Figure 1 : The First Three Districts Taken by Rebels during the Revolution of Nepal

            The initial strategy of the revolution was to capture the Tarai, the granary of Nepal. The rebels were able to capture some towns but were not able to hold them from the counterattacks from the army. There was no armed struggle in the Katmandu Valley but up to fifty thousand people were demonstrating. After several weeks of demonstrations, government lost control of Palpa in January 6, 1951, Pokhara in January 9-10, and Gorkha in January 10. By mid-January, many other western towns fell to the rebels, and troops were starting to surrender.
            Negotiation between Ranas and India began in December 24 1950. In Jan. 8, Mohan Shamsher promised restoration of the king, amnesty for political prisoners, and elections based on adult suffrage to be held within two years. The king agreed two days later, and a cease-fire was in effect by January 16. A coalition ministry, headed by Mohan Shamsher with five Ranas and five Nepali Congress members, was set up. This ministry faced a serious law and order problems; some liberation army members did not cease fire, and Tarai was being robbed. When a policeman fired on a student demonstration and killed a student, the ministers stepped down. The king used this opportunity to rule out Ranas for good and set up the government according to his will. On November 16, 1951, a new government led by Matrika Prasad (M.P.) Koirala, half-brother of B.P. Koirala, was declared.


III.2) Democratic Experiment
            During the 50s, the general political trend was the king versus the political parties. On one side, the king, finally restored of its powers after a century of being a mere puppet, controlled the most powerful force in the country, the army, to enforce his wills. On the other side, the political parties were becoming more diverse to represent a wide range of interests. The largest party was the Nepali Congress, headed by B.P. Koirala. The Communist Party of Nepal did not participate in the revolution claiming that it was a revolution of the bourgeois. Other leaders locked out from high positions of the first coalition government revitalized Praja Parishad. The Communist Party of Nepal and Praja Parishad formed a United Front to confront the Nepali Congress. Those criticizing the Nepali Congress for not being democratic formed a revitalized the Nepali National Congress.
            M.P. Koirala was the first prime minister appointed by Tribhuvan after his power was restored. Though B.P. Koirala was the leading figure in the Nepali Congress, he was too radical and disliked by India. Thus, M.P. Koirala, who had been an officer under the Rana regime and therefore is more responsible to the king and less radical, was appointed as prime minister. Then, in August 1952, India suggested that the king dispense congress and rule directly with a council of advisors, since elimination of anti-Indian political parties would strengthen its influence over Nepal. The king did so, but his council of advisors included members of M.P. Koirala's cabinet. During this period, M.P. Koirala created a new party, Rastriya Praja Party (National People's Party). Tribhuvan grew impatient of direct control, and in June 1953 re-appointed Matrika as prime minister. Several political parties joined with the ruling party. The Leftist Nepali Congress, Praja Parishad, the Nepali National Congress, and the Nepal Jana Congress all joined with M.P. Koirala. However, this was a coalition between conservative and radical parties, and though the support base has become greater, the party faced serious oppositions within the party. Thus, after a budget proposal by Matrika was opposed by his own party in January 1955, he decided to resign.
            King Tribhuvan died about a month before M.P. Koirala's resignation, so Mahendra Bir Bikram Shah, son of Tribhuvan, accepted the resignation and began to rule directly with a council of royal advisors. When political parties refused to allow Mahendra to pick their representatives, he appointed Tanka Prasad Acharya, leader of Praja Parishad. Acharya was an anti-Indian, so Mahendra used him to reduce Indian influence on Nepal. Also, Mahendra wanted to postpone the constituent assembly promised by Mohan Shamsher, and Acharya gave a speech hinting that the constitution would be a gift from the king, rather than a creation by the people. However, Acharya faced oppositions within his own party and resigned in July, 1957. The next appointed prime minister was Kunwar Indrajit (K.I) Singh, leader of the United Democratic Party. K.I. Singh was a congress fighter in the Tarai, who refused to lay his weapons down after the revolution was over. Indian troops were called in twice to capture him, and thus K.I. Singh had a "Robin Hood" image. He was an anti-Indian, but after he came back from Tibet in 1955, he became an anti-Chinese. Mahendra used him to maintain a balance between two giants: India and China.
            During this period, Tribhuvan and Mahendra tried many forms of councils and ministries in order to find a form of government that would execute their wills under a democratic façade. Political parties faced a dilemma between continually protesting for democracy and being subjugated to the king to earn government posts. However, B.P. Koirala, who commanded the widest allegiance, was excluded from government and there was not much progress on interim administration, and based on deals with former local kings, principalities in western hills enjoyed autonomy.


III.3) 1959 Election
            Right after K.I. Singh's appointment, the Nepali Congress united with Praja Parishad and the Nepali National Congress to form the United Democratic Front. In December 1957, they organized a satyagraha, civil disobedience campaign in English, pressing for elections for government to be held within six months. K.I. Singh's United Democratic Party and Rana-oriented Gorkha Dal, along with many other small parties, opposed United Democratic Front and proposed a date of Febuary 12, 1959. Mahendra suggested Febuary 18, 1959, the anniversary of Tribhuvan¡¯s return from Delhi in 1951. Although the date Mahandra gave was much later than United Democratic Front's proposals, there was limited support of satyagraha, and also UDF showed poorly in the mid-January election in Katmandu, (3) so B.P. Koirala had not much choice but to accept the offer.
            Until the election was held and a new government is formed, a council of ministers comprised of representatives of major parties and two royal nominees was founded in May 1958 to govern the country. To draft a new constitution, a Drafting Commission, including party politicians, was set up but their existence was only nominal. Rather the actual work was done by Sir Ivor Jennings, who had already written constitutions for many other Asian countries, under Mahendra's orders. The legislative branch was to be comprised of two houses Pratindhi Sabha, the lower house, and Mahasabha, the upper house. Pratindhi Sabha was directly elected by the people, and contains 109 members. Mahasabha, contained 36 members, half elected by the lower house and half appointed by the king. Executive power lay with king. King could also call a state of emergency, which enables king to override all institutions except the Supreme Court. Also, public servants, especially the army was under king's influence. This constitution was announced on Febuary 12, 1959, just six days before the election.
            The first election for the parliament of Nepal was held on February 18, 1959, and the turnout was 43%. This election was a definite win for the Nepali Congress. Out of the 109 seats in the lower house, the Nepali Congress won 74 seats. B.P. Koirala, the head of the Nepali Congress finally became the prime minister. The crucial factor in winning the election was the ability to link with influential individuals or factions in the local area. Though some accuse the Nepali Congress of Malpractice, which could have happened, but nevertheless the Nepali Congress achieved an indubitable win in the election.

Chart 1 : The Results of the 1959 Election (4)

            As prime minister, B.P. Koirala pursued three major reforms. First is the abolition of Birta system without compensations. The Birta system foresees tax-free long holdings, mostly benefiting the Ranas and their close ones. However, an intermediate class of landlord already existed on these Birta estates, so there was not much impact on the actual cultivators, but nevertheless showed the will of land reform. The second is the abolition of the Rajyauta system. Under the Rajyauta system, formerly independent rajas of central and western Nepal retained control over some area for annual payment. The third is the Nationalization of forests with compensation. Some of the forests were owned by the king¡¯s brother, and this reform, before it was even executed, alarmed those who would be affected.
            Gorkha Parishad, with nineteen seats in the lower house, was the major opposition party. However, it accepted the election as free and fair, and became similar to the Nepali Congress in political color. Thus, Gorkha Parishad was not a great threat to the Nepali Congress. Rather, B.P. Koirala faced opposition within the Nepali Congress; with his own brother M.P. Koirala openly backing the Nepali Democratic Party and opposing himself.


III.4) Panchayat Democracy
            The newly elected government did not last long. On December 16 1960, King Mahendra assumed emergency powers and dismissed the government that was elected only 18 months ago. Mahendra accused the Nepali Congress government of failure to maintain law and order corruption, and encouragement of anti-national elements. He argued that parliamentary democracy was alien to Nepalese tradition and fundamentally unsuited for the development of the country. As he dissolved the parliament, Mahendra also arrested B.P. Koirala, the prime minister, banned all political parties, and suspended the constitution. According to an Indian analyst, for King Mahendra, "Nepal was an idea and none but he could realize what it was destined to be." (5)
            Mahendra's dismissal of parliament was not met with direct opposition. Party leaders believed that opposing the palace by militia would only cause the king to use army forces on them. However, opposition did arise and Surbana Shamsher, the only minister who escaped arrests, was leading it. He was originally reluctant to act, but Indian Prime Minister Nehru, not wanting a destabilized border urged him to do so. Bharat Shamsher, leader of Gorkha Parishad, joined forces with him, and Surbana Shamsher began insurgency in Nepal. Though this insurgency was much smaller in scale compared to People's war between Maoists and the palace, Mahendra was feeling the need to compromise with the parties. To make matters worse, India placed an unofficial economic blockade on September 1962. However, Mahendra was saved by the outbreak of war between India and China the next month. India now needed Nepal's cooperation, so Nehru accepted royal rule as a reality and Surbana called off the armed campaign.
            While Mahendra faced opposition from now banned political parties and India, preparation for a new form of government suitable for Mahendra's standards was on its way. On May 8 1961, a commission was appointed to draft a new constitution. This constitution was promulgated on December 16 1962. The new form of government vested sovereignty in the royal palace and much of the powers of the state was given to the king. However, the king would not govern alone, but be advised by a national assembly named Panchayat. This form of indirect or 'guided' democracy already existed in Pakistan, Egypt, Indonesia and Yugoslavia. Also, this was hinted by Padma Shamsher's 1948 constitution, which was aborted by Mohan Shamsher, his successor.
            The Panchayat System was comprised of four tiers. At the lowest or the local level, there were 4,000 village assemblies, or gaun sabha, which elects nine members of the gaun (village) panchyat, who elects the mayor, or sabhapati. Each village panchayat sends a member to zilla (district) panchayat. There were 75 districts in total and each represented forty to seventy villages. The district panchayats elected representatives to Anchal (zone) panchayat. There were 14 zones in total and these zone panchayats functioned as electoral colleges for the Rastriya (National) Panchayat, in Katmandu. Also class organizations of peasants, youth, women, elders, laborers, and ex-soldiers elected their representatives to the Rastriya Panchayat as well. However, this National Panchayat had only limited powers. It could not criticize the royal government, debate the principles of democracy, introduce budget bills, or enact bills without royal approval.

Figure 2 : Organization of the Panchayat System

            Different reception of the Panchayat System divided the Nepali Congress into three wings. The first wing, led by B.P. Koirala, released in 1968, went into exile in India to overthrow the Panchayat system. The second wing, led by Surbana Shamsher, tried to work within the Panchayat System without participating in the Rastriya Panchayat and advocated local cooperation. The third wing, expecting the Panchayat System to gradually progress into democracy, worked within the Panchayat System. Divided, the power of banned political parties became even weaker. On the other hand, Mahendra enjoyed unchallenged power. He was the supreme commander of armed forces, appointed members of the Supreme Court, appointed the Public Service Commission to oversee the civil service, and could change any judicial decision or amend the constitution at any time. The king, in effect, reclaimed the unlimited power once exercised by Prithvi Narayan Shah in the eighteenth century (6).
            This royal coup was not, however, intended to fulfill personal greed. Mahendra believed that he alone could guide the nation in the right direction. He started implementing the reforms that was originally announced by B.P. Koirala's elected government. Land reforms confiscated large Rana estates. Rajya reform terminated the special privileges of some aristocratic elites in western Nepal. Moreover, the new Panchayat System managed to bring 50,000 to 60,000 people into a single representative system, which would have been impossible to accomplish by the elite-oriented political parties. Along with implementing reforms, Mahendra tried to change the political culture. This is reflected in the contradiction of his constitution. He abolished parliamentary democracy claiming that it was alien to Nepalese traditions. Mahendra's intention was to create a new political system harmonious to the already existing tradition of Nepal. However, on the other hand, within the constitution there were clear elements of modern intentions intended to change the political culture (7).
            An important concept to be concerned is 'nation-building'. With the notion of self-determination being used to remove colonial rule, nation-state became a norm in the 20th century. Nation became the source of legitimacy of a state, and the first task of the state was to build the nation. This concept of nation-building was developed in the late 1950s and the early 1960s in America by political scientists and sociologists such as Lucien Pye, Myron Wiener and Karl Deutsch. Apologists of Panchayat democracy claim that nation-building, which they call desa banaune, is central to the 1962 constitution. Indeed, Mahendra aimed to strengthen the unity of Nepal as a nation. Nepal¡¯s identity as a nation had already existed to a certain extent before Mahendra tried to strengthen it. In the 1920s, the Gorkha government renamed their mother tongue, Gorkhali, as Nepali and started to officially refer itself as the 'Kingdom of Nepal.' Religious identity was formed when Jang Bahadur Rana formed a single national caste system. Nevertheless, Mahendra tried to strengthen popular unity through many means.
            One of the most significant examples of this example was unification of language. Though Nepali was the official language and thus the lingua franca of the nation, in regions close to India, especially the Tarai, variation of Hindi was used much widely and Hindustani was the lingua franca. To achieve a cultural unity among the people, government started to enforce Nepali as the official language. The medium of education all state schools became Nepali under the Education Act of 1962. Also, the broadcast of Hindi and Newari news was terminated in Radio Nepal. Moreover, in censuses, Awadhi , Bhojpuri, and Maithili, dialects of Hindi, were included as languages spoken in Tarai, so the number of those returning Hindi as their language was sufficiently dropped to a level that the official documents did not need to mention Hindi as a language spoken in Nepal. Through these measures, Nepali was given the status of common language.

Figure 3 : Districts of Nepal

            Religion was another factor that Mahendra used to unify the people. 1962 constitution defines Nepal as an 'independent, indivisible, and sovereign monarchical Hindu state.' (8) Britannica Book of the Year 1964 shows that in 1963, 85% of Nepalese were Hindu (9). By declaring that Nepal is a Hindu state, Mahendra was opting to draw the legitimacy of the state from the nation. Prior to him, rulers of Nepal sought recognition from foreign colonial powers. Prithvi Narayan Shah held the title Behadursam Ser given by the Mughals. To derive his sovereignty from his people and the country's history, Mahendra deleted this title from his list. Along with this line, titles and offices were Sanskritized. For example, though people still call it the Tourist Office, it is officially Paryatan Vibhag.
            Also, interestingly, service to the public was a monopoly of the state. Almost everyday there were reports of a cabinet member or a member of royal family opening a bridge, dam, school, or hospital, etc. Political parties protested by also serving the public. For example, Students of Tribhuvan University would gather inside the campus to go out and clean the town and roadsides. This put the police in dilemma. Arresting the students would mean that the state is opposed to public health that those cleaning the country on a voluntary basis is arrested, and not arresting them would mean that the state is so negligible of public health that student have to clean it themselves. In such cases, however, the police always arrested the students (10).
            The pursuit for public unity also affected public life. Private opinions could hamper the unity, so only could be expressed with permission. All special interest groups, such as literary societies or businessmen's club, were private-interest groups, and thus they were allowed to enter public space only with approval of the state. Although a class system of five classes, peasantry, youth, women, workers, and ex-servicemen existed, these official classes were not antagonistic, and therefore these classes would not go on strikes. Censorship was harsh, to the extent that for news, the intelligentsia had to read private newspapers published by underground political parties. However, this censorship was not to control private minds but to protect public unity; democratic activists were not arrested as long as they did not express their opinions in a public space.
            The royal coup of Mahendra was truly a revolution in the sense that it was a restoration of the old, mainly the kingship and the Panchayat. He also gave a constitution to the people as a gift, but he could make amendments at it at any time he wanted to, so it was not exactly a gift. This 'is-but-is-not' status gradually built up discontent among people, even those who participated in the Panchayat System hoping that it would eventually become a democracy.
            Mahendra died in January 1972, and his son Birendra Bir Bikram Shah Dev succeeded the throne. He was associated with young, educated, administrative experts who were dedicated to economic development but reluctant to share power with political parties. In August, students of Tribhuvan University went on an indefinate strike, and 100 armed men, supposedly linked with B.P. Koirala, attacked a Tarai village and killed a constable. In June 1973, terrorists hijacked a plane of Royal Nepal Airlines. More armed attacks and assassination attempts occurred during 1974. However, palace had complete control over the army, bureaucracy, and resources that these attacks did not have much impact. In 1975, Birendra appointed a seven member Reform Commision to make changes in the Panchayat System. The number of members in the Rastriya Panchayat was increased from 90 to 134, but at the same time its rigidity was increased.


III.5) National Referendum of 1980
            It became evident that despite the opposition raised by political parties, the Panchayat System would endure with the full support of king Birendra. Political parties started to lower their revolutionary rhetoric and started to reconcile with the king. On December 30, 1976, B.P. Koirala came back to Katmandu from his exile in India. He was arrested for antinational activities and violence. He went through five treason trials and was finally acquitted in early 1978. After his release, the Nepali Congress accepted the king's power. Now, the political pattern became loyalty to the king and opposition to it. Though the Nepali Congress, which had been the greatest challenger to the government, dropped resisting the king¡¯s power, students were continuing to protest against Panchayat System and for human rights in 1977 and 1978.
            On Febuary 1979, two congress fighters were executed, increasing the discontent among students. In April the same year, Pakistan executed Zulfikar Ali Bhutto, its former prime minister. Students gathered in front of the Pakistani embassy protesting against the execution of the former Pakistani prime minister, but with executions of the Nepalese congress fighters also in mind. Protests were escalating in Katmandu and Tarai. Government opened negotiation with the relatively moderate factions, Rayamajhi and Pushpa Lal Communists. An agreement was reached, with most of demands on tertiary education sector. Government promised to allow automatic university entrance for all who passed the School Leaving Certificate exam, abolish the pro-Panchayat student organization, Rastrabadi Swatantra Bidyarthi Mandal (Independent Nationalist Student Organization), and establish an independent union at a national level.
            However, the more radical factions, the Marxist-Leninists and the Fourth Convention regarded this as a sell out and continued their protests. Although the protests were gaining momentum, the situation was under control; this was nothing compared to the people's war in the 21st century. Nevertheless, this was the largest challenge that the <Panchayat regime have ever faced, and India could intervene as well. Also, the Shah of Iran was recently ousted and replaced in a republic by the Iranian Revolution. Thus, on May 24, Birendra announced over Radio Nepal that the people of Nepal would choose its fate through a national referendum would be held in May the following year to decide between the Panchayat System with suitable reforms and multiparty democracy that was once tried a score ago.
            By December, it was clear that the reforms to the system would include election of Rastriya Panchayat not by Electoral College of (Zone) Panchayat but by universal suffrage. This was not an original idea, but an idea already insisted by Rishikesh Shaha, Surya Bahadur Thapa and others for many years. To boost the popularity of the Panchayat side, the government appointed Surya Bahadur Thapa as the new prime minister of the reformed the Panchayat System. This amendment became the third amendment to the 1962 constitution, and also included that the Rastriya Panchayat could suggest a single candidate for prime minister with support of 60% or more, which would than be approved by the king. If a single candidate cannot gain 60% or more support, the Rastriya Panchayat could suggest three candidates for the king to choose. Either way, the council of ministers would be responsible to the Rastriya Panchayat, not to the king.
            The referendum was scheduled for May 4 1980, and almost a year was left between the announcement and the election. The contest between the two sides was intense. Although, the Marxist-Leninist and the Fourth Convention, the parties that led the insurgency against the Panchayat System, boycotted the referendum, most political parties campaigned for multiparty democracy. They were able to make their case in public spaces, and students left schools during the period to support the multiparty democracy side in their hometowns. Moreover, their campaign was boosted by some panchas who left the Panchayat side to advocate multiparty democracy. However, the Panchayat side had more resources. On Radio Nepal, only the case of the Panchayat side was broadcasted, and Birendra's neutrality was completely nominal. Thapa also made concessions to businessmen in return for lucrative donations, and people in the hills were allowed to occupy government land. Furthermore, the Back to the Village National Campaign central committee, an organization that oversaw the entire Panchayat System and was disliked by even the panchas, was suspended.
            On May 4 1980, out of 7.2 million voters, 4.8 million people cast their votes. The result was victory of the Panchayat side by 10.4%, equivalent to 0.4 million votes. Though many political parties accused that wholesale rigging took place, the turnout figures were high and the percentage of spoiled ballot was little enough to say that this referendum correctly portrayed the public opinion of the time (11). Nevertheless, although the Panchayat side won by 400 thousand votes, the results were suggesting that the support and demand of multiparty democracy was growing, and Birendra told Lokendra Bahadur Chand, the future prime minister, that he would have to prepare for multiparty democracy within ten to twenty years.
            The Panchayat System, although it won the election, was beginning to wear down from inside. Factions and coalitions were building up within the system. This was intensified in 1983, when Thapa was taken out of office due to serious food crisis and corruption. Thapa started a campaign against the Bhumigat Giroh (underground gang), which he claims that replaced him by Lokendra Bahadur Chand. Two samuhas, or blocs, built up around Thapa and Chand, and the Panchayat System was becoming a stage for factional fighting and suffling coalitions.
            Opposition outside the system was rising as well. The Nepali Congress, although weakened by the death of B.P. Koirala in 1982, launched a satyagraha or a civil disobedience campaign in May 1985. Parallel agitations were launched by communist parties, and ended in June. During the satyagraha, bombs were set off in Hotel de l'Annapurna, which was owned by the king's sister. The ban on the political parties was beginning to thin; political parties could meet, debate, and recruit members pretending that they were not political parties. They could not set up signs, and their activities were reported with pratibandhit (outlawed) in brackets next to the party¡¯s name. Journalism was subject to intermittent harassment, but evaded being banned by closing and opening under a new name.
            Despite these unfavorable political situations, the palace was still the one which chose the prime minister. Birendra orchestrated Surya Bahadur Thapa's appointment after the first election of the Rastriya Panchayat by universal suffrage. He was also the one behind Thapa's replacement by Lokendra Bahadur Chand. Also, though the political parties rejected the amended constitution, participation of the public was rather high. In the first election held in 1981, 52 percent of the whole electorate cast their votes. In the second election, held in 1986, drew 60 percent of voters (12). Due to unwavering power of the palace and high participation in the Panchayat System, not many expected this reformed system to fall so soon.


III.6) 1991 Election
            With increased support of the Panchayat System after the third amendment to the 1962 constitution, it seemed evident that the system would thrive. However, the force that triggered the toppling of Panchayat regime came from a foreign source: India. On March 1989, India decided to place a semi-blockade on Nepal. This was because Nepal did not concede the right of having separate treaties on trade and transit agreements. These agreements were signed in separate treaties in 1978. However, this economic concern was only an apparent reason, and the actual reason was more on work permit issues and Chinese arms issues. At first, the public was hostile towards India, which placed the economic blockade. However, discontent with the royal palace was already mounting, due to prince Dhirendra's mischief. Bharat Gurung, former aide-de-camp of Dhirendra, along with other senior figures, was caught smuggling drugs and accused of attempt of a murder of a journalist. Moreover, Dhirendra wanted to divorce his wife, and renounced his royal title and settled in the UK with his British partner. Thus, soon the public discontent was pointing at the royal palace.
            With the support of the public discontent of the government, actions of political parties gained momentum. On August 1989, Marxist-Leninist's conference was held, and the party officially abandoned Maoism, and announced that it will align with the Nepali Congress in the campaign against the government. On January 1990, the Nepali Congress's conference was held. The Nepali Congress declared that they would begin the Movement for the Restoration of Democracy on February 18. The Nepali Congress joined organizing the United Left Front and was joined by other parties: Marxists, Nepal Worker's and Peasant's Party, the Fourth Convention, and the Marxist-Leninists. As chairman was chosen Sahana Pradhan, one of the leaders of Communist Party of Nepal (Marxist). Marxist-Leninists replaced the Fourth Convention as the major force; the Fourth Convention set up the United National People's Movement instead. The Nepali Congress' movement was supported by the Indian government. The government criticized them of being under foreign influence; this criticism usually worked, but not at this time when public opinion was so opposed to the government.
            The Movement for the Restoration of Democracy was launched on February 18. Demonstrations were done by party supporters, whom were mostly students. During the demonstrations, a number of demonstrators were killed and thousands were arrested. The leaders were either held custody or put under house arrest. By mid-March, the movement seemed to come to a deadlock.
            Fresh energy was brought in when a student was shot to death on Mechi campus, located in south-east Nepal. Starting from March 29, people protested by black out, extinguishing lights at a set time. This was a very safe way of protesting, and brought large number of supporters, including professional groups, human rights activists, and even some panchas within the system. Foreign donors began to express concern over the situation. On March 31, Patan inhabitants, angered by police firing, set up Public Safety Committee, confined police within the old palace, and blocked all accesses with ditches. This became the turning point of the movement. Demonstrations continued in other valley towns.
            On April 6, Birendra announced over Radio Nepal that concessions would be made. Marich Man Singh Shrestha, prime minister at the time, was ousted, and replace by Lokendra Bahadur Chand. Furthermore, Birendra promised to discuss with the opposition and set up a constitutional reform commission. Birendra had no choice but to do so. Just before the announcement, India proposed a new agreement that would return the relationship between the countries to the 1950 treaty, in return for Indian assistance in controlling the situation. Accepting this offer would mean surrendering to India, and Birendra thought it was better to make concessions at home rather than being humiliated by maintaining his rule with the help of a foreign power.
            However, the people were not satisfied with the concessions made. People continued their protests, demanding an immediate end of the ban on political parties. Some even marched to the royal palace, and police had to open fire. Curfew was declared in the Katmandu Valley. On April 8, after a meeting at Ganesh Man Singh¡¯s bedside, Congress leaders Krishna Prasad Bhattarai and Girija Koirala, Communist Party of Nepal (Marxist-Leninist) leader Radha Krishna Mainali, and Sahana Pradhan went to the palace for direct negotiation. The king and the party leaders agreed on a simple ending of the ban on political parties; this was broadcasted on that evening. The next day, streets were filled with joyous celebrations. Further demonstration led to the complete abolition of Panchayat institutions and Chand¡¯s resignation on April 16. Ganesh Man Singh was offered the premiership, but declined due to health issues (13). On April 19, Bhattarai was appointed as prime minister of the interim government and a cabinet of ten was formed: three each from the Nepali Congress and the United Left Front, two independents and two royal nominees.
            To regain some of the lost ground, Birendra appointed a constitutional reform commission on his own. He eventually backed down, and a commission to write an entirely new constitution was formed with representatives of the Nepali Congress, United Left Front and the King. The palace made final moves to increase the power of the king, but these attempts were abortive. There were criticisms by the radical leftists that the constitutions should be drafted by the newly elected government, but the Nepali Congress and the more moderate leftist parties believed that there was a need to quickly draft a new constitution, and that a drafting commission would be more suitable than an entire parliament.
            The new constitution was promulgated in November, and striped the monarch of most of his powers. There was to be a bicameral system, as in 1959, with a 205-member lower house, Pratindhi Sabha (House of Representatives) elected by first-past-the-post system. The king would be constituently obligated to appoint the leader of the party or a coalition of parties with a majority in the Pratindhi Sabha. The monarch was expected to normally act on the recommendation of his ministers, and was left with the powers to declare a state of emergency and dissolve the Pratindhi Sabha with the prime minister's suggestion. Nepal was declared a multiethnic, multilingual Hindu state. Nepali was chosen as the language of the nation. Communities became able to educate their students in their regional languages, but in such cases, government funding would be unavailable.
            At first, the moderate leftists hoped to participate in the election in alliance with the Nepali Congress, but this was made impossible after the Nepali Congress' conference held in January 1991. Since then, the campaign of each political party began, and was vigorously fought. Many students took a month off to participate in the campaign of the party they support. There were some accusations of corruption; one minor leftist leader insisted that the United Left Front was organizing strikes and obtaining capital from the factory owner in return for stopping the strikes. However, the bigger problem was distinguishing among the many political parties that participated in the election. A total of 20 political parties participated in the election, but generally all the parties promoted economic development and a more equal society. Besides this, distinguishing the numerous parties was quite difficult. There was a general trend, though. The Nepali Congress was viewed as the 'party of the haves', and the other communist parties were seen as the 'party of the non-haves'.

