GSJ: Volume 12, Issue 6, June 2024

ISSN 2320-9186

GSJ: Volume 12, Issue 6, June 2024, Online: ISSN 2320-9186

www.globalscientificjournal.com

Cross-Border Trade and Livelihoods: The Dynamics of

Nepali Traders on the India-Nepal Border

HIMAL THAPA
himalthapa0504@gmail.com

Introduction
The India-Nepal border spans approximately 1,800 kilometers, serving as a crucial conduit for both formal
and informal trade, which significantly influences the socio-economic fabric of both nations. This paper
delves into the multifaceted dynamics of this border, examining the opportunities it presents and the
challenges it poses for Nepali traders. Through interviews with local residents, traders, and individuals
affected by cross-border interactions, we gain insights into the nuanced realities shaping this vital economic
corridor.
Historically, the India-Nepal border has been relatively porous, facilitating the movement of people and
goods with minimal restrictions. This openness has fostered a vibrant trade ecosystem, where goods ranging
from agricultural produce to consumer goods flow freely, bolstering local economies on both sides. For
Nepali traders, this accessibility to the Indian market is critical, providing access to a larger consumer base
and diverse products that may not be readily available domestically.
However, this openness also engenders challenges. Despite the benefits, informal trade at the border can be
prone to fluctuations in policies and geopolitical tensions between the two nations. Regulatory changes or
political disputes can disrupt supply chains, impacting livelihoods dependent on cross-border commerce.
Interviews with Nepali traders reveal the complexities they navigate, including fluctuating tariffs,
bureaucratic hurdles, and the unpredictability of informal trade regulations.
Moreover, the border’s porous nature presents security concerns for both countries. Issues such as
smuggling and illegal crossings necessitate robust border management strategies, which can inadvertently
affect legitimate trade activities. Balancing security measures with trade facilitation remains a delicate task,
requiring ongoing cooperation and dialogue between Indian and Nepali authorities.
Cultural and social ties between communities along the border also play a significant role in shaping trade
dynamics. Shared linguistic and cultural affinities foster trust and collaboration among traders and
communities on either side. These ties not only facilitate smoother trade operations but also underscore the
interconnectedness of livelihoods across the border.
The COVID-19 pandemic highlighted vulnerabilities in cross-border trade, disrupting supply chains and
revealing the dependency of Nepali traders on the Indian market. Restrictions imposed to curb the spread
of the virus severely impacted informal traders who rely on daily cross-border interactions. Interviews
conducted during this period underscored the resilience of Nepali traders who adapted to new norms while
advocating for policies that balance public health concerns with economic realities.
The India-Nepal border represents a dynamic nexus of opportunities and challenges for Nepali traders.
While its openness facilitates crucial economic exchanges and enhances livelihoods, it also exposes traders
to regulatory uncertainties and security risks. Understanding these complexities is essential for
policymakers and stakeholders aiming to foster sustainable trade relations and mitigate the vulnerabilities
inherent in cross-border dynamics. By addressing these challenges through cooperative frameworks and
adaptive policies, both India and Nepal can harness the full potential of their border to foster economic
growth and enhance regional integration.

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GSJ: Volume 12, Issue 6, June 2024
ISSN 2320-9186

Opportunities in Cross-Border Trade

Economic Opportunities: The open border offers significant economic benefits. Traders can access larger
markets, increase sales, and diversify their product offerings. For many, informal trade provides a livelihood
when formal avenues are restricted or economically unviable. According to the Kathmandu Post, informal
trade has ballooned in recent years, with goods like rice and vegetables crossing the border outside formal
channels

Cultural and Social Ties: The shared cultural and social ties between communities on both sides of the
border facilitate smoother trade interactions. These ties foster trust and collaboration among traders and
local people. The free movement of people across the border has historical roots, creating a unique socio-
economic dynamic that supports trade and mutual assistance.

