Goldstar footwear is in jeopardy as India tightens import regulations.

The refusal of India to provide the Bureau of Indian Standards certificate resulted in over 100 trucks of Goldstar shoes not being cleared for export, hence threatening the survival of Nepal's domestic shoemaker.

For the last 25 days, exports have been prohibited without official notice.

Launched two years ago and rigorously enforced in the last two months, the Bureau of Indian Standards (BIS) provides the obligatory certification for goods to be imported into and sold in India. The BIS certification guarantees that the goods meet Indian regulations.

Goldstar Shoes executive director Vidushi Rana stated, "We have been unable to obtain the necessary certificate from India, which is why our Bhairahawa factory has been closed for almost a month."

"Our footwear business is stagnant, so we have already laid off 1,200 of our 3,500 workers ahead of Dashain."

The business is getting ready to fire another 1,000 employees.

The Maoists grew to love the Goldstar Shoes brand during the insurgency (1996–2006). It developed as Nepal's top footwear producer and exporter throughout time.

The corporation has been exporting 60 percent of its products to India.

According to insiders, the harsh treatment of the Nepali manufacturer by the southern neighbor may have been influenced by the Chinese factor. The corporation has been primarily obtaining raw materials from Taiwan, China, and India.

India does not purchase electricity from hydroelectric projects in Nepal that include China in any way. Similarly, it hasn't approved the landing of a joint venture airline between China and Nepal at New Delhi. The new international airport that China built in Pokhara is not allowed to be used by Nepali airlines to connect cities in India, according to the neighbor to the south.

In addition, New Delhi's rejection of Nepal's request for air entry routes to enable the new international airports in Bhairahawa and Pokhara to become commercially viable has left the proposal hanging.

Additionally, India has banned the import of cement made by joint venture enterprises between China and Nepal.

“India is reluctant to provide the BIS certificate on strategic grounds. We have no idea what to do," remarked Rana. "We questioned Indian officials about it, and they said it was an order from higher up."

Rana brought up the matter on Monday during the "Policy Dialogue on Nepal-India Trade and Transit Issues" in Kathmandu, which was sponsored by USAID and the Nepal-India Chamber of Commerce and Industry.

Goldstar Shoes entered the US market in October 2021.

"We have complied with every requirement, including the guidelines established by India," declared Rana.

For the past three decades, Goldstar has been selling shoes to India, particularly to the heavily populated states of Bihar and Uttar Pradesh.

The corporation directly employed 3,500 workers until recently.

Rana claimed that, in vain, she had visited the Nepali Embassy in New Delhi as well as other pertinent ministries.

Sources from Nepal's private trade association claimed that India has also halted imports of Bangladeshi goods due to the BIS certification requirement. India swiftly granted the BIS certificate in response to Bangladesh's threat of retaliatory measures.

Non-tariff barriers have been imposed on Nepali products as a result of our ineffective political system and subpar economic diplomacy. Non-tariff obstacles cannot be imposed by India on Nepali goods, according to Rana.

Trading experts have stated that Nepal's poor bargaining abilities, frequent changes in the bureaucracy, and lack of research and data are the reasons behind its trading problems with India.

According to Rana, the widespread illegal import of shoes into Nepal will end if Nepal issues a Nepal Standard certificate on Indian goods, similar to how India has done with BIS certificates.

Government representatives have been rejoicing at the progress made in trade and transit between Nepal and India, while the private sector has been airing its complaints about export limitations to India on goods like tea and ginger.

Nepal has received several trade subsidies due to its status as a least developed country. A number of dry ports that are built or being built with funding from India represent a significant accomplishment for Nepal's commerce transit, according to Tarka Raj Bhatta, joint secretary of the Ministry of Industry, Commerce, and Supplies.

However, Bhatta stated that as Nepal typically lacks homework, discussions get challenging when India, a neighbor and important commercial partner, imposes bans or limitations.

"We have brought up issues on a number of occasions during the bilateral mechanism meetings between India and Nepal."

The Covid-19 epidemic forced the preceding Inter-Governmental Committee (IGC) meeting to be held virtually in December 2020. The two countries' commerce secretaries will preside over the next meeting of the International Group on Trade and Transit (IGC), which will take place in November.

According to Bhatta, the private sector's involvement in transit and trade is equally crucial. They established a cooperative business forum in 2023, with ten participants from Nepal and India each.

The 2009 Agreement of Cooperation to Control Unauthorized commerce, the 2009 Rail Service Agreement, the Transit Treaty 2023, and the 2009 Trade Treaty are the four agreements governing commerce and transit between Nepal and India.

Experts claim that despite these procedures for resolving conflicts, Nepal's weak negotiation abilities have consistently left Nepali traders in a challenging position.

In 2023, Nepal ranked 17th among Indian importers.

India is Nepal's largest export market, accounting for 68% of its exports and 62% of its imports.

In the previous fiscal year, Nepal's imports from India totaled Rs996.68 billion, while its exports were Rs103.17 billion.

Based on data from the Department of Customs, there was a deficit of Rs893.50 billion with India throughout the study period.

The goal of the trade agreement between Nepal and India, according to Posh Raj Pandey, chairperson of South Asia Watch on Trade, Economics and Environment (SAWTEE), is to encourage industrialization in Nepal; the measure of this achievement will be the industry's share of the country's GDP.

"Yet, we are using the incorrect metric to measure success—the commerce perspective. We need to examine how the trade pact aided Nepal's industrialization.

Up to 2021, Nepal ranked among India's top 10 import destinations. It now ranks 17th in 2023, mostly as a result of India's prohibition on food goods, particularly rice, and Nepal's 2022 import restriction.

Our inability to modify our trading arrangements with our southern neighbor is one factor contributing to Nepal's growing trade deficit with India. We continue to export conventional items like zinc sheets, juice, jute, polyester yarn, cardamom, and textiles to India, despite the constant changes in trade dynamics, according to Pandey.

Former Commerce Secretary Purushottam Ojha predicted that Nepal will leave the list of least developed nations in November 2026 and that the country's rules of origin requirement, which is currently 30%, will drop to 20%, making exports more challenging.

At the moment, regulations mandate that 30% of the value of a Nepali export good, including labor and materials, must originate in Nepal. However, once Nepal leaves the LDC club, this cutoff will be reduced to 20 percent. Less local content will be required for export goods, but they may still be subject to higher taxes and stronger trade restrictions.

"Norway ought to bring up trade facility concerns after LDC graduation at the IGC meeting," stated Ojha.

According to Baburam Adhikari, joint secretary of the industry ministry, "the Nepali side has not been effective in trade discussions mainly due to the frequent changes in bureaucracy."

When dealing with India, Adhikari stated, "We need a double 'C' strategy, consisting of competence and confidence."

It will aid bilateral negotiations if government agencies work together more effectively and take significant action against internal problems that are not being addressed promptly.

We intend to establish a structure comprising of knowledgeable trade specialists and former government officials. Adhikari stated, "It will assist in addressing emerging issues as soon as possible.