working on its own reform agenda. If both sides stay away from populist language and focus on steady diplomatic talks instead, the current political change in Nepal could quietly mark the start of a more stable and mature phase in India–Nepal relations.

*Harsh Pandey is a PhD Candidate at the School of International Studies, Jawaharlal Nehru University, New Delhi, He is also a Life member of Delhi Based International Centre for Peace Studies.

In a historic political shift, the newly formed Rastriya Swatantra Party (RSP) and its prime ministerial candidate, rapper-turned-politician Balen Shah, swept the elections in Nepal and are set to form the government – dislodging the country’s old political institutions. While the mandate marks a pivotal moment in Nepal's political landscape following the Gen-Z protests that rocked the country last year, it also poses a significant strategic test for India in Kathmandu. 

Nepal occupies a key strategic place in India’s South Asian engagement strategy. India remains Nepal’s largest trading partner. Over the past decade, New Delhi has invested significantly in developmental assistance, strengthening cross-border connectivity projects and hydro and energy cooperation.

Initiatives such as amending the ‘Treaty of Transit’ to enhance trade flows via the Jogbani-Biratnagar rail link – enabling direct rail transport of containerised and bulk cargo to Nepal’s custom yard – and completion of the 34 km Jayanagar-Kutha rail link, similarly, integrated check posts have been operationalized to streamline customs procedures and reduce logistical delays – illustrate India’s effort in institutionalising supply chains that bind two economies closer together.

In the energy sector, India has invested heavily in several hydropower and electricity transmission projects. Multiple cross-border electricity transmission lines are already operational, while agreements have been signed for a new 400 kV transmission line linking Inaruwa to New Purnea and the Lamki-Dododhara corridor with Bareilly. Additionally, under a long-term power-purchase agreement, Nepal plans to export up to 10,000 MW of electricity to India over the next decade – reinforcing New Delhi’s ambition to position itself as the hub of a broader regional energy network. 

However, the smooth operationalization of these initiatives depends significantly on a cooperative and predictable political leadership in Kathmandu. It is precisely at this juncture that the landslide victory of the RSP carries profound significance. 

The RSP’s electoral triumph reflects the aspirations of a new generation shaped by the Gen-Z wave. For many Nepalis, the political mandate represents not merely a change in government but a generational reset in a political system long criticized for stagnation and persistent corruption. The anti-corruption sentiment that fuelled the September protests has now propelled a leadership that emphasises transparency, accountability, and institutional reforms while simultaneously articulating what many describe as a more “vocal sovereignty."

Within this emerging political cohort, relations with India may no longer be viewed through the lens of ‘historical obligation’. Sections of Nepal’s political discourse have historically accused India of excessive involvement in Nepal’s internal affairs and behaving as ‘big brother’ rather than engaging on equal terms. Whether justified or not, such perceptions have periodically strained bilateral ties in the past. The emergence of a political order committed to “strategic autonomy” and a “Nepal First” approach is therefore likely to scrutinize India’s role far more closely, particularly in negotiations concerning trade felicitation, customs procedures, and cross-border administrative arrangements. 

Consistent with this outlook, RSP under Shah’s leadership has pledged to reposition Nepal from a traditional “buffer state” between India and China into a “vibrant bridge” that facilitates trilateral economic partnerships. The RSP argues that Nepal must pragmatically maximize its sovereign interests with both neighbors through technical negotiations. 

China, meanwhile, is keen to steadily expand its economic and infrastructural footprint in Nepal. During K.P. Sharma Oli’s tenure, Kathmandu finalized several projects under the Belt and Road Initiative, deepening Chinese engagement in the country’s infrastructure sector. 

While Shah has expressed equal frustration with both India and China, it is very likely that the new government will seek to diversify Nepal’s external partnerships to reduce long-standing dependence on any single partner. Such balancing is common in South Asian diplomacy; yet, most of the party leadership’s relative lack of prior institutional experience in governing at the national level, coupled with a new political landscape, introduces an element of unpredictability regarding how these ambitions will translate into policy or whether the party’s “Nepal’s First” policy will slip into a “China First” reality – inevitably complicating India’s strategic calculations in the Himalayas.