Figure 4 : Results of 1991 Election (14)

            On May 12 1991, the first election under the 1990 election was held. Voter's turnout percentage was 65.15 percent, and a total of 11,148,258 people cast their votes. Out of 1,345 candidates, 205 candidates were elected, including 7 female candidates. The election was won by the Nepali Congress, with 110 seats. People in the hills supported them, and supporters of the National Democratic Party believed that the Congress would be better choices. The major opposition party became the Communist Party of Nepal (United Marxist-Leninst), with 69 seats (15). It gained much support from the Katmandu Valley and the eastern region. Girija Prasad Koirala, younger brother of B.P. Koirala and M.P. Koirala, was elected prime minister, and this marked the end of 28 years of royal rule with the Panchayat System.


III.7) International Relations

Figure 5 : Location of Nepal (green) between India (red) and China (yellow)

            Being a landlocked country between two giant countries of India and China, Nepal's international relations are mostly concentrated on the relations with these two countries. Moreover, three sides of Nepalese border are surrounded by India, and the only side of the border with China is blocked by the Himalayas. Thus, Nepalese foreign relations focus mostly on the relationship with India, and India has a tendency of conceiving Nepal as a country under its sphere of influence. The greatest task that Nepal faced was to skillfully maneuver between China and India in order to maintain a balance between the two giants. Nepal, as a landlocked country that requires other countries' cooperation in order to sustain its economy had to stay keen. Else, becoming a political and/or economic dependency of either India or China would have been inevitable.
            During the 1950s, Mahendra maintained balance between the two neighbors by appointing pro-Indian and pro-Chinese prime ministers alternatively. In the early 1950s, when India fully supported the revolution of Nepal, Matrika Prasad Koirala of the pro-Indian Nepali Congress was appointed as prime minister. In 1956, diplomatic relations were opened with the PR China, and Tanka Prasad Acharya, a politician widely known for his anti-Indian views was appointed prime minister, in order to reduce the influence of India, which has been the norm since Tribhuvan's restoration of power. A year later, to counterbalance the anti-Indian atmosphere, Acharya was disposed of his post and replaced by Kunwar Indrajit Singh. Singh was originally an anti-Indian politician, but after he came back from Tibet in 1955, became a stern anti-Chinese.
            This trend of sustaining balance between India and China continued on with B.P. Koirala's elected government in 1959. The Nepali Congress had been traditionally on good terms with India, due to similarity in political hue. However, since Dalai Lama's flight to India in March 1959, tension between the two giants was building, and Koirala was careful not to get caught in the middle between the two. Soon after his inauguration, Koirala doubled the defense budget on the northern border, and agreed with the Indian government to maintain the Indian monitors at points along it. However, he rejected the proposal of a defense pact between India and Nepal. At the same time, he retained a hard line against China's attempt of occupying Mount Everest, and even got an official apology and compensation for China's shooting at Nepalese border patrol. Moreover, Nepal was granted development aids from both India and China. Nepal also gained independency of its foreign currency and the tariff system.
            During the Panchayat era, Indian development aid remained significant. However, the relationship between Nepal and India was not necessarily cordial. India wanted to keep Nepal under its sphere of influence, and Nepal tried to break free from it. There were recurrent tensions over a few issues: tariff, Nepal's right of transit across India for trade with third party countries, and security issues. In 1965, Mahendra secretly concluded an agreement not to purchase military from other countries if India could provide it. This, however, was renounced in 1969, when Nepal requested to end the stationing of Indian monitors along its northern border. Kirtindhi Bista, the prime minister at the time, in an interview, expressed that the 1950 Treaty of Friendship was no longer relevant. Standing up against Indian pressure led to increased domestic popularity.
            This relevant freedom gained did not last long. In 1971, India defeated the Pakistani Army and caused the creation of Bangladesh in East Pakistan. China had supported Pakistan only verbally, and this meant that the entire South Asia was under India¡¯s sphere of influence. Moreover, India annexed the Kingdom of Sikkim in 1975. The ethnic Nepalese majority in the kingdom believed that this was emancipation from the Lepcha Dynasty, but within Nepal, this was seen as sheer expansionism, and anti-Indian sentiment mounted. To maintain balance between India and China, Birendra declared in 1975 that Nepal would be a 'zone of peace'; most countries with which Nepal had diplomatic relations accepted this, except India. Nepal's international profile was raised in 1983, when Katmandu was chosen as the site for the South Asian Association for Regional Co-operation (SAARC) secretariat. SAARC members included Nepal, India, Pakistan, Bangladesh, Sri Lanka and the Maldives.
            Besides the tension with India, Nepal enjoyed friendly relations with other countries in South Asia and those outside of it, and obtained large development aid from individuals and multi-national organizations. There was a rivalry in the aid programs between India and China and between India and the United States, and these resulted in larger help granted to Nepal.
            By the end of Panchayat era, however, the relations with India began to sour. In 1976, an ethnic cleansing occurred in the state of Assam in India. Originally, the subject of ethnic cleansing were immigrant Bengalis, but the soon immigrant Nepalese were persecuted as well. However, the Indian government did not protect the Nepalese from being victimized. Relationship between India worsened in 1987, when prime minister Marich Man Singh Shrestha limited the number of Indians that could work in Katmandu, ignoring the 1950 treaty, which denotes that Indians and Nepalese can freely live and work in either countries. A violent uprising by the Nepali-speaking majority in Darjeeling in West Bengal from 1986 to 1988 further soured the relationship. The agitation was settled by granting limited autonomy in a newly created state of Gorkhaland. Actually, the central government almost welcomed the incident as a tool against the Communist Party of India (Marxist), but many Indians accused Nepal of dreaming of a 'Greater Nepal.' (16) As discussed in chapter III.6, this uneasy relation with India eventually caused the downfall of Panchayat regime.
            Besides the irksome relationship with India, Nepal's foreign relations were generally a success story. Most importantly, Nepal was able to obtain a great amount of development aid, which is much more that what was given to other South Asian Countries (17). However, whether this enormous amount of foreign aid benefited or harmed the economic development of Nepal is a question to be discussed in the next chapter.

IV. Economic Development

Figure 6 : Five Development Regions of Nepal

            From early 1970s, more attention was given to agriculture in the hills, resource conservation, and regional planning. The country was divided into five development regions: Eastern, Central (includes Katmandu), Western (includes Pokhara), Mid-Western, and Far Western. The original intention was counterbalancing the concentration of resources in Katmandu Valley and promoting development of other regions. However, the limited urban development tended to only benefit the local merchant classes. The development regions were a very weak grouping in the administrative structure and the decentralization to the districts were not so successful. Some even argued that the seventy-five development districts themselves, established in the 1960s, were not ideal units for planning purposes because boundaries between them tended to run not along the ridges separating river valleys but along the rivers themselves. The districts were therefore not usually natural economic or cultural units (29).
            The Fifth Five-Year Plan (1975-80) proposed expenditures of more than 8.8 billion rupees (30). For the first time, the problem of poverty was addressed in a five-year plan, but no specific goals were mentioned. Top priority was allotted to agricultural development, and emphasis was placed on increasing food production and cash crops such as sugar cane and tobacco. Increased industrial production and social services also were targeted. Controlling population growth was considered a priority.
            The Sixth Five-Year Plan (1980-85) proposed an outlay of more than 22 billion rupees (31). Agriculture remained the top priority; increased social services were second. The budget share allocated to transportation and communication was less than that allocated in the previous plan; it was felt that the transportation network had reached a point where it was more beneficial to increase spending on agriculture and industry. During the Sixth Plan, the annual growth rate finally exceeded the projected 4.3 percent (32). However, this was accompanied by a balance-of-payment crisis. Imports in 1984-5 was four times the level of 1975-6 (33), and after 1982-3, the deficit was no longer covered by foreign aids. This was due to the rising need of importing raw materials and equipment. Nepal had to negotiate a structural adjustment loan from the World Bank in the mid-1980s, and the conditions included not only reducing the trade deficit but also taking action against poverty.
            The Seventh Five-Year Plan (1985-90) proposed expenditures of 29 billion rupees (34). It encouraged private sector participation in the economy (less than 22 billion rupees) and local government participation (2 billion rupees). The targets of the plan were increasing productivity in all sectors, expanding opportunity for productive employment, and fulfilling the minimum basic needs of the people. Birendra, in a 1985 speech announced that he would bring the entire population to a reasonable income level in accordance with Asian standards by the end of the century (35). For the first time since the Five-Year Plans were launched, specific goals for basic needs were established.

Chart 2 : Balance of Payment from 1945 to 1991(36)

            Six goals were to be achieved in areas of nutrition, housing, education, birth control, life expectancy, and health services. Daily food consumption was to be raised to 2,250 calories per capita. Each person was to have eleven meters of clothing and a pair of shoes per year. Housing requirements were thirty square meters per urban household and forty to sixty square meters per rural household. Essential utilities and sanitation were to be furnished by the government. Universal primary education for all children between five and ten years of age was to be provided, and the government was also responsible for supplying teachers, classrooms, and educational materials, although villagers pitched in with labor and supplies to build schoolhouses. The population growth rate was targeted at 1.9 percent by 2000 (2.6 percent in the 1980s), and life expectancy was to increase to 65 years of age by 2000 (almost 51 years in the late 1980s). The infant mortality rate was to be reduced to 45 deaths per 1,000 by the year 2000; World Bank figures placed infant mortality at 171 per 1,000 in 1965 and at 126 per 1,000 in 1988 (37). Universal primary health services also were to be ensured, primarily by the government. The government also targeted to improve social services provided to the handicapped, maintain law and order, and establish an environment conducive to development (38).
            However, as with other development programs launched by the government, this basic needs program failed to meet with expectations. In 1991, an estimate of 7 to 9 million out of the entire population of 19 million was unable to obtain their minimum daily calorific requirements (39). Natural increase rate was 24.0, much higher than the world average of 17.2 (40). In Human Development Report 1991, published by United Nations Development Programme, Nepal was ranked 145th in human development index, which combines national income and social indicators, such as adult literacy and life expectancy, out of 160 countries surveyed (41).
            One of the problems that hampered growth was failure to elaborate on the vague objectives set by the government. Another problem lay in the success of the local elite in steering benefits in their direction. Local panchas faced a difficult situation for they could not utilize the resources held by the wealthier households and had to make poorer families work on projects that would be more beneficial to others. However, although the people of Nepal are the ones most responsible for the nation's development, the foreign donors which offered extensive development should be held responsible as well.


IV.2) Foreign Aid
            Nepal has been a recipient of foreign financial assistance since 1952. During the 1950s, many Nepalese received scholarships to go to different countries for studies in technical and professional areas. Also during this time, all other aid was in the form of grants. The major targets were developing agriculture, transportation infrastructure, and power generation. Other areas assisted were communications, industry, education, and health. The United States and India respectably were responsible for more than one-third of all grants (42). Both countries established aid missions to Nepal and directed aid to specific projects. China and the Soviet Union were other major donors during the 1950s. Britain, Switzerland, Australia, Japan, and New Zealand also were involved in lesser assistance programs. The United Nations provided some technical assistance. Until the mid-1960s, Nepal depended mostly on foreign grants for all its development projects. Most of these grants were granted based on bilateral treaties. Beginning in the 1960s, some bilateral assistance was in the form of loans. The percentage of loan in the entire foreign aid increased from under 4 percent between 1965 and 1970 to more than 25 percent by 1985-88 (43).
            In the 1970s, multilateral assistance programs started to play an important role in development planning and accounted for more than 70 percent of funding for development planning (44). By the end of the 1980s, the large majority of foreign aid was in the form of multilateral assistance programs. The major sources of loans or grants for these programs were the International Development Association of the World Bank and the Asian Development Bank. Most of these loans were soft loans. There were numerous sources of foreign aid: Eleven UN agencies, seven multilateral lending agencies, eight private agencies, and at least seventeen countries which offered bilateral assistance. Under the supervision of the World Bank, the Nepal Aid Group was founded in 1976. Sixteen countries and six international agencies participated in the group by 1987. The level of commitment from the Nepal Aid Group had increased from 1.5 billion rupees in 1976-77 to 5.6 billion rupees in 1987-88 (45). Much of foreign aid contributions after 1976 came from this group.
            By 1991, Nepal was receiving external assistance in four forms: project aid, commodity aid, technical assistance, and program aid. Project aid provided funds for irrigation programs, hydroelectric plants, and roads. Donor aid agencies supplied fertilizers, improved seeds, and construction materials as Commodity aid. Experts advised the government in training indigenous personnel as technical assistance to perform research in technological fields and develop skilled labor. Program aid supported various projects, particularly in the agricultural and health fields.
            Nepal was becoming more dependent on foreign aid by the end of Panchayat era. Between 1984 and 1987, foreign aid as a percentage of GNP increased from under 8 percent to almost 13 percent. Debt service as a percentage of GDP increased from less than 0.1 percent in 1974-75 to almost 1 percent in 1987-88. Debt in this period increased outstandingly from 346 million rupees to almost 21 billion rupees (46).