Agricultural Trade: Informal trade in agricultural inputs like seeds, fertilizers, and machinery is crucial for
Nepali farmers, who often rely on these inputs to meet local demand and sustain their livelihoods. Research
by CUTS International highlights the significant impact of this trade on small and marginalized farmers,
particularly women-led farms

Hurdles in Cross-Border Trade

Regulatory Challenges: Despite the open border, regulatory hurdles such as tariffs, non-tariff barriers, and
import restrictions pose significant challenges. Traders often resort to informal channels to circumvent these
barriers, risking penalties and confiscation of goods. According to the Kathmandu Post, the imposition of
agricultural reform fees and advanced income taxes has pushed many traders to engage in informal trade to
avoid high costs

Health and Safety Risks: Informal trade routes expose traders to health and safety risks. The COVID-19
pandemic, for instance, led to severe restrictions and disruptions in trade, impacting livelihoods and causing
economic hardship. The closure of borders during the pandemic highlighted the vulnerabilities of those
relying on cross-border trade for their survival.

Political Instability: Political issues, such as border disputes and changing policies, can disrupt trade. The
introduction of new maps or changes in border management policies can lead to tensions and affect the
smooth flow of goods and people. The pandemic exacerbated these issues, as geopolitical tensions between
India and China also influenced the India-Nepal border dynamics.

Interviews with Stakeholders

Kamlesh Yadav from Kakarvitta Border, Nepal

How does the informal trade across the India-Nepal border impact your daily life?
Informal trade is a lifeline for us. We sell Local vegetables(Cabbage, Cauliflower,radish,pea,chilly)and
fruits across the border in India. The prices are better there, and we can make a decent profit to support our
families. Without this trade, we would struggle to make ends meet because formal employment
opportunities are scarce in our village.

Have you faced any challenges due to this informal trade?

Yes, there are challenges. Sometimes, we face harassment from local authorities(Nepal Police and Nepal
Armed Police Force) who demand bribes to let us pass. The border closures during the pandemic also made
it difficult for us. We had to find alternative ways to sustain our livelihoods, but it wasn’t easy.

How do cultural ties influence your trading activities?

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The cultural ties between our communities are strong. We share similar traditions and festivals like
Dipawali,Dashera,Holi,Chhath Puja and many more.We also share similar language.I can speak both
Bengali and Hindi which makes trading easier.My wife is from India, Bengal.We are happily married since
12 years.There’s a level of trust and understanding that helps us in our daily business. For instance, during
festivals, we often see an increase in trade as people buy goods for celebrations.

Roshan Das from Birgunj Border, Nepal

Can you describe the nature of your cross-border trade activities?

I trade in textiles and garments. The demand for these products is high in the border towns. We source
materials from Kathmandu and sell them in towns like Raxaul and Muzzafurpur. The open border makes it
convenient for us to move goods back and forth without too many restrictions.

What are some of the benefits and challenges you experience?

The benefits are significant. We have access to a larger market, which means higher sales and profits.
However, there are also challenges. The authorities can be unpredictable. Sometimes, they impose sudden
checks and seize our goods, accusing us of smuggling. The competition from larger syndicates is also tough.
They have more resources and can dominate the market, making it harder for small traders like us to survive.

How did the COVID-19 pandemic impact your trade?

The pandemic was a major setback. The border closures disrupted our supply chains. We couldn’t move
goods, and our sales plummeted. Many traders faced financial difficulties, and some even went out of
business. The health risks were also a concern, as we didn’t have proper safety measures in place.

Nishant Adhikari from Local NGO of Birgunj, Nepal

How has the cross-border trade influenced social issues like addiction?
The accessibility of goods across the border has led to an increase in smuggling of illicit substances. This
has a direct impact on vulnerable groups, particularly young people, who are more likely to fall into
addiction. The availability of cheap, smuggled drugs exacerbates the problem. We see a rise in addiction
cases, and it's challenging to provide adequate support and rehabilitation services.

What measures can be taken to address these issues?

There needs to be better regulation and monitoring of the border to prevent smuggling. Additionally, support
systems for rehabilitation and awareness programs are crucial. We need to educate communities about the
dangers of addiction and provide them with the resources to seek help. Joint efforts by both Indian and
Nepali authorities are essential to tackle this issue effectively.

Advantages and Disadvantages

Advantages

ECONOMIC INTEGRATION

Access to Larger Markets: One of the most significant advantages of cross-border trade between India and
Nepal is access to a larger market. Nepali traders can sell their goods in Indian markets, which increases
their customer base and potential sales. This access is crucial for economic growth and development,
especially for small and medium-sized enterprises (SMEs) in Nepal that might struggle to survive solely
in the local market.

