During a human rights seminar here last week one Indian journalist was particularly emphatic that we should not say 'Indians' when all we mean is the 'Indian Government'. Point well taken. But there is a slight problem. When it comes to issues concerning Nepal, or any other foreign policy issue for that matter, Indian media functions like an extension of South Block.

The latest proof of this is the campaign launched by foot soldiers of India's External Affairs and Commerce ministries in the Indian media. First, they spread outlandish rumours about Pakistan's Inter-Services Intelligence (ISI) subsidising Nepali businessmen to smuggle cheap Chinese goods to India through Nepal. But that turned out to be a red herring. The real issue came out this week in a daily barrage of news leaks in Indian financial newspapers and the Internet about Nepali goods flooding the Indian market.

It is difficult to say what plot is being hatched in the byzantine corridors of power in India this time, but it must have something to do with the scheduled minister-level talks in January to discuss trade and transit during which India would like to roll back the Gujral doctrine, the gains made in bilateral trade since 1996 and impose a more favourable definition for manufactured goods. Indian trading houses and policy-makers in Delhi were never happy with the treaty, since for the first time Nepali goods were given limited access to the Indian market. It went against the general strategy that these pesky small neighbours must be put in their place, and power is the only language they understand. Being an enlightened forward-thinking person, IK Gujral did not think so: he felt a more prosperous Bangladesh or Nepal would actually be in India's strategic interest. Poverty breeds instability, and a richer middle class in both countries could, after all, only mean bigger markets for Indian goods.

In the internal policy battles in New Delhi, it seems the narrow-minded hardliners have won out again. They are cracking the whip, and once more, the media vanguard is softening the Nepali positions for the muscle-flexing and arm-tweaking in January. It's a deliberate strategy aimed at drawing parallels with similar media bashing that preceded the embargo of 1989.

The media harassment has been accompanied by harassment at the border. Customs officials have introduced debilitating non-tariff barriers like quarantine charges, for instance, on Nepali cauliflower exports to India. If a cauliflower farmer of Bhedetar has to fork out Rs 5 per kg for the privilege of taking his vegetable across the border, he is better off feeding the cauliflowers to his cattle. There are other new and imaginative bureaucratic hoops that Nepali traders have to jump through: they need Bureau of Indian Standards Certification. In theory, quality checks are good. In practice, no Nepali entrepreneur will probably be able to negotiate this latest maze of Indian babudom. The only Nepali enterprises that will be able to compete in India will be those that have their de facto head offices in Calcutta or Delhi.

The withering broadsides from the Indian media in the past week have been effective in doing three things:

. WORSEN already shaky relations between Nepal and India

. CONFIRM the Nepali public's perceptions about Big Brother

. AMPLIFY the managed voices of protest in India's trade lobby

Can it get any worse? That's exactly what bothers us. It's with a lot of effort that at least some Nepali products like biscuits, noodles, vegetable ghee, milk and milk products, or yarn were able to compete in the Indian market, even that only in the border areas. But the surge in Nepali exports after the 1996 treaty had a role in narrowing the huge gap that exists in the balance of trade between our two countries. But the gap is still there and another way to bridge it could have been tourism. But the motivated India media onslaught following the hijacking of IC-814 sabotaged this. Even the partial recovery of tourism this season has been thwarted by the absurd new bilateral agreement that only Indians and Nepalis with passports or voter ID cards are allowed to visit each other's countries by plane.

Our government needs to realise that all diplomacy is economic diplomacy these days. Shital Niwas should be more proactive in using friends across the border to anticipate and counter the Indian gameplan. If our embassy in Delhi was less preoccupied with ferrying Nepali VIPs to and from the airport as they transit to Bangalore for a darshan of Sai Baba maybe it would serve as a more effective early warning system for sounding out the Indians on what to expect at the talks in January.

In the final analysis, India must realise that a poorer Nepal is not in its long-term strategic or economic interest. So the present policy-makers in South Block's Nepal desk should stop needling Nepal with paranoid accusations and find win-win ways to benefit the people of both countries. We are not denying there is smuggling, but many Indian businessmen will be the first to admit that the level of contraband crossing the border is miniscule compared to India's total imports of the same goods. Those affected are small-time traders in West Bengal, Bihar and Uttar Pradesh, and they are the ones raising a big hulla.

Having said that, our own authorities at Singha Durbar need to take a close, hard look at the way unauthorised trade has hijacked the agenda between India and Nepal. Smuggling cannot be the basis of the Nepali economy for much longer. Not only does this empower the mafia, it also has no future now that the WTO will make it obsolete. Some individuals may benefit from such transactions, but they damage the national economy almost permanently. The countdown for the sacrifice of Nepali trade at the altar of Indian intolerance has started. Both Shital Niwas and South Block must look beyond scoring diplomatic points. Poor people in India and Nepal are suffering for the follies of the high and mighty on both sides of the border.