Another sensitive dimension concerns unresolved territorial disputes. Shah and his party have taken a critical position on revisiting the India-Nepal Treaty of Peace and Friendship and have repeatedly called for a stronger Nepali stance on key territorial disputes, including Kalapani, Lipulekh, and Limpiyadhura, insisting that no foreign activity should take place in these regions without Nepal’s consent. The issue has remained a sensitive flashpoint between the two since Nepal’s controversial map revision in 2020. Now, with a two-thirds parliamentary majority, the new leadership could possess the domestic political capital to pursue a harder line on such issues, considering Balen Shah’s earlier anti-India rhetoric as a mayor of Kathmandu – possibly sharpening bilateral tensions.

New Delhi’s diplomatic outreach towards Nepal was traditionally anchored in the long-established political entities, such as the Nepal Congress and the Communist Party of Nepal – Unified Marxist–Leninist (CPN-UML). The RSP’s landslide victory signals the erosion of this familiar political landscape and the emergence of a new generation of leaders whose governance approach remains largely untested. In a country witnessing a dramatic shift, its younger generation is more digitally connected than ever before and uncompromisingly aspirational. Nepal’s electoral earthquake has brought the RSP into the corridors of power – one that India’s regional diplomacy has not previously had to navigate in such a form.

Although the new mandate sends some optimism in New Delhi's strategic circles. Analysts view the emergence of RSP, compounded by Shah's technocratic priorities – its emphasis on improving infrastructure, digital connectivity, and boosting GDP – could also open new avenues for cooperation. RSP ambitiously wants to be vehicle of change of a new Nepal and the trajectory of India-Nepal relations will therefore depend on how India adapts to this evolving landscape, making the RSP’s rise not a just a domestic phenomenon but a critical strategic test for New Delhi’s regional diplomacy in Kathmandu. 

Ammu S. Anil is a Senior Research Fellow at the MMAJ Academy of International Studies, Jamia Millia Islamia, New Delhi, and a Visiting Fellow at NIICE Nepal, Lalitpur.

Mahesh Ganguly, Teaching Assistant and Research Fellow, IIT Bombay. 

The Rastriya Swatantra Party (RSP) has done more than just sweep the old guard from power in the House of Representatives elections held last week. With a clear majority in the 275-member lower house, it has become the largest political force in the county and a beacon of hope for millions of people. 

However, as the celebrations fade, the new government, the new finance minister to be precise, faces a sobering reality: the task of translating populist fervor into a functional, resilient economy.

The economy the new government inherits is a study in contradictions. On one hand, the macroeconomic indicators are deceptively stable. The recent central central bank data show inflation at decades-low levels, and foreign exchange reserves have bolstered to nearly Rs 3,200bn by mid-Dec 2025—more than half of the country’s gross domestic product (GDP). However, this stability is a mere thin veil over structural decay. The new finance minister’s desk will be piled with reports of subdued domestic demand, slow credit disbursements, rising non-performing loan (NPL) levels in the banking sector, and waning investor confidence. 

Although the International Monetary Fund (IMF) has projected a real GDP growth of 5.2 percent for the upcoming fiscal year, the real situation of the economy tells a story of empty villages, industries running at below capacity, agricultural land remaining fallow, and a youth population migrating abroad in record numbers. The new minister inherits a nation where remittance is the primary life-support system, accounting for nearly 24 percent of the GDP, while the domestic manufacturing and industrial sectors continue to shrink.

The RSP, in its election manifesto, has promised a transformation that sounds almost mythical in the Nepali context. The plan envisions building a $100bn economy by more than doubling the country’s GDP within the next five years. It also aims to raise per capita income to $3,000, up from the current estimate of around $1,650. In addition, it has vowed to create 1.2m jobs to reduce forced labor migration.

