India Nepal Relation


  • Nepal and China finalized the protocol of their Transit and Transport deal.
  • Nepal declined to attend BIMSTEC military exercise (MILEX 2018) hosted by India.

Brief background of relationship

  • India and Nepal share a very special relationship with each other. They share a common culture and terrain south of the Himalaya. Bound by languages and religions, marriage and mythology, the links of their civilizational contacts run through both the countries.
  • At the people to people level, relations between India and Nepal are closer and more multifaceted than between India and any other country.
  • Republic of India and Nepal began their formal relationship with the 1950 Indo-Nepal treaty of Peace and Friendship. This treaty is the cornerstone of our current relation with Nepal.

Present phase of relationship

  • Relation between India and Nepal was on a downward curve since 2015 when Nepal put out its draft constitution and alleged economic blockade by India
  • With PM Oli back in power in 2018, the India’s outreach to the new government in Nepal was quick — announcing new connectivity and development projects.
  • A series of bilateral visits have taken place by the Prime Ministers of both the countries.

Developments in 2018

High level political visits

  1. Visit of PM Oli to India:(April,2018)
  • A 12-point joint statement was issued, highlighting the resolve to take the bilateral relation to newer heights on the basis of equality and mutual trust, avoiding key contentious issues between two countries.
  • During the visit Nepal and India signed three new agreements
  1. A partnership in agriculture
  2. Plan for connectivity through Inland waterways
  3. Expanding linkages to connect Indian railway lines to Kathmandu

2)  Visit of PM Modi to Nepal (May,2018)

  • PM Modi visited India within weeks of Nepalese Prime Minister K. P. Sharma Oli’s visit to India.
  • It was decided that urgent attention will be paid to the problems of river training, inundation and flood control on the common border.
  • PM Modi gave a new “5T” (“Tradition”, “Trade”, “Tourism”, “Technology and Transport”) formula for Indo-Nepal relation during this visit.

3) Visit of PM Modi for BIMSTEC Summit(August,2018)

  • PM Modi again visited Nepal to attend the 4th BIMSTEC summit.
  • PM of both the countries held a detailed review on all aspects of the bilateral relationship including ways to further deepen economic and trade ties.

Significance of Nepal


  • Nepal’s geographical location is unique such that it is a natural buffer between India and China
  • Since Nepal is a landlocked country it greatly depends on India for its interaction with the outside world.


  • Nepal shares a special relationship with India historically.
  • India has a Treaty of peace and friendship with Nepal since 1950.
  • This treaty is instrumental for a close cooperation between the two countries.
  • India has always considered South Asia to be its sphere of influence.


  • India is Nepal’s largest trade partner
  • Nepal is endowed with fast flowing rivers with huge hydroelectric potential. Nepal’s installed hydel capacity is less than 700 MW while it sits on a hydel potential of over 80,000 MW.
  • Nepal is part of many international projects like BBIN etc


  • India and Nepal share a common culture and have a long history of people to people relationship.
  • Nepali and Indian people visit each other’s country for religious pilgrimage. Pashupati and Janakpur are traditional centres in Nepal whereas Varanasi and the four Dhaams are important pilgrimage destination in India.
  • The Buddhist network is interlinked — Lumbini is in Nepal, while Kushinagar, Gaya and Sarnath are in India.
  • It is said that India and Nepal have ‘Roti-Beti ka Rishta’ (ties of food and family).

Areas of Cooperation

  1.     Trade and Economic
  • India is Nepal’s largest trade partner and the largest source of foreign investments, besides providing transit for almost the entire trade which Nepal has with other countries.
  1.     Indian Investment in Nepal
  • Indian firms are the leading investors in Nepal, accounting for about 40% of the total approved foreign direct investments.
  1.     Water Resources and energy cooperation
  • A three–tier mechanism established in 2008, to discuss all bilateral issues relating to cooperation in water resources and hydropower.
  • Nepal has many fast flowing rivers and its terrain makes it ideal for hydroelectric power generation. Nepal’s installed capacity is less than 700 MW while it has a potential to generate over 80,000 MW.
  • A 900 megawatts hydropower project Arun III has been launched recently.
  • An Agreement on “Electric Power Trade, