Observing that India could 'not afford' to see Nepal becoming a 'failed state,' Prime Minister Manmohan Singh [Images] on Saturday welcomed King Gyanendra's announcement on handing over power to political parties as a step in the 'right direction.'

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Dr Singh, en route to Germany [Images], said the king's announcement had initiated the process for formation of a government in Nepal which exercises all executive powers. "By and large, whatever steps the King has made, they are in the right direction," Singh told reporters accompanying him on his two-nation trip.

The prime minister said it was important that multi-party democracy should be restored in Nepal and 'there should be a government in place which exercises all the executive powers. The process has begun.'

He said India will do whatever it can to strengthen Nepal.

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"We have to help Nepal to deal with the difficulties they have got into," the prime minister said.

Making it clear that India was 'not dictating' anything to Nepal, Dr Singh said, "Our role is that of a conciliator to ensure that democratic process is restored... Our role is to ensure that all elements of Nepalese polity are talking to each other. Now I hope the King and political parties will talk about future consequential steps."

Dr Singh said India had a position that the Constitutional monarchy and multi-party democracy were two pillars of Nepalese polity and there is no change in the stand.