IV.2.a) The United States
            The foreign aid era started on January 23 1952, when Nepal signed an agreement to accept United States' 'Point Four' program and received US $ 2000 as a first token payment (47). This program was in line with United State's containment policy, and was modeled after the successful Marshall Plan which revitalized the Western Europe. In the same year, Nepal also joined the Colombo Plan for Cooperative, Economic, and Social Development in Asia and the Pacific and became a recipient of foreign assistance (48). As the Marshall plan was highly successful in Europe, Americans hoped that as in Europe, a relatively small injection of fund and expertise would trigger a self-sustaining economic progress. The early American efforts were quite successful. The United States assisted the expansion of national education system and established a teacher-training college. Also, it supported the establishment of Nepal Industrial Development Corporation, which founded Nepal's first industrial estate at Balaju on the northern outskirts of Katmandu.
            However, as with many other development programs in Nepal, American development programs were soon beset with difficulties. To begin with, being an agrarian society, Nepal did not have the highly educated intelligentsia and industrialized workforce that the Western Europe possessed when the countries recovered after World War II, and thus promoting economic development was much difficult. Moreover, in agricultural extension work, which the Americans put the most emphasis on, they were up against many factors such as land-tenure system. The cultivators did not have any incentive to participate in the program, and the local trainees were unenthusiastic. Americans hoped that the government would institute land reforms, but when the government failed to do so, they reduced their agricultural assistance program in 1952.
            Foreign advisors, in general, faced a dilemma. On one hand, if they constrained their role to a purely advisory role, the efficiency would be greatly reduced. On the other, however, if they tried to take control themselves, they would be provoking resentment from the locals. Initially, Americans tried the first alternative, but in 1954-8 started a system of 'co-operatives', in which Nepalese and Americans nominally work as equals, but in reality Americans were in control. In a 1958-63 program for constructing suspension bridges, the control was given back to the Nepalese, with Americans only supplying the materials and the trainings required to initiate the program. The target was seventy, but only six bridges were built (49).
            Another problem faced by foreign aid suppliers in the 1950s was the frequently changing administration. From 1951 to 1960, Nepal had 7 different prime ministers, and more numbers of different governments, and thus the administrative system changed quite often. Americans insisted that foreign advisors be posted in the heart of government departments, but was met with Nepalese resistance. However, the blame is not wholly for the Nepalese to take. The advisors are also responsible for some poorly executed programs such as initial anti-malaria efforts that used inadequate amounts of insecticide over a too wide area.
            Tensions with other powers further restricted America's assistant role in Nepal. In 1958, King Mahendra visited Moscow and was revealed that the soviets offered help with civil aviation. In response, the United States diverted some of the funds from its suspension bridge project and established the first and national airline, Royal Nepal Airlines Corporation, which is currently the largest airline of Nepal. A more serious tension was with India, although the two countries shared a common objective of reducing the influence of China on Nepal. Rivalry in village development project became so intense that Americans withdrew from the sector in 1958. However, during 1961-2, when tension between India and Nepal grew, Nepal asked the Indians to stop the project and Americans went on with their projects after three years of absence. United States also tried to collaborate with India in road building, but in 1962 no usable road was constructed and the equipment was used by the Chinese to build the road from Tibetan border to Katmandu.
            Despite these difficulties, American aid remained significant, amounting to 46 percent of all individual country aid in 1960-6 (50). In the early 1970s, rapprochement with China reduced the strategic importance of the Himalayan region, and the aid provided by the United States reduced to 10 percent in 1980-90 (51). Nevertheless, this was not because Americans significantly reduced the assistance to Nepal, but because the number of other donors increased. From Fiscal Year 1970 through Fiscal Year 1988, United States commitments, including United States Export-Import Bank funds, totaled US $ 285 million (52). In the 1980s, bilateral United States economic assistance through the Agency for International Development was an average of US $ 15 million annually (53). The United States was still an important stake holder in Nepal Aid Group, and contributed to various international institutions. Many American private voluntary organizations, such as Fulbright which offered scholarship for Nepalese students to study in the United States, provided serviced to Nepal. I the 1980, the total of American contribution to multilateral aid was over US $ 250 million in the 1980s (54). Focusing on village development, agriculture, education, and public health, United States remained an important contributor to Nepal.


IV.2.a) India
            Although India was closely related to the political events in Nepal of 1950-1, it began to provide a full-scale development aid in 1952. The first two Indian projects in Nepal were the construction of the Tribhuvan Rajpath (Highway) liking Nepal with the Indian border at Birganj and of the Katmandu International Airport. At first, these programs were funded by loans from India, but soon these loans became grants. The village development program began in 1956 in response to United States' program in the same sector. This was boosted by the pro-Indian Congress government of 1959-60, but was ceased in 1962 by Mahendra's request.
            India saw United States and Soviet Union opening diplomatic relationship with Nepal as a threat to its influence over the country. To reduce their influence and save resources for its own development, India proposed to the two countries that United States and Soviet Union provide the capital for the developmental projects and India provide the personnel to run them. However, neither of the countries accepted the offer.
            Indian advisors faced the same dilemma that the Americans faced. India's solution was a system of 'joint boards', with Nepalese but formally in charge, but every three months, Indian approval was required for further funds. Thus, resentment with this 'big brotherly' approach grew, and when Mahendra formally asked for the termination of Indian aid in village development, the public was pleased. Anti-Indian sentiment grew more because India preferred the projects that it would benefit from. For example, the Tribhuvan Rajpath, connecting India and Nepal, was rapidly constructed, but Trisuli dam and hydro-electric power plant was completed in 1971, while the projected schedule was to be finished in 1962.

Figure 7 : Major Rivers of Nepal

            Besides the projects listed above, India was primarily involved in irrigation and power generation of water from the country¡¯s major rivers. All of these rivers originate in the Himalayas, and thus all flow into India. Thus, the Indian projects in Nepal involved division of benefits between the two. In the Kosi agreement of 1954, in return for building a dam on Nepalese territory that would principally benefit India, Nepal could only use only enough water to irrigate only 33,000 acres, together with a 9000 kW power plant (55). This caused outrage in opposition circles in Katmandu. This agreement was still regarded a sellout after India allowed more water enough to irrigate additional 180,000 acres. In another deal over the Gandaki River in 1959, Nepal was to receive water for up to 343,000 acres and a 10,000 kW power station while India used water for up to 5 million acres (56). Therefore, the 1990 plans for schemes on the Karnali and other rivers in the Western Nepal did not get beyond the feasibility-study stage.
            Though India did not participate in World Bank's Nepal Aid Group, it continued assistance, primarily in road construction, irrigation and water supply projects. In 1990, the percentage of Indian aid in Nepal was only 6.5 percent (57), but as with United States' case, this was due to the increase of total aid granted to Nepal, not due to the reduction of Indian aid itself.


IV.2.c) China and the Soviet Union
            China's objective was to win some influence without provoking India. Thus, China's aid was rather less than India's and this was explicitly explained by Zhou Enlai to B. P. Koirala in 1960. China's aid program started in 1956, when the pro-Chinese Tanka Prasad Acharya was prime minister. China gave an initial gift of US $ 4.2 million in cash and $ 8.4 million in credit for Chinese goods (58). The credit was rarely used because no other country would send technicians to construct a factory from Chinese aid. The cash was used partly to pay for Nepal's portion in American aid projects and partly in an abortive attempt to prop up the Nepalese rupee. China built a shoe factory, and in the 1980s, a paper mill and a sugar factory. China also assisted road-building, including the road to the Tibetan border, which had more strategic and political notion than economic purposes. Although India and the US blocked China from constructing a part of the East-West Highway in 1964, China made many contributions in the Katmandu Valley, including a ring-road and a trolley bus system connection Katmandu with Bhaktapur, which is at nine miles east. Chinese aid peaked in 1977 with 28 percent of total bilateral aid (59), although it was still slightly lower than that of the US and India, and declined ever since. However, Chinese firms bid successfully for projects within Nepal and were allowed to work in the Tarai, which fueled the tension between India and Nepal that led to the fall of the Panchayat System.
            The objective of Soviet Union's aid, like that of China, was to prevent influence of China and the US from Nepal. Soviet Union started aiding Nepal in 1959, a year after Mahendra's visit. Major projected included the Birganj Sugar and Agricultural Tools Factories, the Janakpur Cigarette Factory and a hospital in Katmandu. Also, Soviet Union constructed a part of the East-West Highway through the Tarai, when the US and India stopped construction for it was not cost-effective. Soviet aid reached the maximum in 1962 with 23.6 percent, but ceased after completion of the road project in 1972 (60). Soviet projects were restarted in 1978, but remained below 3 percent of total individual aid. From the 1970s, the Soviet Union developed a close security relationship with India, and stood behind India without granting much aid to Nepal. A program lasted after the fall of the Soviet Union in 1991: provision of scholarship to Nepalese students for higher education. From 1970s, sixty to sixty-five students were accepted annually, and by 1990, over 2000 Nepalese benefited from the program.


IV.2.d) Other Individual Donors
            From the 1950s, aid was provided by countries other than the US, India, China, and the Soviet Union. The United Kingdom, Australia, New Zealand, Israel, and Switzerland, to a lesser extent, participated in many development programs within Nepal in the 1950s. The Swiss program was of small scale, but nevertheless successful. Switzerland established plants for the production of cheese from yak milk, built suspension bridges, and ran a demonstration farm in the Dolakha District. Israel assisted the Nepali Congress government, set up the Nepal Construction company, and designed a program for the resettlement of hill farmers in Tarai.
            Aid from other countries greatly increased from the 1970s, to the extent that the aid from the US, India, China, and the Soviet Union became a relatively small proportion. In the 1980s, Japan was the largest donor, accounting for more than one-third of aid (61). Second to Japan was the Federal Republic of Germany (West Germany). The Japanese program began soon after an embassy was established in Katmandu in 1968. Japan assisted rural water-supply projects, medical services, agricultural development, hydro-electric and other infrastructure schemes, and forest conservation. The Scandinavian countries also became major donors from the mid-1960s, and Norway supported hydro-electric development at Butwal. Britain provided aid in educational sector, including the project of building a 'Nepalese Eton' north of Katmandu. British program also included a unique program on the resettlement of former Gurkha soldiers. The British army had a brigade of Gurkhas, which consisted of 10,000 men in 1947 and was reduced to 7400 in 1990, and further reduction to 2500 was planned (62). This British program was a compensation of the reduction of the size of the brigade of Gurkhas, and also served as the base for the extension workers introducing new crops and techniques. Nevertheless, by 1990, around 21,000 retired servicemen were receiving pensions from Britain, and this, although small in British standards, contributed to the Nepalese economy. Other Western countries and official development assistance and bilateral commitments for the 1980-87 period totaled US $ 1.8 billion (63). The Organization of Petroleum Exporting Countries provided US $ 30 million in bilateral aid from 1979 to 1989 (64). Communist countries provided US $ 273 million in aid from 1970 to 1988 (65).


IV.2.e) Multinational Organizations
            International agencies were involved in Nepal from as early as 1952. In 1952, Nepal joined the Colombo Plan for Cooperative, Economic, and Social Development in Asia and the Pacific, and was granted scholarships from many countries. Also, during the 1950s, the World Health Organization started its malaria-eradication program in the Tarai, which was plagued by malaria, a fact which hampered further growth. Since the 1950s, a number of non-governmental organizations were working inside Nepal Catholic orders started to run schools in Katmandu since the early 1950s. On March 1954, United Mission to Nepal (UMN), an international and interdenominational coalition of protestant church groups, was founded (66). At first, UMN started to provide health services, and expanded its activities into community health services, agriculture, education, and others.
            It was in the 1980s that these multilateral organizations started to become important agents in Nepal and even outdo the individual countries. By 1987, the Nepal Aid Group under the World Bank was consisted of sixteen countries and six international organizations (67). During the 80s, many countries and organizations preferred co-operation with the NGOs rather than with the government, since the NGOs had more flexibility. A plethora of organizations and were involved in aids at different levels, but the most important organizations were the major international bodies, especially the World Bank and the International Monetary Fund. These two organizations had the greatest influence over the government policies, and thus should take some responsibility for the failure of the development projects in Nepal.
            Despite these massive amounts of aid, Nepalese government was reluctant to institute reform to facilitate the development. The monarchy depended on the support of the conservatives against the radical intelligentsia represented by the banned political parties. Landholders did not see much incentive in increasing the productivity in their lands or becoming entrepreneurs, and resorted to exploiting the rising scarcity value of land. Much of the bureaucracy sought and exercised patronage. Thus, Nepal tended to simply absorb resources rather than use it to develop the country. The aid's actual role was often just to keep the government running. In 1956, Nepal was rescued by the US $ 4.2 million in cash granted by China. American funds played a similar role after Surbana Shamsher appealed for desperately in 1959. Until the 1970s, the government bureaucracy was rapidly expanded to allow most educated youth to find jobs. However, terminating aid to Nepal and letting the unemployment rise would not be beneficial for Nepal as well.
            The foreign aid providers are not free from the responsibility for the failure of many development programs as well. Until the foundation of Nepal Aid Group, rivalries between donors in same fields hampered efficiency of programs, as explained above in the chapters IV.2.a and IV.2.b. This was partly encouraged by the Nepalese government in the early stages in order to obtain more foreign aids from different donors. More serious problem was that many aid providers had the tendency of putting more emphasis on spending the money itself, rather than on ensuring efficiency and sustainability. This was strengthened when many countries found out that much of their aid funds flowed to the companies at home. Also, difference in the income level of foreign advisors and the locals created resentment towards the development programs. Even the advisors from India and China, which are developing countries, were high-handed to Nepalese. Lastly, aid projects successful at a regional level, were not often of large enough scale to make a difference for Nepalese economy (68).


IV.3) Achievements and Failures
            The economic development from 1951 to 1991 could be regarded as a 'failed development' (69), but the actual results differed among sectors.


IV.3.a) Infrastructure, Communication and Energy

Chart 3 : Development of the Road System from 1950 to 1991 (70)

            Infrastructure is the most visible achievement of development efforts after 1951. In 1950, Nepal was an almost a roadless country with only 276 kilometers (71). By 1991, however, the road system was greatly expanded to 7401 kilometers (72). Twenty-four districts out of seventy-five was still not connected by road and had to be supplied by porters or air (73). Nevertheless, all the major centers of populations were connected by road. Major roads built during the period are as follows:
            Tribhuvan Rajpath, from Katmandu to the Indian border, financed by India
            Biratnagar - Dharan, financed by the United Kingdom
            Hetaura - Narayanghadh, financed by the United States
            Arniko Rajmarg, from Katmandu to the Tibetan border, financed by China
            Prithvi Rajmarg, from Katmandu to Pokhara
            Siddhartha Rajmarg, from Pokhara to the Indian border
            Mahendra Rajmarg (East-West Highway), involved many donors
            These roads not only had economic value, but also enabled Mahendra and Birendra to send troops from point to point, and thus had strategic value as well. In late 1950s, Mahendra was not able to suppress the Congress insurgency, so the infrastructure project was given the first priority. Although the construction of these roads was clearly essential, these roads were not used as much as expected. Even on the Tribhuvan Rajpath, the busiest road in Nepal, only 1600 vehicles used it everyday in 1990 (74). In the Swiss-built Lamasangu-Jiri road, only twenty to thirty vehicles used it everyday (75). Therefore, though communities all over the hills demanded access roads which would be feeder roads to the Rajmarg, the cost-effectiveness was often questioned. A solution was construction of green roads, which relied on local labor and thus required about one-fifth of the cost.

