Well, it's not in India's interest to keep a constitutional vacuum in Nepal, so there has to be great efforts made to cobble together a government in Nepal. This is the time for some skilful, off-radar diplomacy by India, not the crude, boot-stomping variety we have seen of late.
To be honest, India really has a menu of bad options here.
While no government in India (except perhaps the Communists) will give the Maoists the time of day in Nepal, India cannot really wish the Maoists away. It's well known in the UPA government that despite the fact that it was India that stitched together the 12-point agreement, everybody from Prime Minister Manmohan Singh, foreign minister Pranab Mukherjee, NSA, RAW etc woke up every morning worrying about the Maoist threat. Mukherjee was particularly concerned about the effects of the Maoists in West Bengal. Besides, nobody wanted the Nepal army to be infiltrated before the constitution was enacted and a regular government formed.
The China threat is real. Prachanda has not only been receiving a long succession of official delegations from China, he has meekly submitted to some tough-worded strictures from Beijing by their envoy in Kathmandu.
Now we are back to the old mainstream political parties, who, because of their lousy grassroots politics, haven't shown any spark of intellect in being able to govern as a cohesive entity.
Where India erred was in the tactical employment of its diplomacy. India should have nudged the Maoists to accept a solution on the cadres issue that could have been sold as theirs but which would not rock the boat. Second, India should have built a "wall" of centrist parties to keep the Maoists on the straight and narrow. There are any number of levers India should have used in the past 6 months to express its discomfort with the Chinese marching all over the Himalayan state.
India should have used the skills of a rapier in the run-up to this crisis, so as to be able to prevent events to getting to the crisis state. Instead it was the sledgehammer at work which never really helps India's cause since Nepal will continue to be vitally important to India.
The spreading mess in Nepal
The instability in Nepal is not going away in a hurry, though there seems to be an urgency to resolve the political chaos before the results of the Indian elections.
The Maoists are determined to play spoiler in the hectic efforts to cobble together a coalition. Last heard, they were trying to coax the Madhesi leader, Upendra Yadav by tempting him with the prime ministerial position. This means the Madhesi parties, who are now key in the political sweepstakes in Nepal are yet to present a unified front. Part of them want to go with the UML but some are still playing ducks and drakes with the Maoists.
While all these political shenanigans are underway, it's still a pleasure to see the new political alignments in Nepal today. The Madhesis, traditionally stepped over by both the mainstream political parties and the Maoists, have grown to a state where they are indispensable to government formation.
As for the Maoists, things are not going their way at all. Not only has Prachanda lost the moral sheen after his video surfaced, he is confronting a virtually hostile Indian leadership as well as a United Nations that is mad as fire, because he has made them look foolish and now there is a clamour for re-verification of the Maoist cadres who had already been screened by the UN.
On the other hand, Prachanda's protestations of innocence are sounding a little desperate. For instance, in his interview with the Hindu , he said he had asked the Indian ambassador, Rakesh Sood, to resolve the crisis with the army, but was told no one was available to come. The real story is a little different. Prachanda did indeed tell Sood, but this was after he had made up his mind to sack Katuwal, and having given India notice of just a couple of days. So there was little India would have done that would have been useful, except to perhaps preside over the actual sacking. Sood passed on his message to New Delhi but by this time South Delhi had decided to dump him, particularly since Pranab Mukherjee had spoken to Prachanda, earlier, which had fallen on deaf ears.