Nepal’s Exports to India: How a 'No Chinese Component' Rule is Stirring Up Trade Trouble

Picture this: Nepal’s most popular exports—from high-quality cement, footwear to much-needed sanitary pads — are lined up at the border, waiting to cross into India. But they’re stuck. Why? Because India’s now enforcing a “no Chinese component” rule on imports, and it’s putting our products in a tough spot. This issue has been going on for quite a while now: just recently, we covered how India denied export clearance to Goldstar Shoes, halting a beloved Nepali brand’s journey to one of its largest markets.?

Other Nepali manufacturers, who have poured their savings and sweat into these industries, are finding themselves at a similar standstill. And with millions of rupees in exports on the line, this isn’t just a border issue anymore.?

Let’s dive into what’s going on.

India’s ‘No Chinese Component’ Rule: What’s the Deal?

India, our biggest trading partner, recently intensified its push against Chinese imports. Already back in 2020, India banned over 200 Chinese apps, and that was just the beginning. Now, India’s zero-tolerance approach has shifted toward physical goods, and it's hitting home for Nepal. Here’s the crux: any product entering India from Nepal must be certified by the Bureau of Indian Standards (BIS), guaranteeing no Chinese components.

And we’re not talking about a minor inconvenience here. The BIS certification process is so extensive that goods can be held up indefinitely. The rule now impacts major exports like cement, diapers, sanitary pads, and even footwear, which is Nepal’s second most-exported item to India. Any slowdown here threatens jobs and businesses across the country.

Stuck at the Border: How Nepali Industries are Taking the Hit

Let’s talk about the sanitary product industry for a moment. Sanitary pads and diapers, two of the highest-demand items, are produced in Nepal and exported to India on a regular basis. But now, According to the Nepal Sanitary and Diaper Association, nearly 6,000 jobs are on the line, as manufacturers are forced to pause production while they wait for BIS inspections. Nepali manufacturers have already shelled out large sums for BIS certification fees, but they’re just… waiting. It’s like getting ready for an important exam, only to be told the invigilator may or may not show up.

Then, there’s cement. In Rupandehi alone, dozens of cement factories are seeing demand from India practically vanish overnight. Cement was among Nepal’s top exports, amounting to Rs. 779.3 million in fiscal year 2022/23 alone. Now, companies like Arghakhanchi Cement and Palpa Cement are facing backlogs, unable to move their products across the border. With such strict requirements, the cement sector could lose a significant chunk of revenue — and that’s money that could’ve gone towards employee salaries, new hires, or even local community projects.

This Isn’t Just About Trade — It’s About the Economy’s Pulse

It’s easy to see this as a “business problem,” but here’s the reality: every delay in trade impacts the Nepali economy. Exports make up around 7% of Nepal’s GDP — and India accounts for nearly two-thirds of these exports. According to the Nepal Rastra Bank, our total exports to India were NPR 106.69 billion in FY 2022/23. Cement, sanitary products, footwear, and other goods are part of the lifeblood of our export market, fueling businesses, creating jobs, and circulating income throughout Nepal.

With fewer exports, Nepali companies start scaling back. Less production means fewer shifts, which means fewer wages for workers. This trickles down into everything — from reduced spending at local shops to slower economic growth.

And let’s not forget the costs. BIS certification isn’t free. Nepali companies have already paid for fees, inspections, and compliance upgrades just to meet India’s standards. Yet, they’re left holding inventory while Indian authorities drag their feet on inspections. In the meantime, Nepali businesses are bearing the brunt, paying to store goods, maintain staff, and keep operations running, even when revenue has slowed to a crawl.

Why an MRA Could Be Nepal’s Best Bet

So, is there a solution? Experts are calling for a Mutual Recognition Agreement (MRA) between Nepal and India. An MRA would mean that once a product is certified by Nepali authorities, India would automatically accept it, bypassing the need for BIS inspections on every shipment. This is already a common practice in global trade, allowing smaller countries to keep their export industries alive in larger, more restrictive markets.

For Nepal, an MRA could streamline exports, saving millions in certification costs and time delays. Not only would this stabilize trade with India, but it would give businesses the predictability they need to keep workers employed and operations steady.

The Cost of Inaction: How Long Can Nepali Industries Hold On?

Without a solution, the cost of inaction could be enormous. Manufacturers are expected to report huge losses in the near future if the Indian government stalls the BIS certification further. These industries support thousands of workers, most of whom are paid daily wages. With a slowdown in production, daily-wage earners lose their income, and that impacts their families and local communities.

We’ve also got a budding footwear industry on the verge of global recognition. But with these restrictions, Nepali footwear could lose its competitive edge, as Indian competitors take advantage of our stall to flood their own market.

Looking Ahead: A Critical Moment for Nepal-India Trade Relations

This trade disruption is a wake-up call for both sides. For Nepal, it underscores the need to diversify exports beyond India. For India, it’s a chance to strengthen trade ties with a loyal neighbor by establishing an MRA and supporting regional cooperation. The stakes are high, not only for businesses but for the people whose livelihoods depend on a stable trading environment.

The hope is that diplomatic discussions will lead to a more practical approach. But until then, the Nepali industries that keep our economy running are in a tense standoff with uncertainty. If there’s one thing to take away from this, it’s that even minor policy shifts can have massive impacts — and right now, the fate of Nepal’s exports rests on finding a fair and fast solution.