Figure 8 : Major Roads of Nepal

            Three other transportation systems complemented the road system. The first was the railroad system. In the 1951, two stretches of railway line were in operation: Raxaul-Birganj and Jaynagar-Janakpur. The former was reduced when Tribhuvan Rajpath was completed. The Nepalese lines had a different gauge from the Indian lines, so good had to be unloaded at the border and be reloaded on a new car, decreasing the overall efficiency of railway. The second was the ropeway, connecting Katmandu with the edge of the Tarai. It was originally built in 1925 by Ranas, and was replaced by a new American built on in 1964. However, the ropeway became an unreliable method for private traders due to government mismanagement. The third, and the most important, was the air travel. India built the Tribhuvan International Airport on the outskirts of Katmandu in the early 1950s, and Indian airlines operated Nepal¡¯s domestic flights. Royal Nepal Airlines Corporation was founded in 1958 and took over. By 1990, Royal Nepal Airlines Corporation was carrying 600,000 passengers annually, with international flights to major South Asian cities, Europe, South-east Asia, mainland China and Hongkong, and domestic services to forty-two airports (76). For those who could afford air travel, Nepal became much smaller.
            As with Infrastructure, communication services were greatly expanded as well. The postal service was available to a small population in 1951, and was expanded to cover most of the population. There were only 25 telephone lines in 1951, and in 1989 there were 44,514 lines (77). Radio Nepal started broadcasting in 1951, and in 1991, there were 600,000 receivers, 1 per 32 persons (78). Nepal Television launched in 1985 with French aid, and in 1989 there were 35,100 receivers, 1 per 539 persons (79). By 1990, satellite dishes and video rental services were available.
            Some major tributaries of the Ganges river flows from Nepal to India, and harnessing this hydro-electric potential became a controversy. The original idea was produce large amount of energy to export to India, as well as build large dams to control the floods downstream. The arguments on who should build the dams that would benefit both Nepal and India. However, amidst the disagreements, a number of major projects were completed to supply the needs of the urban population. By 1990 power generation capacity reached over 890 TW (80) from only 1.1 MW in 1951 (81).


IV.3.b) Birth Control
            Due to improvement in public health, population growth was accelerated. The government tried to curb this by providing family planning service. The service was founded in 1965, but reached only a limited success, and natural increase rate in 1988 was 24.7, much higher than the world average of 17.2 (82). The population more than doubled from 1951 to 1991. Family planning posters were prominently displayed in towns, but family planning itself was hampered by lack of information, the inadequate provision of clinics and a cultural gulf between the family planning staff and the villagers. Those who actually started using contraception usually had four or more children already.

Chart 4 : Population Growth 1951 to 1991 (83)

IV.3.c) Agriculture and Forest Conservation
            Agriculture dominated the economy. In the late 1980s, it was the livelihood for more than 90 percent of the population, although only approximately 20 percent of the total land area was cultivable, and accounted for, on average, about 60 percent of the GDP and approximately 75 percent of exports (84). From the Fifth Five-Year Plan (1975-80), agriculture has been given top priority because economic growth was dependent on increasing the productivity of existing crops and diversifying the agricultural base for use as industrial inputs.
            Trying to increase agricultural production and diversify the agricultural base, the government focused on irrigation, used of fertilizers and insecticides, introduced new implements and new seeds of high-yield varieties, and provided of credit. These inputs were not distributed well, inhibiting progress. Ecological imbalance resulting from deforestation also prevented progress. Using modern technology to achieve a healthy growth was also a difficult task. Producing cash crops both for food and for industrial inputs were conflicting goals and therefore problematic as well. These factors, combined with weather conditions, caused the production of crops to fluctuate widely. The agricultural production grew at an average annual rate of 2.4 percent from 1974 to 1989, but it was slower than the population growth, which increased at an average annual rate of 2.6 percent over the same period (85). Furthermore, food grain production grew at an annual average growth rate of only 1.2 percent during the same period (86).

Chart 5 : Growth of Agricultural Production from 1962 to 1991 (87)

            Land holding structure was also another key problem. During the 1950s and early 1960s, many peasants were paying up to 80 percent of their crop as rent. Since the benefits of any improvements made on productivity would be going mostly to the landlords, the tenants were reluctant to make improvements, and the content Landlords had no incentives as well. Thus the slogan 'land to the tiller' was not only taken up by Communists but also many political parties and more importantly by American officials. The United States believed that land reforms were not only desirable in principle but also able to deprive the Communists from using their main weapon. Land reform efforts began with the enactment of the Land and Cultivation Record Compilation Act of 1956 and continued with the Lands Act of 1957 when the government began to compile tenants' records. These acts did not improve the lot of the small farmer, and further efforts were made. The Agricultural Reorganization Act of 1963, and the Land Reform Act of 1964, emphasized security for tenant farmers and imposed ceiling on landholdings. However, there were loopholes in the acts which allowed largelandholders to control most of the lands. In protecting the rights of tenant farmers there was some success, but not much was achieved in land redistribution. In 1990, average landholdings remained small.

Chart 6 : Groth of the Production of Individual Crops, from 1962 to 1991 (88)

            Despite these impediments, there were some successes. Fertile lands in the Tarai Region and diligent peasants in the Hill Region provided greater supplies of food staples, increasing the daily caloric intake of the population to 2,208 calories per capita in 1988-90 (89) from about 1,900 per capita in 1965 (90). Moreover, areas with access to irrigation facilities increased from approximately 6,200 hectares in 1956 to nearly 583,000 hectares by 1990 (91).
            The most important food crop, as many other South Asian countries, was rice. In 1966 total rice production amounted to a little more than 1 million tons (92); by 1991 more than 3 million tons were produced (93). Rice production fluctuated often due to changes in rainfall; overall, however, following the introduction of new cultivation techniques as well as increases in cultivated land, rice production had increased. By 1988 approximately 3.9 million hectares of land were used for the cultivation of rice (94). In 1966 approximately 500,000 tons of corn, the second major cereal crop, were produced. By 1991 corn production increased to over 1 million tons (95). Other food crops included wheat, millet, and barley, but their contribution to the agricultural sector was comparatively small. In the early 1970s the production of cash crops, used as input to new industries, was increased. Sugarcane and tobacco production also considerably increased from the 1970s to the l980s. Potatoes and oilseed had shown moderate growth in production since 1980. In the north on the slopes of the Himalayas medicinal herbs were grown, but increases in production were limited by continued environmental degradation. Production of milk, meat, and fruit had improved but as of the late 1980s still had not reached a point where nutritionally balanced food was available to most people.
            One of the hopeful conclusions that could be drawn from assessing the agricultural development in 1951-91 is that Malthusian catastrophe, which some forecasted, was avoided. Production increased more rapidly during the 1980s. Agricultural extension services tended to aid the relatively well off, but by the end of the period new major crops were accepted across the whole country. Out-migration and remittances from labor overseas provided a breathing space for Nepal and there is still room for increasing productivity, especially in the Tarai.
            Some of increase of total agricultural production was due to increased arable land, most of which were created by deforestation; from 1950 to 1980, Nepal lost half of its forest cover. By 1988 forests covered only about 30 percent of the land area (96). Deforestation was typical of much of the country and due to increased demands for grazing land, farmland, and fodder as the animal and human populations grew. Furthermore, firewood was the principal source of most of the population's energy needs. All these factors exacerbated deforestation. Fuel wood needs mainly resulted from the lack of alternative sources of energy. This fact was particularly evident during the 1989 trade and transit deadlock with India; the dispute resulted in a shortage of domestic cooking fuel. Because kerosene was difficult to obtain during this period, the demand for fuel wood rose sharply in the Kathmandu Valley, and fuel wood consumption increased by an estimated 415 percent (97).
            Government efforts to stop deforestation date back the 1950s. In 1951, most of the forests were either private property or under various systems of local management. By 1957, most of the forests were brought under central control. This was strengthened by the Congress government in 1959-60, and specially protected national parks were set up. However, individuals were either unaware of the change or quick to change the forests into agricultural land. Over the long term, central management proved unsatisfactory. There were conflicts between government agencies responsible for timber extraction and for conservation, but the Forestry department was often the weaker counterpart. Moreover, timber was sold cheaply by the government, further exacerbating the condition. In the late 1970s, the government tried to solve the problem by involving local Panchayat. However, this proved unsatisfactory, and the focus was shifted to smaller 'user groups' and to the encouragement of those 'traditional' management systems still functioning.
            This new solution had possible flaws as well. The 'user groups' might be captured by the local elite. Moreover, landless migrants from the Hills pressed for deforestation in the Tarai. However, direct participation investment in forests by local people did achieve a better balance between the needs for conservation and for access to forest products (98). Another solution to the increasing pressure on the land was providing more non-agricultural employment.


IV.3.d) Industry
            Obstacles to the rapid industrialization hoped for were numerous. To begin with, as in all agrarian societies, land ownership was the preferred store of wealth and people were used to using foreign consumer goods. Ranas invested in India as an insurance against the political instability in Nepal, and when political upheavals caused the collapse of the Nepalese industry, Nepalese elite's wariness of investing in industry was reinforced.
            Mawari businessmen orginally from Calcutta were instrumental in the limited industrial development in 1951-90. Their role was in some ways similar to that of Jews in Central and Eastern Europe and Chinese in South-east Asia. They often worked with members of the Nepalese political elite, who welcomed them not only for their business acumen but also for their status as outsiders. Being outsiders, Mawaris did not possess much political threat. Other communities were active as entrepreneurs as well. One of these was the Newars, who dominated the commercial activity of much of the country since unification. Another was the community of Tibetan refugees, who emerged as the pioneers of the carpet industry which became important in the later period. Thalakis in the northern Gandaki Valley was involved in a range of activities including trading and construction industry.
            Government attempts at assisting the development of private industries started in 1951, when Companies Act, which authorized the establishment of private limited companies, was promulgated. A 1957 statement of industrial policy welcomed domestic and foreign investment (99). After the royal coup, the Industrial Enterprises Act in 1961 offered facilities such as ten-year initial tax holiday. Improved tax and customs duty concessions were mad in the 1981 act. In 1962 government agreed with India's leading business the (Marwari) Birla Group for co-operation. Industrial estates were established in Balaju and Hetaura, and importing and exporting was made easier in 1966 by an agreement allowing Nepalese goods in transit exemption from Indian customs duties.
            Nevertheless problems existed in the private sector. Many businesses needed to import raw materials, but acquiring the licenses for this was quite difficult, thought the government policy was liberal in policy. Without special political connections, entrepreneurs often had to buy materials at a higher price from the black market. Growing shortage of foreign exchange also hampered growth. Bureaucratic regulations supposed to prevent abuses, which was actually prevalent, punished the honest as well as the dishonest and increased opportunity for corruption. Obtaining finance and labor was also difficult. The stock market was poorly developed, and in April 1990, only thirty-nine companies were listed on the Nepal Stock Exchange (until 1993 under the name of Securities Exchange Center) (100). Loans from Nepalese banks had a very high interest rate, with a 6 to 10 percent difference between borrowing and lending rates. Getting loans from Nepal Industrial Development Corporation often required bribery. Moreover, skilled engineering personnel were in shortage, with only 4800 available in 1985-90 while the required number was estimated 7800 (101).
            These factors resulted in the slow growth of private industry, which led to the establishment of many state enterprises. While there was only eight in 1961, in 1988-9, there were sixty-four state enterprises (102). Some of these corporations, for example the Janakpur Cigarette Factory, the Royal Nepal Airlines Corporation, the Nepal Oil Corporation, the Nepal Telecommunication Corporation, and the Electricity Corporation, did operate at a profit. However, overall, the public enterprises operated at a loss and by 1988-9 government subsidies to them equaled 13 percent of the total development budget (103). Privatization became a major issue of industrial policy in 1985-6, which also liberalized and simplified registration formality for the private sector. These were explicit conditions of the World Bank and International Monetary Fund, but the actual implementation was slow and private industrialists still complained that the state enterprises were competing at an unfair advantage with easier access to foreign exchange and other special concessions.

Chart 7 : Structure of the GDP in 1989-1990 (104)

            By the end of Panchayat era, about 10 percent of the country's workforce was employed full- or part-time in industry (105). Enterprises were largely confined to Biraganj-Hetaura-Katmandu area, which contained three-quarters of large scale manufacturing units, and the eastern Tarai. The major manufacturing industries produced jute, sugar, cigarettes, beer, matches, shoes, chemicals, cement, and bricks (106). Agro-industry of different kinds were also very important. Over half of the industrial units in the census were grain mills, thought these provided only 10 percent of the industrial employment. The processing of vegetables and fruit also clearly had great potential, but there were unfortunately still inadequate arrangements for getting such produce to the factories before it rotted.