To achieve this, the party has banked on ‘development diplomacy’, a strategy aimed at courting investment from India, China, and the Western world without falling into geopolitical debt traps. 

Addressing voters after his victory in Chitwan last week, RSP President Rabi Lamichhane said his party would align development priorities, foreign policy objectives, and private sector interests. “We will take relations to new heights by cooperating in development. Our policies will be to protect and safeguard the private sector,” Lamichhane said. “RSP will continuously work to create an environment for domestic investment and to ensure investment security.”

Likewise, in his reply to Indian Prime Minister Narendra Modi’s congratulatory message on social media platform X, Lamichhane said the RSP and its government will remain dedicated to fostering a relationship built on mutual respect and shared prosperity where the party will prioritize development diplomacy. 

Perhaps the most immediate and symbolic challenge lies in the party’s stance on the duties on automobile imports. RSP Vice-chair Swarnim Wagle, who is expected to lead the finance ministry in the new government, earlier told the media that the new government would review the exorbitant duties of as much as 300 percent on motor vehicle imports.

This represents a familiar two-sided challenge for a finance minister. On one hand, lowering these duties would lower the cost of living, stimulate the transport sector, and please the urban middle class that fueled the party’s electoral victory. On the other hand, motor vehicle taxes have been one of the primary sources of revenue for the government. Reducing them necessitates a radical broadening of the tax base elsewhere—something previous governments have failed to do. 

The intensifying conflict in West Asia has already prompted the government to suspend labor approvals for 12 countries. If the Gulf crisis spirals further, it would not only choke the flow of remittances but saddle the new government with the herculean task of rescuing and repatriating over 1.7m workers. Managing this massive influx of returnees within a stagnant domestic job market will be a challenge of unprecedented proportions for the new administration. 

The prospects, however, are genuine. For the first time in decades, Nepal has a government with a clear mandate and a younger, more technocratic leadership. If the RSP can simplify the business environment and leverage its development diplomacy to attract high-quality FDI, the target of achieving seven percent annual growth is not impossible.

However, the challenges are equally real. The new government will have no representation in the National Assembly which remains dominated by the opposition. Any radical fiscal legislation will not pass through the upper house. Moreover, the youth that voted for the RSP expects immediate results. If the promised 1.2m jobs do not materialize quickly, the same ‘blue wave’ that brought them to power could turn into a tide of disillusionment.

The new finance minister will not just inherit a fiscal budget to implement, s/he will be inheriting the hopes of a generation that has finally dared to believe in a ‘New Nepal’. It remains to be seen whether the bell can ring in actual prosperity.

The general election of 2026 marks a defining moment in Nepal’s democratic journey. While elections routinely change governments, they only occasionally signal a deeper shift in the nature of democratic politics itself. The verdict from the Nepali electorate seems to represent just such a transition, suggesting that Nepal is evolving from the politics of democratic transition to one focused on democratic performance—where citizens evaluate leaders less on their historical legacies and more on their capacity to provide effective governance, economic opportunities, and national advancement.

For the Nepali Congress (NC), this outcome demands sober introspection. As a party that once led Nepal’s democratic struggles, it must now reassess its role in a rapidly changing society. This process should transcend nostalgia for past glories or short-term electoral tactics, centering instead on a fundamental question: How can Nepal’s democratic institutions best support the nation’s next phase of development and prosperity? Such moments call for humility, broader perspective, and a forward-oriented sense of national duty.

Accepting the verdict with democratic grace

Elections embody the essence of democratic sovereignty. Through their votes, citizens not only select representatives but also convey their vision for the country’s future. This collective judgment merits unwavering respect. In this election, I sought renewed trust from voters in a constituency that had backed me before. The electorate has chosen another direction, and I accept that choice with humility and grace. I am profoundly grateful to those who offered their support and encouragement, especially against a sweeping national tide. Their faith remains a lasting source of inspiration and obligation.