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GSJ: Volume 12, Issue 6, June 2024
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Increased Sales and Profits: With a larger market, traders can achieve higher sales volumes, which
translates into increased profits. This economic benefit supports livelihoods and contributes to poverty
alleviation. For many traders, the ability to sell in both countries provides a financial cushion against local
economic downturns or market saturation

Diverse Product Offerings: Cross-border trade allows traders to diversify their product offerings. They
can import goods that are in high demand in Nepal but not readily available locally, and vice versa. This
diversification helps meet consumer demand and enhances business sustainability by spreading risk
across different products.

SOCIAL COHESION

Shared Cultural and Social Ties: The India-Nepal border region is characterized by deep-rooted cultural
and social ties. These connections foster trust and cooperation among traders and communities,
facilitating smoother trade interactions. Shared languages, traditions, and festivals create a sense of
camaraderie, which can be crucial in business dealings.

Mutual Assistance: The cultural bonds between communities on both sides of the border often lead to
mutual assistance and support. For example, during festivals and religious events, cross-border trade can
increase significantly as people purchase goods for celebrations. This mutual support strengthens social
cohesion and economic interdependence.

Conflict Resolution: Strong social ties can also play a role in resolving conflicts and disputes that may
arise in trade. Community leaders and informal networks often mediate disagreements, ensuring that trade
relationships remain positive and productive. This informal conflict resolution mechanism is vital in
regions where formal legal recourse may be slow or inaccessible.

RESOURCE AVAILABILITY

Access to Agricultural Inputs: Cross-border trade is particularly beneficial for farmers in Nepal, who often
rely on agricultural inputs from India. Seeds, fertilizers, and machinery are frequently traded across the
border, providing essential resources for Nepali agriculture. This access supports food security and
agricultural productivity.

Affordable Goods: The price differences between India and Nepal make cross-border trade advantageous
for consumers. Indian goods, often cheaper due to subsidies and lower production costs, provide
affordable options for Nepali consumers. This affordability is crucial for low-income households, helping
them manage their cost of living more effectively.

Disadvantages

REGULATORY AND LEGAL RISKS

Informal Trade and Legal Consequences: The reliance on informal trade channels to bypass regulatory
and tariff barriers poses significant legal risks for traders. Informal traders often operate without proper
documentation, making them vulnerable to penalties, fines, and confiscation of goods by border
authorities. This precarious legal status creates a constant threat to their livelihood. According to a report
by the International Labour Organization (ILO), informal traders frequently encounter harassment from
customs officials, who may demand bribes to allow the passage of goods.

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Unpredictable Regulatory Environment: The regulatory environment governing cross-border trade can be
highly unpredictable, with frequent changes in trade policies, tariffs, and border management practices.
For instance, the imposition of sudden trade restrictions or new tariffs can disrupt established trade routes
and force traders to seek alternative, often riskier, means of moving goods. This unpredictability increases
the cost of doing business and can lead to significant financial losses for traders who are unable to adapt
quickly to new regulations.

HEALTH AND SAFETY CONCERNS

Unsafe Trading Conditions: Traders operating in informal markets often face unsafe and hazardous
working conditions. The lack of formal infrastructure, such as proper storage facilities and transportation
networks, exposes traders to various health and safety risks. For example, during the COVID-19
pandemic, the informal nature of many trading activities meant that traders had limited access to personal
protective equipment (PPE) and healthcare services, increasing their vulnerability to the virus.

Impact of Border Closures: The closure of borders during crises, such as the COVID-19 pandemic, has
highlighted the health risks associated with cross-border trade. Border closures disrupted supply chains,
leading to shortages of essential goods and increased prices. This situation exacerbated the economic
hardship for traders and local communities who depend on cross-border trade for their livelihoods.
Furthermore, the lack of coordinated health measures between India and Nepal during the pandemic
resulted in inconsistent enforcement of safety protocols, further complicating trade activities.