IV.3.e) Notable Industries
            The most successful industry during the Panchayat era was carpet and garment industry (107). As a result of relief effort for Tibetan refugees by the Red Cross in the 1960s, Tibetan-style carpet industry began in Nepal. Switzerland initially subsidized the export to Western Europe, and the industry was boosted by the vogue in the West for Tibetan culture. At first, wool was imported from Tibet, but later was supplemented by imports from Australia and New Zealand. By 1985, the industry was Nepal's principal source of foreign exchange, and it is estimated that people involved in the business, either full- or part-time, amounted to 1 million in 1986-7. There were some problems of pollution and child labor. 30 percent of the work force of this industry was comprised of children (108). The export figures were inflated due to Indian carpets smuggled into Nepal to be re-exported. Moreover, there was competition with the relatively high-quality Indian carpets. Nevertheless, this example serves as an example of what might be achieved with the right combination of local self-help and foreign technical assistance.
            In 1983, the United States reduced the quotas for import from India; in response, many Indian entrepreneurs moved their factories into Nepal, greatly boosting the Nepalese ready-made garment industry. These Indian entrepreneurs brought Indian workers with them into Katmandu, which caused ethnic tension in Katmandu. This led to Nepal limiting the number of work permit of Indian workers. This was one of the reasons that caused the Indo-Nepalese crisis in 1989. The United States imposed quotas on Nepal in 1985, dealing a severe blow to the industry. The situation worsened due to the government taxing rayon imports from India, which was needed as raw material. The industry later recovered, and in the final year of Panchayat regime, carpet and garment industry accounted for 81 percent of foreign exchange earnings and 71 percent of exports (109). This figure would be reduced if the goods smuggled into Nepal for re-exporting is not regarded. Nevertheless, the two sectors are a vital prop to the Nepalese economy.

Figure 9 : Geographic Regions of Nepal

            Another notable industry is the tourist industry. Nepal, with the Pashupatinath temple and many other shrines in the Katmandu Valley, has long been the designation of many Indian pilgrims. From the 1950s, it became an increasingly attractive destination for European and North American tourists. Thomas Cook organized its first group tour to Nepal in 1955 and the annual number of visitors grew from 4000 per annum in 1960 to 100,000 in 1976 and 250,000 in the 1990s (110). During the 1950s, the typical tourists in Nepal were members of the upper class on a 'grand tour', but this changed drastically when Nepal became a mecca for Western Hippies, or as they preferred to call themselves, 'world travelers'. The Hippie era ended in 1975, but Nepal was still the destination for low budget travelers. In 1991, receipts from visitors reached US $ 126 million (111). Most of this money was spent in the Katmandu Valley, where the historic cities are located. Casino Nepal was also located in the Katmandu Valley. There were also growing number of adventure tourists seeking activities like trekking and white water rafting in the Himalayas.
            However, tourism industry had its problems as well. There was overprovision of hotels in Katmandu due to unplanned growth, according to government statistics, between 1985 and 1988 the number of hotel rooms increased from under 22,000 to more than 27,000 (112). Much of the foreign exchange earned flowed out of Nepal to import the items that tourists needed for their comfort. Also, the influx of tourist could inflate the prices of consumer goods and lessen the buying power of the locals. Moreover, popular trekking routes were polluted by tourists, to the extent that it was described as the 'toilet-paper trail' (113). Nevertheless, the money spent by tourists in Nepal did contribute to raising the living standard of a substantial number of Nepalese.


IV.4) Foreign Trade

Chart 8 : Import and Export Figures from 1945 to 1991 (114)

            Nepal's traditional trade was overwhelmingly with India. In the 1950s, over 90 percent of its foreign trade was conducted with India (115). Goods moved by land through India for at least a few hundred kilometers, and a good relationship with India was crucial for the smooth transportation of goods to and from foreign countries. Most of Nepal's agricultural exports went to India and most of its basic consumer goods were imported from India. India also supplied coal, cement, machines, trucks, and spare parts which were needed by Nepal's industries. In 1966 it was agreed that Nepalese goods in transit should be exempted from Indian customs duty, Nepalese companies allowed their own warehouse space in Calcutta, and goods made from Nepalese raw materials were to be allowed duty-free access to the Indian market (116). The 1960 trade and transit treaty allowed Nepal to set its own external tariffs. However, disagreement over the exact nature of the arrangements continued, leading to the March 1989 impasse in negotiations for trade and transit treaties with India, which severely damaged Nepalese economy and eventually led to the downfall of the royal regime. Only two trade and transit points remained open, both in eastern Nepal. Nepal's exports to India were subjected to high tariffs, and the cost of imports from India was also increased. The dispute was not solved until June 1990 when Nepal and India agreed to restore economic relations to that of April 1, 1987.

Chart 9 : Economic Dependency on India, 1960-1991 (117)

            Though India often used trade as a political weapon, there was also a genuine conflict over economic interest. India already had a substantial industrial sector at the time of its independence, and wanted to protect its domestic market from exports and promote import substitution. Although Nepal hoped to develop its own industry, there was no prospect of becoming as self-reliant as India tried to become, and thus Nepal maintained a more liberal policy. Consequently, businessmen operating in Nepal, who were often Indian citizens or at least of recent Indian origin, were tempted to import goods from third countries to re-export into India either illegally or under special arrangements India granted for Nepalese products (118). Whether the Nepalese government deliberately connived with this practice is disputable, but this practice of importing from another country for re-export into India was encouraged by the diversification policy.

Chart 10 : Major Trade Partners - Imports, 1990-1991 (119)

            Nepal's efforts of diversifying their import sources and export destinations started in the mid-1960s. During this period, Nepal allowed its jute manufacturers to keep 60 percent of the hard currency earned by exporting to third countries. Concerned of Indian jute flowing into Nepal for re-export, India imposed a surcharge on Nepalese jute products equal to the levy on Indian jute manufacturers. A compromise was made in 1968 to allow Nepal to impose a levy equal to 80 percent of the Indian one and to let Nepalese goods enter India duty-free. Despite this advantage, the production cost of Nepalese goods was higher than India, so Nepalese goods were unable to compete in the Indian market. In 1964, the Bonus Voucher Scheme, which allowed a Nepalese exporter to an overseas country to keep 90 percent of the foreign exchange earned, was introduced. Additionally in 1966, the Gift Parcel Scheme, which allowed businessmen in Nepal to receive packages of consumer goods from Hong Kong or Singapore, was introduced. Some of these gift parcels were smuggled into India, creating tension with India, even though Nepal correctly pointed out that it was mostly Indians who did the smuggling (120).

Chart 11 : Major Trade Partners - Exports, 1990-1991 (121)

            With these incentives granted by the Nepalese government, factories were set up along the Indian border to process imported synthetic fibers and stainless still. The processed product would then be exported to third countries, earning the foreign currency bonus, or into India, where the price of the products could be substantially lowered thanks to concessions offered by the Nepalese government. As a result, Nepal's synthetic fiber output expanded in five years from 5700 to 2,305,000 yards per year (122). India reacted harshly in 1969, and Nepal was allowed to export to the 1967-68 level. Eventually most of the factories closed.
            The drive to diversify import sources and export destinations continued. During the 1970s, the Exporter's Exchange Entitlement Scheme, a modified version of the 1964 Bonus Voucher Scheme, was introduced. This was replaced by an incentive in 1978 by a dual exchange rate. When unified exchange rate was introduced in 1981, the government directly subsidized the exporters. These efforts led to some degree of success. In 1990-91, India was receiving only 32.1 percent of Nepal's total exports and supplying just 22.4 percent of its imports (123). The Federal Republic of Germany became the largest export destination with 35.9 percent of total exports, which was about 7.6 billion Nepalese rupees (124). However, there was much unrecorded export across the border, (125) and when this could be taken into account, the dependency on India would substantially increase. It could be said that for exporters, India would have been a more profitable market compared to the new overseas markets.
            Despite these diversification efforts by the Nepalese government, trade with Nepal's northern neighbor did not increase much. Some grain and dairy products, along with imported Indian items, were sent to Tibet. This was banned later on by Indian pressure. China was concerned with its political control over Tibet, and tried to replace traditional transhumance and local cross-border trade by state-to-state trade. By 1966, much of the private Lhasa-based Nepalese traders were replaced by the state. During the 60s and 70s, some Chinese customer goods were sold in Nepal, but this was mostly intended to meet the local cost of Chinese aid programs. Moreover, trade across the Himalayas was much costly compared to overseas trade through Calcutta. By the end of the Panchayat era, however, prospects for greater trade with China increased when Deng Xiaoping opened China to the outside world. This made India object on security grounds, and India even accused Nepal of allowing more favorable access for some Chinese goods than for Indian ones.
            Yet India remained a significant trade partner, and Nepal continuously lobbied for less stringent regulations on trade. In 1966, it was agreed that Nepalese goods could enter the Indian market duty free. India's Janata government allowed separate trade and transit treaty and reduced the content requirements to 80 percent in 1978. Further negotiations to reduce the requirement to 60 percent were held from 1986. Transit was also a major issue. India originally insisted that Nepalese import and exports allowed duty-free passage through Indian Territory be transported only by railroads. India argued that allowing passage by other methods might be abused and jeopardize Indian security and economy. Though limited use of roads was later granted, but practically this alternative was not quite usable. In response, Mahendra spoke vigorously in favor of the rights of landlocked countries in the United Nations Conference on Trade and Development in Geneva in 1964 and New Delhi in 1968. India responded by placing a semi-blockade on Nepal and even threatened to close the border. Though the Janata government took a softer line in 1978, but a decade later, Rajiv Gandhi's government took a harder line. Though many factors were involved in the 1989 trade and transit impasse, closure of the Indo-Nepal border also closed the fate of the Panchayat System.

V. Social Structure

Chart 12 : Number of Pupils, 1952-1991 (128)

            The government was quite successful in establishing new schools from only 455 primary schools in 1952 (129) to 18,694 primary schools in 1991 (130), but the quality of education did not improve much, especially in the regions far from the Katmandu Valley where the majority of the population lived.
            In 1975 primary education was made free, and the government started to provide school facilities, teachers, and educational materials. Primary schooling, for students from age six to ten, became mandatory. Secondary education began at age eleven and lasted five years, two years in the lower cycle and three years in the higher cycle. In 1984, approximately 52 percent of school-age children were enrolled in schools, with a sex ratio of 7:3 (131). Only 27 percent of the total boys, 9 percent of the total girls of the relevant age-group were enrolled in secondary schools (132). About 72 percent of all students were male (133). The Ministry of Education controlled the finance, administration, staffing, and inspected government schools. It also inspected government-subsidized private schools. By 1991, Nepal had 18,694 primary schools, 6,124 secondary schools (134). There were 74,495 primary and 24,632 secondary school teachers (135). Primary school enrollments totaled 2,884,275 persons; secondary school enrollment figures were 773,808 persons (136). United States models greatly influenced the Nepalese curriculum, and the curriculum was developed with the assist of the United Nations Educational, Scientific, and Cultural Organization. Primary education taught reading, writing, arithmetic, along with instilling discipline and hygiene. Lower-secondary education stressed character formation, a positive attitude toward manual labor, and perseverance. The goal of higher-secondary education was emphasizing manpower requirements and preparing for higher education. National development goals set by the government were integral parts of the curriculum.

Chart 13 : Number of Teachers, 1952-1991 (137)

            In the early 1980s, approximately 60 percent of the primary school teachers and 35 percent of secondary school teachers were untrained, despite the institution of a uniform method of training in 1951 (138). The Institute of Education in the Tribhuvan University was responsible for teacher training programs. From 1976, the institute organized a distance learning program, electronic links between distant locations, for prospective teachers.
            After completing the higher-secondary level of education, students could take the School Leaving Certificate examination, a nationally administered and monitored high-school-matriculation examination. Those who passed this examination were eligible for higher education. Some communities had adult education schools in addition to these primary and secondary schools.

Figure 10 : Education System of Nepal (139)

            At the higher education level, Tribhuvan University, charted in 1959 and named after King Tribhuvan, was the only one doctoral degree-granting institution in Nepal. All public colleges were associated with the Tribhuvan University. Private colleges were able to operate independently, but they were also required to meet the standards set by the Tribhuvan University. The total number of colleges increased significantly, from 8 in 1958 to 132 in 1988 (69 under Tribhuvan University and 63 private colleges) (140). In terms of subjects, these colleges covered a wide range of disciplines, such as social sciences; humanities; commerce (business); physical sciences, including some medical sciences; engineering; education; forestry; law; and Sanskrit. The number of students enrolled in higher education institutions totaled almost 83,000 in 1987; the largest percentage was in humanities and social sciences (40 percent), followed by commerce (31 percent), science and technology (11 percent), and education (6 percent). Approximately 20 percent of the students enrolled in Tribhuvan University were females (141).
            The 1981 census showed that 24 percent of the population was literate; by 1990, the literacy rate was estimated to be 33 percent (142). A big gap existed between male and female literacy rates. In 1981, 37.7 percent of the male population was literate, but only 23.3 percent of the female population was (143). A gulf also existed in literacy rates between rural and urban areas. In rural areas, the literacy rates for males and females were 33 percent and 9 percent, respectively; in urban areas, they were significantly higher, 62 percent and 37 percent, respectively (144). The higher literacy rates in urban areas were could be attributed to a number of factors: the availability of more and better educational opportunities, a greater awareness of the need for education for employment and socioeconomic mobility, and the exodus of educated people from rural to urban areas. In 1990, Nepal launched a twelve-year literacy program targeting 8 million people between the ages of six and forty-five. In 1981, only a little over 4 million people were literate (145).


