IMAGE VIA SETOPATI
NEPAL’S ELECTION commission still calls it a partial count. Yet the numbers already describe an earthquake. The Rastriya Swatantra Party—a technocratic upstart barely four years old—has taken more than 50% of the proportional vote and counting is still underway, and leads in 93 of 165 parliamentary constituencies. No party has done anything like this since the monarchy fell in 2008. The coalition era, with its rotating cast of weak premiers and stalled projects, looks suddenly like history.
The question for investors is whether this is merely a strong government or something more transformative. The difference matters because Nepal’s constitution, drafted by exhausted negotiators after the civil war, was built to prevent exactly this: single-party dominance. Its framers wanted coalitions. They got them, for nearly two decades. Now a party that did not exist when that constitution took effect stands on the verge of rewriting it.
Even a simple majority—138 seats in the 275-member house—would break the pattern. The RSP would form a government without coalition partners for the first time since the Maoists briefly managed it in 2008. That means a cabinet that serves a full term; a legislative agenda that actually passes; and foreign policy that does not shift with every ministerial shuffle. For investors wearied by Nepal’s habit of signing memoranda and then forgetting them, that counts as progress.
But a simple majority still leaves the constitutional architecture intact. Provincial governments, elected separately, retain power over land and natural resources. The upper house, chosen by those provinces, can block legislation. The anti-corruption commission, whatever its flaws, operates outside executive control. A simple-majority government must negotiate with these bodies, not command them. Its reforms will be incremental.
A super-majority is a different creature entirely. Two-thirds of the lower house, combined with a similar majority in the upper chamber, would let the RSP amend the constitution at will. The party has signalled what it might change: the federal boundaries drawn in 2015, which carve Nepal into seven provinces that make little economic sense; the citizenship rules that exclude many in the diaspora; even the electoral system itself with its complex mix of first-past-the-post and proportional seats.
The investment implications of such power depend entirely on how the RSP uses it. In the upside case, constitutional protection for foreign investment, rationalised provincial borders as well as streamlined approvals could unlock the hydropower pipeline—projects like Upper Arun and Sunkoshi-3, together worth perhaps $15bn—that has languished for years. Dual-citizenship reform could channel more of Nepal’s $9bn in annual remittances into property and productive investment. The technocrats around party leader Rabi Lamichhane speak this language fluently.
The downside case also deserves attention. Constitutional revision that rolls back ethnic provisions—the 2015 settlement gave Madhesi and Janajati communities hard-won recognition—could stir unrest in Terai, Nepal’s industrial and agricultural heartland. A government that controls two-thirds of parliament might also be tempted to weaken the institutions that check it: the anti-corruption commission, the auditor-general, the courts and the media. Western donors and multilateral lenders, who have tolerated Nepal’s inefficiencies for years, would respond sharply to democratic backsliding.
Then there is geopolitics. India has long managed its Nepal relationship through a network of party contacts, cultivating allies across the fragmented political landscape. A dominant RSP government, with a mandate to renegotiate the 1950 treaty of peace and friendship, would deny New Delhi that leverage. The treaty, which the RSP calls unequal, governs everything from border openness to military liaison. Renegotiation would be a high-stakes game. China, watching from across the Himalayas, might see opportunity in a Nepal less tethered to Indian preferences. Beijing has already invested heavily in trans-Himalayan connectivity; a stable, majority government could advance those projects faster. But RSP’s technocrats also speak warmly of the Millennium Challenge Corporation compact, an American initiative that previous coalitions stalled. Equidistance, in Nepali foreign policy, has usually meant paralysis. A strong government might actually have to choose.
The probabilities favour the simple majority. Katmandu Macro Advisory, our research arm, puts the chance of at least 138 seats at 75-80%. A super-majority is a tail event—20-30% for the lower house alone, lower still if the upper house is included. But tail events matter when they alter the landscape. The first 100 days will show whether the RSP governs as a reformist party or something more ambitious. For now the old Nepal (coalitions, delays, stasis) looks finished. What replaces it is not yet clear. That uncertainty is itself the story. ■
