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  • Context (IE): The External Affairs Minister recently visited Nepal.

Key Outcomes of the Visit

  • Nepal to export 10,000 MW of power to India in the next 10 years.
  • MoU for cooperation in renewable energy was signed by the Nepal Electricity Authority and National Thermal Power Corporation Limited, India.
  • Both countries exchanged agreements on the implementation of High Impact Community Development Projects, Munal Satellite, and Handover of 5th tranche of post-Jajarkot earthquake relief supply.
  • Inauguration of three cross-border transmission lines.

India-Nepal Relations: Convergences

Economic cooperation

  • India is Nepal’s largest trade partner (Nepal is India’s 11th 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.


  • 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.


  • 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

  • Trade in favor of India: Trade between the two countries is highly in favor of India.
  • Outstanding border disputes between the two countries at Susta, Kalapani, and the ‘tri-junction’ of Lipulekh.
    • Release of a New Map by Nepal in 2019 claiming Kalapani, Limpiyadhura, and Lipulekh of Uttarakhand and the area of Susta, Bihar as part of Nepal.
  • Revision of India-Nepal Friendship Treaty 1950 as Nepal views it outdated, unequal and gives unprecedented powers to India to interfere in Nepal’s domestic matters.
  • Big-brother attitude: India has been accused of interfering in the country’s internal affairs, acting as a ‘hegemon’ or ‘big brother’, driving its policies in self-interest, and overlooking Nepal’s sensitivities.
  • Lack of timely implementation of projects: E.g. Kosi Agreement (signed in 1954) and Mahakali Treaty (in 1996) to build the Pancheshwar Multipurpose Project have not been implemented to date.
  • Security concerns: Open borders between both are being abused for fostering illegal activities such as Illegal migration, infiltration, Human trafficking, smuggling of fake currencies, drugs and arms, etc.
  • China factor: China’s chequebook diplomacy, its influence, and its presence (Nepal’s participation in BRI, Trans-Himalayan Multi-Dimensional Connectivity Network) in the region pose challenges to the India-Nepal relationship.

Nepal-China Relations

  • Political sphere: The critical stance of India on Nepal’s promulgation of the Constitution and the unofficial blockade and discontinuation of fuel supply adversely impacted India’s image in Nepal.
    • China, on the other hand, used its economic diplomacy to project itself as a non-interfering neighbor by welcoming the new Constitution and opening trade posts at the border.
  • Connectivity sphere: ‘Trans-Himalayan Multidimensional Connectivity Network’ agreement with China to build all-weather road connectivity between Nepal and Tibet. MoU on BRI signed.
  • Defence Cooperation: Conduct of joint Sino-Nepal military exercises for the first time.

Way Forward

  • Focus on core areas such as economic diplomacy, people-to-people ties, and cultural connections to create stronger dependency bonds.
  • Enhancing connectivity through timely completion of pending projects.
  • Winning the perception battle by exhibiting India’s commitment to an equitable and sustainable partnership based on mutual respect, the principle of sovereignty, and non-interference.
  • Promoting ‘backdoor diplomacy’ to unite the entire political spectrum and encourage talks to resolve thorny issues. E.g. Madhesi rights.
  • Resolving border issues by forming a Joint Technical Boundary Committee.
Backchannel diplomacy, also known as Track II diplomacy, is the practice of informal, unofficial, and non-governmental contacts and activities between private citizens or groups of individuals.

Chequebook diplomacy is a foreign policy that involves countries exchanging economic aid and investments to gain diplomatic favor.

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