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Nathula Pass, reopening of the silk route.

Recently, to mark another milestone of Sino-India ties, Nathula Pass has been reopened. It is the narrow land passage between Sikkim and Tibet which was closed for past 40 years. Currently to test the grounds, only a limited number of commodities are permitted for trade, but by the next summer, this list should grow and volumes would increase. What does it hold for India?

1) The north-eastern provinces of India have little economic activity. They are solely dependednt of Calcutta to sell or buy goods. Unfortunately Calcutta does not seem to have neither enough appetite for these goods, nor free capital to invest there. Government has been trying hard to build roads, hydel dams and infrastucture in the North East, but there are not enough industries to utilize it and justify the expenditure. Nathula Pass will open the Tibetian market for these people and hence enabling the north eastern people to get better price for their produce and cheeper prices for goods they buy.

2) Chineese has some really giant plans for this route. For some of its interior provinces, the closest ports will be the port of Calcutta. With chineese manufacturing and demand for goods booming, this could translate into a few million dollars as transit and port charges for these goods and jobs for not only people of Sikkim, but also West Bengal. Also at a later point of time, China might invest directly to upgrade the infrasturcture in the region. No wonder West Bengal chief minister was unhappy that he was not involved in the talks with China.

3) Looking at the Khalisthan movement, one can conclude that the best way to curb millitancy in the region is to infuse economic prosperity and reduce unemplyment. Green revolution gave employment and made Sikhs too rich to even think about seperating. It transformed a state from a millitant border town to one of the pillars of Indian economy. Opening border trade might do just the same for these provinces.

4) If you look at the Indian export/import pattern, you find heavy reliance on ports for the foreign trade. Ports currently are saturated and cannot handle more cargo. So the cheepest and fastest alternative might be opening up a copule of land routes with China, Pakistan, Myanmar and Bangladesh.

5) Border trade has always reduced smuggling. Taking the example of gold smuggling in the seventies and eighties, I would say that most enterprise find it cheeper and safer to pay a nominal customs duty than to bootleg. Secondly by legalising the trade, the government generates additional revenue which was earlier lost to the smugglers. This very revenue can now be used to increase the vigilance and fight smuggling.

6) Lastly and most importantly if India has to accomplish its grand plans for FTA, common currency for ASEAN and better bilateral ties with its neighbours, it has to improve the bilateral trade. Also trade with china depends heavily on agricutural commodities and manufacturing goods which reduces our reliance on IT sector.

4 replies on “Nathula Pass, reopening of the silk route.”

Nice post.

You assert that border trade reduces smuggling. I was curious about this. I am always amazed at how many bootleg Chinese goods (from CDs, DVD Players, Televisions, knock-off designer clothes, shoes, etc.) find their way into the local markets in Darjeeling(currently by way of Nepal). I wonder if the new pass will increase the influx of these goods or legitimize them in some way.

Btw, I have a post about Nathula reopening on my blog as well.

UPDATE

primarily due to reluctance of India to open the trade route, nathula pass is seeing a miniscule 50k per week of trade.
the restrictions include
1) only sikkim citizens can trade from the indian side
2) the list of permissible items only contains 26 articles of which most of them have little economic value like yak milk etc. machinery, electronics, goods, minerals etc are still banned

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