V.1.b) Problems of Education
            Although the number of student enrolled in schools and the number of schools dramatically increased, there were many problems inherent in the Nepalese education system. To begin with, economy and culture constrained formal schooling. Children generally had to work in the fields and/or at home. Many students began school late, usually at ages nine or ten and more than half of these students left school after only one year of schooling. Educating women was generally regarded unnecessary and thus female enrollment levels were much lower than those of males. The effectiveness of uniform text materials and teacher training was often limited due to Regional variations. Terrain further restricted management and supervision of schools.
            In some cases, discipline was sadly lacking, as witnessed by one foreign researcher during the School Leaving Certificate examination at a high school in Pokhara in 1975: "Examinees from various parts of western Nepal sat shoulder to shoulder in the examination rooms passing answers they received through open windows from youths outside. These well-wishers approached the examinations rooms through a cordon of disinterested police supposedly stationed around the school to protect the integrity of the examination. Nervous and embarrassed proctors tried vainly to maintain an appearance of propriety despite the obvious and open cheating. A teacher informant later explained that Gurkha dropouts from the Indian army had sat as private candidates in the 1966 examination with knives and grenades, and since then no one had dared bother the students from certain schools." (146)
            Though it would be dangerous to state that this level of blatant cheating occurred nationwide, but it was widespread indeed. In some cases the schools decided to tamper with the results of the examinations. However, the more significant was the overall pass rate which was very low despite these malpractices. Failure became the norm in most schools in the rural area.
            The general quality of education was low, compared to Western standards. The Intermediate course in higher education level was roughly equivalent to sixth-form study in the UK and so the Bachelor's degree was of a lower standard than a European or North American first (or bachelor's) degree (147). Even Tribhuvan University, the country's highest educational institute suffered from under funding, compromised examinations and staff absenteeism. Moreover, although English was theoretically the medium of instruction in most its courses, the English standard of students were too low to cope with an advanced level of study. The situation was worsened in 1979 when the New Education System Plan was dissolved and the university was to accept any student who passed the School Leaving Certificate examination. Attempts to provide remedial English classes at the start of courses gained limited success due to the huge size of class. A practical solution was simply to translate the English contents into Nepali. Most university teachers continued to lecture rather than promote interactive study, and many students chose to not attend classes but just read the material before the test. Against this background, many students eagerly sought chances of studying aboard, but this was only possible for students from wealthy families or those lucky enough to win scholarships.
            A good private schooling greatly boosted the chances of succeeding at university. This was often sought in India and one estimate in the early 1990s was that the money leaving the country for this purpose was equivalent to 60 percent of the total national budget for education (148). King Birendra is a prime example of this practice; he studied at St Joseph's College in Darjeeling and later at Eton and Harvard. His son Dipendra serves as another example; he first entered the British run Buddhanilkante School in Katmandu, but he was also sent to Eton. High-quality English education was offered in Nepal since the early 1950s at St Xavier's for boys and St Mary's for girls; the graduates of these institutes stood out in Tribhuvan University, but at the same time created social tension on campus. Thus, education planners made it clear in 1974 that all schools in Nepal use Nepali as their medium of instruction. With the collapse of the New Education System Plan at the end of the decade, the right to teach in English was restored.
            Another problem in the education system was politicization of students. Politics were a significant part of campus life, and students played an important role several times in democratizing the Panchayat System and eventually leading to the fall of the royal regime in 1991. Though majority of students were not political activists, they would stand behind the activist students when a major issue of national importance or an important grievance of the students arose. Frequent protest hampered the learning itself.
            The greatest problem of Nepalese education system, however, was that education greatly heightened the expectations of the students. Those who achieved basic literacy very often set their sights on white-collar employment, which in Nepal normally meant government service (149). That the government expanded its bureaucracy to absorb these students has been discussed in chapter IV. Many of the students who succeeded in passing the School Leaving Certificate examination tended to prefer arts courses, and this led to the general shortages of skilled technical personnel crucial for the development of industry.


V.2) Religion


V.2.a) Hinduism
            Hinduism generally is regarded as the oldest formal religion in the world. It evolved from Vedism, the religion of the Indo-European migrants who settled in the Indus Valley in the last centuries of the 2nd millennium B.C. Unlike other world religions, Hinduism is not a single doctrine, so had no single founder and has never been missionary in orientation. It is believed that the Vedas, the most ancient religious texts which define truth for Hindus, were produced in about 1200 B.C., or even earlier by some accounts; Hindus believe that the texts of the Vedas were received by scholars directly from God and passed on to the next generations by word of mouth.
            Hinduism incorporates all forms of belief and worship without requiring selection or elimination. It is said that no religious idea in India ever dies; the idea is simply combined with new ideas. Hinduism is a very tolerant religion, and a Hindu can believe in a non-Hindu religion still being a Hindu. Hindus believe that highest divine forms complement each other, so few religious ideas are irreconcilable within Hinduism. Moreover, since for Hindus religious truth transcends all verbal definition, there is no set of doctrines. A Hindu does not need any systematic formal creed in order to practice his or her religion; Complying with the customs of their family and social groups is the norm.
            One key concept in Hinduism is that of dharma, which literally means 'that which upholds or supports'. It is the religious and moral law governing the individual conduct; it is to be followed according to one's class, status, and station in life. Thus, although not essential to Hindu philosophy, the caste system has become an integral part of its social or dharmic expression. Under this system, each person is born into a particular caste, whose traditional occupation, although members do not necessarily practice it, is graded according to the degree of purity and impurity inherent in it.
            Other basic ideas common to all Hindus is the idea of Brahman. Hindus believe in an uncreated, eternal, infinite, transcendent, and all-embracing principle, which "comprising in itself being and non-being," is the sole reality, the ultimate cause and foundation, source and goal of all existence (150). It may also be conceived as a high deity, usually Vishnu or Siva. This fundamental belief has remained unchanging for more than 3 millenniums and is a central focus of Hindu's religious life.
            Karma is the influence of an individual's past actions on his future lives, or reincarnations. This reflects the Hindu belief of samsara, the transmigration of souls. This is regarded as an indisputable law of nature. In a lifetime people build up karma, both good and bad, based on their actions within that lifetime. This karma automatically affects their future lives and existences. People must take responsibility for their actions either within this life time or the next. Through the course of cycle of life, individuals can perfect themselves until they reach the eminence of the god Brahma himself and be absorbed in the greater being; this is known as moksha. Else, individuals can degrade themselves and be reborn as animals.
            Veneration for cows has become intimately associated with all orthodox Hindu sects. Cows are regarded as the symbol of motherhood and fruitfulness in Hinduism. Thus the killing of a cow, even accidentally, is regarded as one of the most serious of religious transgressions.
            Hinduism is polytheistic, incorporating many gods and goddesses with different functions and powers. Gods and goddesses are considered merely different manifestations or aspects of a single underlying divinity. This single divinity is expressed as a Hindu trinity or Trimurti, comprising the religion's three major gods: Brahma, Vishnu, and Shiva, personifying creation, preservation, and destruction, respectively. However, although these three deities are assigned positions of special importance, many Hindus do not worship these three gods. Rather, they worship one or more of the innumerable other Hindu gods (151).
            Ironically, Brahma has had no major cult since ancient times, since his role of creation is regarded done. Vishnu and Shiva, or some of their numerous avatars (incarnations), are most widely followed. Buddha is regarded as the ninth avatar of Vishnu. Some Hindus identify Christ as the tenth avatar; others regard Kalki as the final avatar who is yet to come (152). These avatars are believed to descend upon earth to restore peace, order, and justice, or to save humanity from injustice. The Mahabharata describes the great civil war between the Pandavas (the good) and the Kauravas (the bad), which are two factions of the same clan. It is believed that the war was created by Krishna, who is perhaps the flashiest and craftiest avatar of Vishnu. Krishna is believed to be motivated to restore justice, the good over the bad.


V.2.b) Buddhism
            Buddhism was founded by Siddhartha Gautama, a Kshatriya caste prince of the Sakya clan; he was born in Lumbini, a city in the central Tarai Region (located within the Rupandehi district in the Lumbini zone), about 563 B.C. His father was the ruler of a minor principality in the area. Siddhartha Gautama renounced worldly life at about the age of twenty-nine and spent the next six years in meditation. At the end of this period of meditation, he attained enlightenment; thereafter, known as the Buddha, or the Enlightened One, he devoted the rest of his life to preaching his doctrine.
            Born a Hindu and educated in the Hindu tradition, Buddha accepted or reinterpreted the basic concepts of Hinduism, such as dharma, karma, samsara, and moksha, but he did not preach of specific metaphysical theories. He said such theories were essentially irrelevant to his teachings and could only distract attention from them (153). Rather, Buddha was more interested in restoring a concern with morality to religious life, which he believed had become stifled in details of ritual, external observances, and legalisms.

Figure 11 : Location of Lumbini

            The summary of the Buddha's analysis of the human situation and his solution for the problems of life is the Four Noble Truths. The first truth is that life, in an ever-changing world, is inherently imperfect and sorrowful, and that misery is a quality permeating all experience, instead of being merely a result of occasional frustration of desire or misfortune. The second truth is that desire causes sorrow. The third truth is that eliminating desire would end the sorrow. The fourth truth is that to eliminate desire the Eightfold Path should be followed. It rejoins right or perfect understanding, aspiration, speech, action, livelihood, effort, thought, and contemplation (154).


V.2.c) Religion and Society
            Religion is an integral part of Nepalese life and society. In the early 1990s, Nepal was the only constitutionally declared Hindu state in the world (155). However, there was a great deal of intermingling of Hindu and Buddhist beliefs to the extent that many of the people regarded as Hindus in Nepal could, with as much justification, be called Buddhists. According to Hutt,
There is no ugly communalism in Nepal: The Hindu and the Buddhists play the perfect gentlemen. One can see the hear-warming scene of the Buddhist watching arati at Pashupatinath and the Hindu kneeling at Swayambhu. While the din of cliches is heard in the Indo-Gangetic plain, till now Nepal has produced no professional brainwasher (156).

Chart 14 : Religious Affiliation of the Nepalese in 1991 (157)

            Because of such dual faith practices, or mutual respect, the differences between Hindus and Buddhists have been in general very subtle. However, in 1991, approximately 89.5 percent of the Nepalese people identified themselves as Hindus. Buddhists and Muslims comprised only 5.3 and 2.7 percent, respectively (158). The remainder followed other religions, including Christianity. Another estimate shows that in 1991, 86.2 percent of the population was Hindus (159). According to Library of Congress Country Studies: Nepal, Hindus were very widespread in the country, accounting for at least 87 percent of the population in every region (160). Buddhists were largely concentrated on the eastern hills, the Katmandu Valley, and the central Tarai in each area about 10 percent of the people were Buddhist (161). Certain ethnic groups preferred Buddhism. These groups included the Newar, Tibeto-Nepalese, Gurung, Limbu, Bhote, and Thakali groups.
            For Nepal is a Hindu stat and two very similar religions, Hinduism and Buddhism, are dominant in the country, some attribute the root of Nepal's problems to an idea common in both religions: karma. They interpret the Nepalese's acceptance of karma as fatalism, and that the Nepalese accept their living standards as their fate created by the deeds of their past lives, and not do much to improve it. This analysis is partly wrong and partly correct. On one side, the political awareness of and the participation of the public was quite high, which denotes that Nepalese people did try to enhance their lives. Moreover, although the quality was not so high, people were willing to educate themselves. It would be a misjudgment to state that the Nepalese were fatalistic. One the other side, the higher castes, the Brahmans, some higher Kshatriyas, and Newars in the Katmandu Valley, believed that their better-off status was due to their good deeds in the past life and did not care much of the lives of those in the lower social hierarchy. This would be explained in detail in the next chapter.


V.3) Caste and Ethnicity


V.3.a) Ethnicity
            Nepalese society was ethnically diverse and complex in the early 1990s, including the influence of Indian and Tibetan. Expect for the people of Indian birth or ancestry, who are mostly concentrated in Tarai near the Indo-Nepalese border, the varied ethnic groups had evolved into distinct patterns over time.
            Political scientists Joshi and Rose broadly classify the Nepalese population into three major ethnic groups in terms of their origin: Indo-Nepalese, Tibeto-Nepalese, and indigenous Nepalese (162). The first group inhabited the more fertile lower hills, river valleys, and Tarai plains. The second major group, consisted of communities of Tibeto-Nepalese origin, occupied the higher hills from the west to the east. The third group, much smaller and comprised a number of tribal communities, such as the Tharus of the Tarai; they may be remnants of indigenous communities who lived in Nepal before Indo-Nepalese and Tibeto-Nepalese immigrants came.

Figure 12 : Ethnic/Caste Composition of Nepal (163)

