India-Nepal Relations: Convergences & Divergences

Recently, India signed an agreement with Nepal to implement 5 high-impact community development projects (HICDPs) in education and health sectors under an Indian grant of ₹390 million.

High-Impact Community Development Projects (HICDPs)

Sector	Projects
Education	Construction of 4 Secondary Schools in Dhanusha, Parsa, Achham & Bara districts.
Health	Construction of a 5-bed hospital in Manang district.

Strategic Significance

Social Sector Support: Enhances access to health and education in Nepal’s underserved areas, aligning with its decentralisation goals.
Soft Power Tool: Reinforces India’s image as a reliable and benevolent partner, strengthening people-to-people ties through grassroots projects.
Trust-Building Role: Reflects India’s proactive commitment as a “Big Brother” in regional development, fostering goodwill and regional stability.

India is Nepal’s largest trade partner and top source of FDI, with bilateral trade exceeding $7 billion.
Guided by the age-old ‘Roti-Beti ka Rishta’, the open border fosters deep people-to-people ties, shared festivals, and seamless pilgrimage and tourism.

India-Nepal Relations: Convergences

Economic cooperation

India is Nepal’s largest trade partner (Nepal is India’s 11^th largest) and the largest source of total foreign investments, accounting for 32% of total FDI in Nepal.

Military relations

India has been assisting the Nepal Army in its modernization by supplying equipment and providing training, assistance during disasters, and joint military exercises (E.g. Exercise Surya Kiran).
The Gorkha regiments of the Indian Army are raised partly by recruitment from hill districts of Nepal.

Connectivity

India has been assisting Nepal in the development of border infrastructure through the upgradation of roads in the Terai area.
Development of cross-border rail links at Jogbani-Biratnagar, Jaynagar-Bardibas; and establishment of Integrated Check Posts at Birgunj, Biratnagar, Bhairahawa, and Nepalgunj.

Development

Various projects have been implemented in the areas of Health, Agriculture, digital technology, etc. E.g. acceptance of UPI by Nepal.
The total economic assistance earmarked under ‘Aid to Nepal’ budget in FY 2022-23 was Rs 6.8 billion.
During the 2015 Nepal earthquake, India was the first country to respond by dispatching National Disaster Response Force teams and special aircraft with rescue and relief materials.

Water resources cooperation

A three-tier bilateral mechanism was established in 2008, to discuss issues relating to cooperation in water resources, flood management, inundation, and hydropower between the two countries.
Investment in Arun-3 run-of-the river hydroelectric project.

Energy cooperation

India and Nepal have had a Power Exchange Agreement since 1971 for meeting the power requirements in the border areas of the two countries.
Agreement on ‘Electric Power Trade, Cross-border Transmission Interconnection and Grid Connectivity’ signed in 2014 to facilitate cross-border electricity transmission, grid connectivity & power trade.
India has built several hydroelectric projects, like Pokhara, Trisuli, Western Gandak, Devighat, etc in Nepal.
South Asia’s first cross-border petroleum products pipeline connecting Motihari in India to Amlekhgunj in Nepal was inaugurated in 2019.

Culture & Community

The India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal.
Under the Treaty, Nepalese citizens enjoy unparalleled advantages in India, availing facilities and opportunities at par with Indian citizens.
Familiarization visits to India by Nepalese journalists/editors and short-term training in India for Nepalese editors/ journalists/experts/officials in the field of print & electronic media and archaeology.
Sister-city agreements (Kathmandu-Varanasi, Lumbini-Bodhgaya, and Janakpur-Ayodhya) signed between both countries.

India-Nepal Relations: Divergences

Border Disputes: At Susta, Kalapani, and the ‘tri-junction’ of Lipulekh area.
Implementation Delays: Agreements such as Kosi (1954) and Mahakali (1996) remain stalled, leading to the pending of the Pancheshwar Multipurpose Project.
Security Concerns: Porous & open borders lead to illegal migration, infiltration, human trafficking, etc.
Treaty Concerns: Nepal sees the 1950 INFP Treaty as outdated and unequal.
China Factor: China’s chequebook diplomacy & its presence in the region pose challenges to the India-Nepal relationship.

Way Forward

Fast-track Projects: Ensure timely execution of key projects like the Pancheshwar Multipurpose Project to build trust.
Political Outreach: Use quiet diplomacy to bridge internal divides (e.g., Madhesi issue) and strengthen bilateral consensus.
Soft Power Push: Deepen people-to-people connect through cultural exchanges, UPI–RuPay integration, and academic partnerships.
Strategic Balance: Provide transparent, sustainable alternatives to counter China’s growing influence.

India–Nepal ties, grounded in civilizational bonds, are advancing through deeper connectivity, energy cooperation, and mutual respect. As PM Modi stated, “Neighbourhood First is not just a policy, it’s a commitment,” reaffirming India’s focus on a sovereign, future-ready partnership with Nepal.

Reference: Business Standard

PMF IAS Pathfinder for Mains – Question 261

Q. India-Nepal relations have witnessed a see-saw trajectory in recent years. In this context, examine the convergence and divergence between them. (250 Words) (15 Marks)

Approach

Introduction: Write briefly about the India-Nepal relation by mentioning the bilateral trade.
Body: Write the area of convergence and divergence and the way forward.
Conclusion: Emphasis on cooperation and people-centric engagement for a resilient future partnership.