SOCIAL ISSUES

Prevalence of Smuggling and Illicit Trade: The porous nature of the India-Nepal border facilitates not
only legitimate trade but also smuggling and illicit trade activities. The easy accessibility of goods across
the border has led to an increase in the smuggling of contraband items, including drugs and counterfeit
products. This illicit trade undermines public safety and has severe social consequences, including
increased crime rates and addiction problems in border communities.

Impact on Vulnerable Groups: Vulnerable groups, particularly young people, are often the most affected
by the negative social impacts of cross-border trade. The availability of cheap, smuggled drugs and other
illicit goods contributes to higher rates of addiction and substance abuse in border areas. According to
local NGOs working in these regions, the rise in addiction cases is a direct consequence of the
uncontrolled flow of illicit substances across the border. This situation creates a significant burden on
social services and hampers efforts to improve community health and well-being.

Economic Inequality and Exploitation: Informal cross-border trade can also exacerbate economic
inequality and exploitation. Smaller traders and local producers often struggle to compete with larger,
organized syndicates that dominate the informal trade sector. These syndicates have more resources and
can manipulate market prices.

Policy Recommendations

To address the challenges and enhance the benefits of cross-border trade, several policy recommendations
can be considered:
Formalization of Trade: Encouraging the formalization of informal trade through streamlined regulations,
reduced tariffs, and better infrastructure can enhance trade efficiency and security.

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Joint Border Management: Establishing joint border management teams can help address health, safety,
and regulatory challenges, ensuring smoother and safer trade interactions.

Support for Vulnerable Groups: Providing support and rehabilitation services for vulnerable groups
affected by illicit trade can mitigate the negative social impacts and promote healthier communities.

Capacity Building: Investing in capacity building for local traders, including training on regulatory
compliance and business management, can enhance their competitiveness and resilience.

7. Conclusions

The dynamics of cross-border trade between Nepal and India embody a complex interplay of economic
opportunities and significant challenges. On one hand, this trade serves as a vital economic lifeline, granting
Nepali traders access to larger markets, increasing sales and profits, and providing diverse product offerings
that drive local economic growth and poverty alleviation. The deep-rooted cultural and social ties across
the border facilitate smoother trade interactions, fostering mutual trust and cooperation that are essential
for business. These ties also enhance social cohesion and economic interdependence, particularly during
cultural and religious events that boost trade volumes. Additionally, the availability of affordable
agricultural inputs and goods from India supports food security and helps Nepali households manage their
living costs. However, these benefits are counterbalanced by substantial challenges. The informal nature of
much cross-border trade poses significant legal risks, with traders often facing penalties, harassment, and
exploitation due to the lack of formal documentation and regulatory oversight. The unpredictability of trade
policies further complicates the situation, creating a precarious environment for traders. Health and safety
concerns are also prominent, as traders often work in unsafe conditions exacerbated by crises like the
COVID-19 pandemic. The porous border facilitates smuggling and illicit trade, leading to increased crime
rates and addiction problems in border communities, disproportionately affecting vulnerable groups such
as young people. To address these issues, policy recommendations include formalizing trade practices,
establishing joint border management teams, providing support for vulnerable groups, and investing in
capacity building for traders. By understanding the intricacies of cross-border trade and implementing
targeted interventions, both Nepal and India can enhance the benefits of this economic activity while
mitigating its challenges, fostering sustainable development and improving the livelihoods of people in
border regions.

References

Kathmandu Post. (2024). Informal cross-border trade balloons: Report. Kathmandu Post

CUTS International. (2017). Linkages and Impacts of Cross-Border Informal Trade in Agricultural Inputs
in Eastern South Asia (LITA). CUTS International
https://cuts-citee.org/linkages-and-impacts-of-cross-border-informal-trade-in-agricultural-inputs-in-
eastern-south-asia-lita/

Institute of South Asian Studies. (2021). India-Nepal Open Borders and the Pandemic. ISAS

https://www.isas.nus.edu.sg/papers/india-nepal-open-borders-and-the-pandemic/

Kathmandu Post
https://kathmandupost.com/money/2024/05/17/informal-cross-border-trade-balloons-report

ISAS NUS Education

https://www.isas.nus.edu.sg/papers/india-nepal-open-borders-and-the-pandemic/

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GSJ: Volume 12, Issue 6, June 2024
ISSN 2320-9186

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