It is fitting to extend congratulations to the Rastriya Swatantra Party’s leadership for their historic mandate. Victories of this magnitude bring both prestige and weighty duties. Voters have signaled a clear demand for renewal and better governance. We can hope—and must expect—that this new leadership meets the challenge with gravity and dedication, mindful that even robust mandates, like the 2017 left alliance, can stumble amid internal divisions and governance hurdles.

Defeat is a familiar facet of democratic life, serving as a gauge of institutional endurance. The NC has weathered far graver trials—eras of repression, exile, and sidelining—yet it has repeatedly revitalized itself by staying rooted in the people’s democratic hopes. There is strong cause to trust it will do so again, through candid self-examination of recent setbacks, including its own governance lapses and factional strains, to serve the nation with fresh resolve.

The historical arc of democratic politics in Nepal

Placing this moment in Nepal’s extended democratic narrative clarifies its importance. The NC emerged not just as a political entity but as a force for democratic change. In the mid-20th century, it was instrumental in dismantling the Rana oligarchy and ushering in constitutional governance. The 1959 election—Nepal’s inaugural nationwide parliamentary vote under a constitutional monarchy—captured public zeal for representation, yielding a resounding NC win, only for the 1960 royal coup to halt that nascent experiment. Three decades later, the 1990 people’s movement reinstated multiparty democracy after prolonged suppression, reaffirming that sovereignty lies with the people and power must be accountable. The ensuing Maoist insurgency laid bare profound societal inequities, compelling a reevaluation of the constitutional framework.

The 2006 popular uprising drove further transformation, culminating in the republican structure of the 2015 Constitution. Throughout these milestones, the NC stood as a key steward of democratic values, even as shifting public demands now require adaptation from all established (or some may prefer to call, legacy) parties. The 2017 election appeared to promise stability with a dominant left alliance majority, but fractures, fluid coalitions, and delivery shortfalls quickly eroded that promise. Nepal’s democratic triumphs have reshaped political rivalry. The liberties won through generations of activism have heightened citizen expectations for what democracy must achieve.

From democratic struggle to democratic performance

Nepal’s political system has entered a new stage of democratic development. For much of the twentieth century and the early twenty-first, the central challenge was securing democratic freedoms and building constitutional institutions. That struggle shaped the identity of political parties and the experiences of an entire generation of leaders. Today the challenge has shifted. Democratic freedoms are largely institutionalized, and citizens increasingly evaluate political leadership not by historical credentials alone but by governance performance, policy effectiveness, and economic outcomes—such as addressing employment limitations, administrative inefficiencies, and public accountability.

This transition is natural and healthy. Mature democracies gradually move from struggles over political rights toward debates about institutional capacity, economic opportunity, and policy delivery. The electoral shifts of 2026 should therefore be interpreted within this broader evolution. The electorate appears to be signaling a desire for faster progress, stronger institutions, and clearer pathways toward national prosperity, while acknowledging that structural constraints may temper the pace of change. For parties that played historic roles in democratic movements, this adaptation demands self-scrutiny and creativity, including frank reckoning with prior lapses in policy consistency and institutional strengthening.

Listening to the message of change

Every election carries lessons. The message emerging from this one appears to be that many citizens seek new approaches to governance and development. Issues like employment, economic expansion, administrative streamlining, and public oversight dominate discussions, mirroring the ambitions of a younger, better-educated, increasingly urban and interconnected populace. Nepal’s youth confront a stark irony: rising education and global exposure coexist with scant domestic prospects, driving many abroad for work. Remittances bolster families and the economy, yet enduring prosperity hinges on fostering homegrown opportunities, bolstered by targeted investments in education, skills, and entrepreneurship.

For the NC, this moment calls for attentive listening rather than defensiveness. Democratic renewal begins with recognizing that voter expectations evolve. Political institutions remain relevant when they respond constructively to those expectations, addressing both achievements and areas needing reform.

