When it became apparent that the panchayat system was going to endure, B.P. Koirala and other political exiles began to tone down their revolutionary rhetoric and advocate a reconciliation with the king. On December 30, 1976, Koirala and his close associate, Ganeshman Singh, flew to Kathmandu hoping to "make a fresh attempt." They were arrested for antinational activities and violence, and a tribunal was set up for a trial. After considerable agitation, Koirala was released in June 1977 because of ill health. He met briefly with the king and then went to the United States for treatment. When he returned to Nepal in November 1977, he was again arrested at the airport. After further public agitations on his behalf, he underwent five treason trials in early 1978 and was ultimately acquitted. Thereafter, despite factional splits, the Nepali Congress resembled other opposition parties in its acceptance of the king's power. Thus, the pattern of modern Nepalese politics was established--loyalty to the king and opposition to his government. In practice, there were continuing student demonstrations against the panchayat system and for human rights in 1977 and 1978.
On May 24, 1979, King Birendra announced on Radio Nepal that there would be a national referendum in the near future, during which the people could decide to support or reject the panchayat system of government. This referendum represented the first time in modern history that the monarch had publicly consulted his subjects. Political freedom was allowed to all citizens during the period of preparation for the referendum, and there was intense realignment of political factions inside and outside the panchayat system. Finally, on May 2, 1980, out of a potential 7.2 million voters, 4.8 million cast their ballots. The outcome supported the panchayat system, with 54.7 percent for and 45.3 percent against it. Koirala and the Nepali Congress accepted the results. Although the referendum was a victory for the king, its narrow margin clearly indicated the need for change. Accordingly, the king quickly confirmed freedom of speech and political activity and announced the formation of an eleven-member Constitution Reforms Commission. The result, in December 1980, was the Third Amendment of the 1962 constitution, setting up direct elections to the National Panchayat, which would then submit a single candidate for prime minister to the king for approval. A Council of Ministers would thenceforth be responsible to the National Panchayat, not to the king.
In March 1981, the Constitution Reforms Commission announced that elections to the National Panchayat would take place on May 9, 1981. Aside from pro-Moscow factions of the Communist Party of Nepal and a "Group of 38" from the Nepali Congress, political parties rejected the amended constitution and refused to participate in the elections. The Nepali Congress led by Koirala observed an "election boycott week" from May 1 to 8, but on election day a 52 percent turnout of voters chose 111 representatives to the National Panchayat. Surya Bahadur Thapa was returned as prime minister, and the king formed a twenty- eight-member Council of Ministers in June 1981.
Opposition politics were in a state of disarray, dominated by the terminal illness of Koirala, who died in July 1982. The victory of the king was not complete, however. During the elections, more than 70 percent of the candidates favored by the king lost. The panchayat system, a major source for local patronage, was becoming the stage for factional fights and shuffling coalitions. On many college campuses, elections for student unions went to communists after violent clashes.
The trend toward factionalism in the National Panchayat intensified in 1983, when a serious food crisis and charges of corruption caused the fall of Surya Bahadur Thapa's government. Lokendra Bahadur Chand took over as prime minister, but two blocs, or samuha had emerged in the National Panchayat around Thapa and Chand. The factional fighting did not prevent the celebration in 1986 of the panchayat system's twenty-fifth anniversary, which created an opportunity for the second general election to the National Panchayat. The Nepali Congress and most other opposition parties again boycotted the elections, although the communists and a few other small parties did participate. The elections drew 60 percent of the voters, and 60 percent of the members of the National Panchayat supported Marich Man Singh Shrestha as prime minister.
Before elections to the local panchayat the following year, the Nepali Congress announced that it would continue its boycott but then changed its strategy and allowed its members to run for local seats, claiming that it could "capture the outposts" of the system and politicize the people. The poor showing of the Nepali Congress candidates embarrassed the party, however, and revealed its isolation from many rural voters.
Despite low growth figures, throughout the 1980s Nepal at least had made some progress in economic development, but it remained in any case one of the poorest countries in the world. The king was achieving a higher profile in international affairs, canvassing widespread support for the declaration of Nepal as a zone of peace and participating in the South Asian Association for Regional Cooperation (SAARC). These modest trends encountered a sudden interruption in 1989 when a major international incident with India occurred. On March 1, the Indian embassy announced that trade and transit treaties with Nepal, renewed regularly since the 1950s, would expire twenty-two days later. Both the Indian and Nepalese governments accused each other of delaying negotiations. When March 23 arrived, India declared the treaties had expired and closed all but two border entry points with Nepal. These closures caused huge backups on the border and delayed or halted the bulk of foreign trade, including crucial shipments of oil and gasoline and the tourist trade, a major source of foreign exchange carefully cultivated under King Birendra. There was a severe decline in agricultural production, layoffs in factories increased, and the inflation rate in 1987-88 rose to 11 percent. The growth rate of the economy, a healthy 9.7 percent in 1987-88, declined to 1.5 percent in 1988-89.
The Nepali Congress, early in its history accused of bowing to Indian opinion, in September organized a National Awakening Week during which 3,500 party members committed nonviolent civil disobedience. Student demonstrations against India began to take on antigovernment tones, and all campuses in Kathmandu closed for two months. The crisis demonstrated the fragility of the political and economic system in Nepal--an old culture but a young nation-- landlocked between two giants and directed by a medieval monarchy.
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