Historical Background
- Ancient civilisational links through shared Hindu and Buddhist traditions such as Pashupatinath, Lumbini, Janakpur, and Bodhgaya remain living symbols of cultural continuity.
- Treaty of Sugauli (1816) defined Nepal’s boundaries along the Kali River, laying the groundwork for later territorial disputes like Kalapani and Susta.
- 1950 Treaty of Peace and Friendship formalised open borders, reciprocal rights, and security cooperation and thus it is the legal foundation of bilateral relations that Nepal increasingly views as unequal.
- Economic Blockade (1989-90) severely strained trust as Nepal’s GDP growth fell from 9.7% (1988) to 1.5% (1989) when trade and transit treaties expired.
- Operation Maitri (2015) delivered immediate earthquake relief, reinforcing India’s role as Nepal’s first responder in humanitarian crises.
Key Areas of Cooperation
- Trade and Connectivity
- Bilateral trade reached ₹57,858 crore in 2018-19; India exports ₹54,300 crore while Nepal exports only ₹3,558 crore, reflecting deep asymmetry.
- India provides transit for nearly all of Nepal’s third-country trade, making Indian ports vital for Nepal’s economic stability.
- Motihari-Amlekhgunj petroleum pipeline is South Asia’s first cross-border petroleum pipeline and thus ensures secure and affordable fuel supply to Nepal.
- Jayanagar-Kurtha rail line operational; MoU signed for electric rail link between Kathmandu and Raxaul.
- Energy and Hydropower
- Arun-3 (900 MW) implemented by SJVN with ₹1,236 crore Indian investment; Arun-4 (490.2 MW) agreement signed for long-term power cooperation.
- Pancheshwar Multipurpose Project under Mahakali Treaty aims to generate 1,200 MW while supporting irrigation and flood control.
- India committed to import 10,000 MW of electricity from Nepal over a decade, boosting Nepal’s revenue base significantly.
- Nepal exported electricity worth ₹10.38 billion to India by mid-2022 the hydropower becoming a major export sector.
- Defence and Cultural Cooperation
- Around 32,000 Nepali citizens serve in Indian Army Gorkha Regiments, a unique symbol of historic military integration between the two nations.
- Surya Kiran is an annual joint military exercise enhancing interoperability, disaster response, and counterterrorism coordination.
- Army chiefs of both nations confer honorary General ranks on each other, reflecting deep institutional respect.
- Sister-City Agreements linking Kathmandu-Varanasi, Lumbini-Bodhgaya, and Janakpur-Ayodhya strengthen people-to-people ties.
- India provides over 1,500 scholarships annually to Nepali students and has extended over USD 1.5 billion in development assistance since 2008.
Key Challenges
- Territorial disputes over Kalapani, Susta, Lipulekh, and Limpiyadhura intensified after Nepal’s 2019 map claim; Nepal further issued NPR 100 currency notes depicting disputed territories, deepening diplomatic tensions.
- Trade imbalance persists as Nepal imports over 64% from India but exports less than 10% to India, creating structural economic dependence.
- China’s growing influence through Belt and Road Initiative investments in Nepal directly challenges India’s traditional influence and buffer-state dynamics.
- Open border exploitation: The 1,770 km porous boundary is misused for smuggling, fake currency circulation, human trafficking, and insurgent movement.
- Trust deficit caused by delays in project execution, perceptions of political interference, and the 1950 treaty’s unequal image fuels anti-India sentiment in Nepal’s political discourse.
Way Forward
- Revise the 1950 Treaty based on the Eminent Persons Group recommendations to reflect contemporary realities and address Nepal’s perception of inequality.
- Accelerate hydropower and connectivity projects to demonstrate tangible development dividends and reduce the trust deficit caused by implementation delays.
- Strengthen border management through joint surveillance mechanisms while preserving the open border’s humanitarian and economic benefits for border communities.
- Engage Nepal through cultural and educational diplomacy to build durable people-to-people connections that outlast political fluctuations.
- Counter China’s influence not through pressure but through delivering on commitments — reliable partnership is India’s most effective strategic tool with Nepal.