            Although Indo-Nepalese migrants were the last to migrate to Nepal, they have come to dominate the country demographically, socially, politically and economically. The Indo-Nepalese migrants achieved early dominance over the already existing population. Consequently, their overall dominance has been tremendously significant in terms of ethnic power structure.
            Within the Indo-Nepalese group, there are at least two distinct groups. The first group is those who fled India and moved to the safe haven of the Nepal hills in the beginning of the Muslim invasions of northern India several hundred years ago. The hills were occupied by a group of Indian origin primarily composed of descendants of high-caste Hindu families. According to Joshi and Rose, "These families, mostly of Brahman and Kshatriya status, have spread through the whole of Nepal with the exception of the areas immediately adjacent to the northern border. They usually constitute a significant portion of the local elites and are frequently the largest landowners in an area." (164) With the nation's royal family in its apex, this segment of the Indo-Nepalese population has played the most dominant role in the country. Other ethnic groups, including those of Indian origin that settled in the Tarai, have been peripheral to the hill group in the political power structure.
            The second group of Indo-Nepalese migrants is the inhabitants of the Tarai. Many of this group migrated relatively recent and were encouraged by the Nepalese government or its agents to move into the Tarai for settlement during the nineteenth and early twentieth centuries. In the early 1990s, most of this group was landless tenants and peasants from northern India's border states of Bihar and Bengal.
            The first group of Indo-Nepalese migrants, in the early 1990s, made up more than 50 percent of the total population. They are distinguished by their language, religion, social organization, and physical appearance. In the Nepalese environment, however, all of these features have been modified. These groups, including several castes of Brahmans, the high-ranking Thakuri and Chetri castes, and an untouchable caste, generally are classified as Pahari, or Parbatiya. However, except for the Tarai, throughout most parts of Nepal the term Pahari has only a limited use because the Paharis generally are known by their individual caste names. Both Nepali (165), the native tongue of the Paharis and the national language of Nepal, and Hindi are derived from Sanskrit; they are closely related to each other, but are not identical. The Hinduism of the Pahari has been affected by influences of Buddhism and indigenous folk belief. Physically, many of the Paharis were racially intermixted with the Mongoloid migrants of the region.
            In the foothills of the Himalayas, the Bhotiya groups inhabiting the region, including the Sherpas who have attracted the most attention in the mountaineering world, have developed regional distinctions among themselves, although clearly related physically as well as culturally to the Tibetans. The term Bhotiya literally means inhabitant of Bhot, a Sanskrit term for the trans-Himalayan region of Nepal, or the Tibetan region (166). However, Bhotiya can also be a generic term, often applied to people of Tibetan culture or Mongoloid phenotype. The Paharis and the Newars often use the term with a pejorative connotation, and the term could be applied to any non-Hindu of Mongoloid appearance.
            The complex terrain of Nepal also affected the geographic distribution and interaction among various ethnic groups. Within the general latitudinal sorting of Indo-Nepalese groups in the lower hills and Tibeto-Nepalese groups in the higher hills and mountains, there was a longitudinal pattern, in which various ethnic populations were concentrated in specific geographic pockets. The deeply cut valleys and high ridges divided the general ethnic groups into many small, relatively isolated, and self-contained communities. This pattern was especially prominent among the Tibeto-Nepalese group. For example, the Bhotiya group was found in the far north, trans-Himalayan section of the Mountain Region, close to the Tibetan border. The Sherpas, a subgroup within the Bhotiya, were concentrated in the northeast, around the Mount Everest area; they are the majority in the northern Solukhumbu district. Other Tibeto-Nepalese ethnic groups were located below the Bhotiya groups; the Gurung in the west-central hills, the Tamang in the central hills close to Katmandu Valley, and Rai in the east-central hills east of the Kathmandu Valley. The Magar group was much more widely distributed than the Gurung, Tamang, and Rai and was found largely in the central hills. The Limbu people were located farther east of Rai domains. The Tharu group settled in the Tarai, and the Paharis were scattered throughout Nepal. Newars were largely concentrated in the Kathmandu Valley. However, because they migrated as traders and merchants, they also were found in virtually all the market centers, especially in the hills, and even in Lhasa in Tibet.
            This geographically concentrated ethnic distribution pattern generally remained in effect in the early 1990s, but a trend toward relocating ethnic populations was arising. For example, a large number of Bhotiyas (167) in the central section of the Mountain region, Tamangs, and Sherpas have moved into the Kathmandu Valley. Likewise, Thakalis from the Mustang District moved to Pokhara, Butwal, and Siddhartha Nagar. Gurungs, Magars, and Rais have also become more dispersed.
            Most of the Indo-Nepalese peoples, both Paharis and Tarai dwellers (168), were primarily agriculturalists, although the majority also relied on other activities to earn additional income. For domestic purposes, they generally raised some farm animals, particularly water buffalo, cows, goats, and sheep. The Paharis traditionally occupied the vast majority of civil service positions. Thus, they have dominated and controled Nepal's bureaucracy to their advantage. Until the 1980s, all the prime ministers were Paharis (169). Despite some loosening of the total Pahari domination of the bureaucracy in recent years, a 1991 newspaper report, summarized in the Nepal Press Digest, revealed that 80 percent of the posts in the civil service, the army, and the police still were held by the Brahmans and Chetris of the hills, who comprised less than 50 percent of the population; 13 percent were held by Kathmandu Valley Newars, whose share of the total population was merely 3 percent. The report added that even in 1991, the eleven-member Council of Ministers in 1991 had six Brahmans and three Newars (170). Furthermore, six of the nine-member Constitution Recommendation Commission, which drafted the new constitution in 1990, were hill Brahmans (171). Although the number of Newars holding government jobs was increasing, the Newars were traditionally recognized as a merchant and handicraft class, for they historically have been the prime agents of Nepalese culture and art. Since a large number of them also were engaged in agriculture, the Newars can be described as agro-commercialists.
            Most of the Tibeto-Nepalese groups were traditionally considered agro-pastoralists. Because their physical environment offered only limited land and agricultural possibilities, the Bhotiya, who occupied the high mountainous areas, were almost forced to rely more on herding and pastoral activities than on crop farming. To supplement their income and food supply., they also participated in seasonal trading activity. However, those inhabiting the medium and low hills, the Gurung, Magar, Tamang, Rai, and Limbu groups, depended on farming and herding in relatively equal amounts because the environment was relatively more suitable for agriculture. The Gurung, Magar, and Rai historically have supplied the bulk of the famous Gurkha contingents to the British and Indian armies.


V.3.b) Caste System
            The Hindu caste system, modeled after the ancient and orthodox Brahmanic system of the Indian plains, existed as an integral aspect of Nepalese society. Its establishment led to the feudalistic economic structure of Nepal: the high-caste Hindus began to appropriate lands, particularly lowlands that were more easily accessible, cultivatable, and productive. The Indo-Nepalese migrant also introduced private ownership, while Tibetan migrants' system was based on communal ownership. The migrants from the north were later incorporated into the Hindu caste system, and the Paharis, who introduced the system, quickly controlled the positions of power and authority.

Figure 13 : Hindu Caste System

            There is no single, widely acceptable definition for the Nepalese caste system. The Paharis, however, view caste as a multifaceted hierarchy that comprises all members of society, with each individual ranked within the broad, four Hindu class (or Varna) divisions, or within the fifth class of untouchables, the outcastes and the socially polluted. The fourfold caste divisions are Brahman, Kshatriya or Chetri, Vaishya, and Shudra. These Pahari caste divisions are not strictly upheld by the Newars. Rather, they have their own caste hierarchy, which, according to their claim, is parallel in caste divisions to the Pahari Hindu system. In both systems, each caste is ideally an endogamous group in which membership is both hereditary and permanent. The only way to change caste status is to migrate to a new area or marry across the caste line, which can lead to the upgrading or downgrading of caste, depending on the spouse's caste. However, the caste system is very rigid, and inter-caste marriage carries a social stigma, especially when it takes place between two castes at the extreme ends of the social spectrum.
            At the core of the caste structure is a rank order of values bound up in concepts of ritual status, purity, and pollution. Further, caste determines an individual's behavior, obligations, and expectations. In a caste society, all the social, economic, religious, legal, and political activities are prescribed by sanctions that determine and limit access to land, position of political power, and command of human labor. In such a constrictive system, wealth, political power, high rank, and privilege are distributed according to the caste hierarchy, and hereditary occupational specialization is a common feature. Nevertheless, caste is only significant when viewed in a regional context at a particular time. Because of numerous institutional changes over the years and increased dilution or expansion of the caste hierarchy stemming from inter-caste marriages, many poor high-caste and rich low-caste households could be found in the society in 1991 (172).
            Unlike Paharis, especially those in rural areas, who were generally quite conscious of their caste status, Tibeto-Nepalese communities did not usually speak of caste unless they were aware of the Hindu caste status arbitrarily assigned to them. Rather, the Tibeto-Nepalese tended not only to see themselves at a higher level than did the Hindu Pahari and Newar, but also differed as to ranking among themselves. The status of a particular group varied from place to place, depending on its relative demographic size, wealth, and local power.


V.3.c) Social Class and Stratification
            In terms of wealth and political power, Nepalese society could be divided into a small ruling elite; a growing, intermediate-sized group of government officials, large landholders, and merchants; and the vast majority of the population, mostly of peasant base. These divisions are descriptive, functional class categories rather than social class entities based on relations of production. All three classes were a long continuum in Nepal's social structure; most members of the ruling elite and government functionaries had their direct roots in the rural landed class, which was one stratum of the farming population.
            Even though the entire agricultural sector was under similar economic and technological circumstances, it was quite diverse and contained several strata in landholding, relative economic dependence, and independence. In terms of members' ethnic and geographical backgrounds, the intermediate stratum of the farmers was only slightly less diverse than the rest of the rural population. However, the relative economic and educational advantages of this group and its occupations made its members relatively homogeneous in terms of shared interest. They generally yearned to achieve an elite-class status. The ruling elite, largely composed of high-caste, educated Paharis, namely different strata of Brahmans and Chetris, was the the smallest and least diverse of the three categories. At the apex of this class was the Shah Dynasty, whose authority was derived from the orthodox Hindu contention that the king was the reincarnation of Vishnu. The monarch's authority was based on divine right, not on any public support.
            The increase in the educated population directly led to the continued expansion of the bureaucracy. The blatant lack of development created a deficiency of employment, and a large number of educated people failed to find gainful employment other than government jobs. Because they were the most potent revolutionary force, and geographically concentrated in urban centers, the ruling class had to absorb them into an already bloated bureaucracy in order to neutralize any sociopolitical disturbance they might cause. Many of these jobs were jagirs, salaried jobs where one does not have to work but will receive a pay cheque at the end of each month. In the 1980s, a significant number of people with higher education residing in Kathmandu Valley cities found a second employment outlet: development consultant firms and associated services which have emerged throughout Kathmandu. Foreign donors had a growing pressure to hire Nepalese consultants for development feasibility and evaluation projects; these firms were able to tap into the large pool of foreign aid money and have generated a significant number of jobs. This opportunity allowed many of the more educated to acquire middle class status.
            Some efforts were done by the monarchy during the period to reduce the rigidity of the caste system and social stratification. A good example would be the addressing of the subjects at the royal courts. As in French and German language, the Nepali language has two forms of you: the polite form, tapain, equivalent to vous in French and sie in German; and the familiar form, timi, equivalent to tu in French and du in German. Prior to and during the Rana regime, the rulers addressed their servants as timi. Tribhuvan and Mahendra, however, used the term tapain instead. This, although is only a change in a single vocabulary, significantly reduced the rigidity of the caste system and social stratification throughout the country. Some strict Brahman cultures, such as Brahman men eating in a separate room on a heightened platform were dissolved. Nevertheless, this was only between the pure castes, and the distinction between the dalits, or the impure caste and the pure ones remained significant.


V.3.d) Brahmanism
            As observed in the earlier chapters, a small group of ruling elite, mostly comprised of Brahmans and some high-Chetris of Indo-Nepalese migrants with some high-class Newars in the Katmandu Valley, dominated the country in many aspects, even though the group expanded a little by education and other factors. Thus, it could be said that this group of people are the ones responsible for the growth and development of the entire country, and that the assessment of the culture of this group would be adding another point of view in this study. Although the ruling elite group includes some high-Chetris and some high-class Newars, it is mostly comprised of the Brahmans, and it would be appropriate to address the culture of this group as 'Brahmanism'. According to Hutt, Brahmanism is a cultural configuration combining caste and fatalism (173).
            An important factor in Brahmanism is Chakari. Chakari is an institutionalized sycophancy, largely created by the hierarchic nature of the Hindu caste system. It was institutionalized in the 19th century court of the Ranas. In the court, potential mighty subjects had to be constantly seen, spying on each other while attending the ruler; in the modern democracy, this evolved into a way of securing government posts by being dependent on superiors. As Hutt puts it, 'though it will be commonly denied, today Chakari remains a solid fact of social life, and is evident at all levels of government.' (174) Under such a system, endless gossip and back-biting became the norm. This led to widespread paranoia, for each maligns others who could be gossiping behind his back. This can also lead to irrational bureaucracy; the patron could be forced into actions that are not of the best interests of the government but of the interests of his clients. Hutt concludes that Chakari is a 'built-in guarantor of incompetence, inefficiency, and misplaced effort.' (175)
            Another concept that complements Chakari is Afno Manche. Afno Manche is one's inner group, those who could be approached when something is needed. Almost every activity in the Nepalese society is affected by it; the length of time it takes to cash a check, whether one receives a permit, the treatment one receives in hospital, and one's child's chances of school, all of these activities were influenced by Afno Manche connections. This has already been seen in chapter IV.3.d, which states that Nepalese entrepreneurs complained that it is too difficult to get raw material and development funds without sufficient connections. With Afno Manche, personal ties cut across the supposedly impersonal bureaucracy.
            Although the existence of Chakari and Afno Manche itself is quite problematic, these institutions create more serious problems. One such problem is the fear of making decisions and taking responsibility for them. In a rather fatalistic society, not many expect anything to be changed. Moreover, making decisions for changes is taking responsibility for them. In a system where people get fired not for doing nothing but for making changes, even the smallest decisions get passed on to the higher level, making the entire bureaucracy inefficient. Some of these decisions even go up to the King or the prime minister. In Nepal, the decision making system is often an infinitely circular game. Another problem is dependency on foreign aid donors. With the massive amount of foreign aid granted to Nepal, the foreign donors became the superiors of the Brahmans and other ruling elites. Thus, since the Nepalese became clients to foreign aid donors, soon the foreign assistants were the only ones active in the development programs.
            These characteristics of Brahmanism are further strengthened by the family structure of the Brahmans. The sons of high-caste families, when they are young, develop deep bonds with their mothers. However, in Hindu culture, women are taught to be treated as second-class, polluting, and inferior, and thus when these sons grow up, become superior to their mothers. The Brahmans fathers, however, are autocrats, who will remain very influential figures throughout their sons' life. In such a family structure, young Brahmans learn both dependency and autocracy at the same time, and these can naturally lead to becoming familiar with Chakari and Afno Manche.
            Attitude to time in Brahmanism is also worth considering. Ingrained in the Hindu religion, Nepalese people view time as a circle, not as a line as many westerners do. Hindu concepts such as samsara, the transmigration of souls, reinforce this view of time. Thus, there time is not conceived as a commodity, and cannot be wasted. This also leads to little interest in both past and future. This sense of timelessness is particularly favored by many tourists, but is least favorable when forward planning, saving, and investment is required. Squandering resources that might be more useful in the future is not rare in such a society.
            Moreover, although the traditional group structure that dominated Nepal is getting replaced by individualism, the individualism remains at a primitive stage. It would be more relevant to call Nepalese individualism simply as egotism rather than individualism. To the Nepalese, the public, the state, and the nation are all very vague ideas, and they prefer themselves over everything else in the world. Thus, many do not have a sense of public duty or service. As Hutt states, 'very few people take high positions responsibly, as a duty to society at large.' (176) In Nepal, contrary to economic theories, the more the people are paid, the less they work (177). Values common in the westernized societies, such as noblesse oblige, is very difficult to find in Nepal. With such an egoistic people dominating the country, promoting the greater good for the society as a whole was an extremely difficult task.
            One thing to be noted, however, is that Brahmanism only applies to the culture of the small ruling elite in Nepal. The rest of the population, in order to raise their living standards, were relatively less fatalistic, and eagerly sought ways to enhance their lives; this is explicitly shown in the large public participation in education and politics. This, however, is not to say that the Brahmans are morally inferior, but rather that although they were in the positions to lead the country, they were generally content with their present status and did not seek for improvement much. Thus, the ruling elite of Nepal should also be responsible for the failure of Nepal's struggle for modernization in the later half of the 20th century.

VI. Conclusion