The responsibility of the incoming government

This election has yielded a decisive mandate for the incoming government, which commands a near-supermajority—a rarity in Nepal’s splintered politics. Such a mandate brings both opportunity and responsibility. A strong majority provides the stability necessary to pursue ambitious reforms, implement long-term policies, and address structural challenges requiring sustained commitment. At the same time, it raises expectations and risks if progress stalls due to administrative capacity issues or policy disruptions. When voters grant decisive authority, they expect visible progress in governance, economic development, and institutional reform.

The responsibility of the incoming government is therefore not merely to govern but to demonstrate that democratic institutions can deliver tangible national progress, building on existing sectors like agriculture, hydropower, and tourism. If the coming years bring improvements in governance, job creation, and development, they will strengthen public confidence not only in one administration but in Nepal’s democratic system itself. From opposition or wider civic roles, all democratic participants should aid this constructively, as national gains transcend partisan lines.

Reimagining Nepal’s development path

The central challenge facing Nepal today is the transformation of democratic stability into economic prosperity. Nepal possesses significant resources and opportunities. Its hydropower potential remains among the largest in South Asia. Its natural landscapes and cultural heritage offer exceptional prospects for tourism development. These sectors alone, if developed strategically with sustained investment and policy clarity, could become powerful drivers of growth and employment.

Still, development faces inherent structural limits—landlocked status inflating trade costs, a modest internal market, gradual industrial growth, and heavy remittance reliance. While these inflows aid households, they fall short of a varied, vibrant economy. Institutions have improved, yet administrative prowess and policy steadiness persist as challenges. Such constraints, however, do not define a country’s destiny. Nations facing similar limitations have overcome them through consistent policy direction, institutional strengthening, and political stability. A government with a strong parliamentary mandate therefore has a rare opportunity to pursue reforms with strategic focus and long-term continuity, while navigating risks like geographic vulnerabilities and economic dependencies.

Nestled between Asia’s economic giants, Nepal can tap connectivity, energy trade, and tourism flows. Realizing these opportunities will depend less on geography itself than on the quality of infrastructure, regulatory predictability, and balanced diplomacy. Agriculture remains pivotal and continues to be the primary source of livelihood for rural millions. Improving productivity, expanding agro-processing, and strengthening rural infrastructure are key to easing economic vulnerabilities. No less vital are ongoing commitments to education, skills, and innovation. Nepal’s youthful demographic is a prime resource, with long-term success tied to channeling it into domestic productivity. With political stability and strategic clarity, Nepal can gradually transform its economic base, turning democratic maturity into durable national prosperity, provided all stakeholders collaborate to address ongoing challenges.

Renewal within democratic institutions

The lessons of this election extend beyond any single political party. They highlight the importance of continuous renewal within democratic institutions. Political parties must remain open to generational change, policy innovation, and organizational reform. Public institutions must strengthen transparency, accountability, and professional competence. Democracy thrives by evolving with societal shifts while upholding constitutional essentials. For the NC, this means deliberate contemplation of its place in Nepal’s changing arena. Its historic role in the democratic movement provides a strong foundation, but its future relevance will depend on how effectively it engages with the aspirations of a new generation, including through self-critical evaluation.

Looking ahead

Moments of electoral disruption often appear dramatic in the immediate aftermath, yet they affirm democratic vigor, reminding us that power rests with the people and democratic systems remain capable of renewal. For those of us who have spent many years in public service, the appropriate response is reflection rather than resentment and commitment rather than retreat. The task now is to contribute—within whatever roles we occupy—to the strengthening of democratic institutions and the advancement of national development.

Nepal has already demonstrated remarkable resilience in its journey from monarchy to republic and from conflict to constitutional democracy. The next chapter must focus on translating democratic stability into broad-based prosperity. If the lessons of this election encourage both government and opposition to pursue that goal with seriousness and humility—acknowledging past disruptions and structural hurdles—the electoral transformation of 2026 could endure not as rupture but as the dawn of Nepal’s deepened democratic integration and national evolution.