Nepal's decision to redesign its 100-rupee currency note has ignited a fresh wave of tension between Kathmandu and New Delhi. The primary cause of this dispute is the inclusion of contested border territories in the new map featured on the banknote. This move, involving a Chinese printing company, has fueled political and strategic sensitivities between the neighboring nations.

Redrawing Borders, Reigniting Disputes

Nepal Chooses China for New Currency Production

The Nepal Rastra Bank (NRB), the country's central bank, has awarded a contract to China Banknote Printing and Minting Corporation to design, print, and deliver 300 million copies of the redesigned 100-rupee banknote. The printing cost has been set at around $8.99 million, averaging 4 rupees and 4 paisa per note. The new note will feature Nepal's revised political map, which incorporates the disputed regions of Lipulekh, Limpiyadhura, and Kalapani.Nepalese Minister of Communication Rekha Sharma affirmed the government's stance, stating, "The government has authorized the Nepal Rastra Bank to replace the current map with the updated version on the currency note." This decision was made during the Pushpa Kamal Dahal government in May 2022, following a formal tendering process and a subsequent letter of intent by the NRB.

The India-Nepal Border Dispute: A Longstanding Conflict

The Nepal-India border row dates back to 1816, following the Sugauli Treaty signed between Nepal and British India after the Anglo-Nepalese War. According to this treaty, the Kali River was designated as the natural western border of Nepal, with territories east of it — encompassing Lipulekh, Limpiyadhura, and Kalapani — belonging to Nepal. Despite this, these territories have been under India's administrative control since the 1960s.Tensions over this territorial issue spiked in November 2019 when India released a new political map that included these disputed regions within its boundaries. Nepal countered in May 2020 by publishing its own revised political map that claimed these areas as Nepalese. Foreign Minister S Jaishankar criticized Nepal's unilateral action, stating, "Our position is very clear. With Nepal, we are having discussions about our boundary matters through an established platform. In the middle of that, they unilaterally took some measures on their side… But by doing something on their side, they are not going to change the situation between us or the reality on the ground."

Geopolitical Implications: China's Involvement Raises Eyebrows

Awarding the printing contract to China's state-owned corporation has further complicated the issue. According to reports from the English daily Republica, the selection of China Banknote Printing and Minting Corporation occurred following an open global tender. Yet, given the strategic tension in the India-China-Nepal tri-border region, the Chinese involvement has raised eyebrows. Observers in India suggested that Nepal's government, at the time under Prime Minister Pushpa Kamal Dahal, may be using the currency redesign to appeal to nationalist sentiments.

Potential Fallout: Eroding India-Nepal Ties?

Experts have warned that Nepal's new banknote move may erode the historically strong, multi-faceted relationship between the two countries, which includes open borders, shared cultural ties, and significant economic cooperation. With a 1,750-km border shared across five Indian states — Sikkim, West Bengal, Bihar, Uttar Pradesh, and Uttarakhand — the potential fallout from this issue is substantial.Then Nepal's Foreign Minister Narayan Kaji Shrestha had expressed a willingness for diplomatic engagement, saying, "We want to resolve the boundary issue with India. We want to fix it through diplomatic means and through table talks. We are taking an initiative for this," as quoted by The Kathmandu Post. However, whether this will be enough to bridge the gap remains uncertain.

The Strategic Significance of the Disputed Areas

India views the inclusion of Lipulekh, Limpiyadhura, and Kalapani on Nepal's currency as a bid for territorial assertion that could disrupt regional stability. In May 2020, Nepal intensified claims over the disputed regions shortly after India inaugurated an 80-kilometre road through Lipulekh, connecting the Indian state of Uttarakhand to Tibet's Kailash Mansarovar. This road was seen as strategically significant for both trade and regional security, as it provides a practical route to Tibet from India.India has voiced strong objections to Nepal's ongoing efforts to establish these regions as Nepalese, calling it an "untenable" claim that amounts to an "artificial enlargement" of Nepal's borders. The disputed land measures roughly 335 square kilometres, a modest area yet significant due to its strategic location at the India-Nepal-China tri-junction.

Navigating the Complexities: Preserving India-Nepal Ties

Despite the border strain, Nepal and India share extensive ties, from religious and cultural exchanges to economic investments. India remains Nepal's largest trade partner, with substantial investments in infrastructure projects such as hydropower plants. However, without diplomatic resolution on the boundary issue, the bond between the two nations may be adversely affected.For now, both nations appear determined to hold their respective positions, underscoring the need for a nuanced and diplomatic approach to address this longstanding dispute. As the geopolitical landscape continues to evolve, the outcome of this currency redesign saga will have far-reaching implications for the future of India-Nepal relations.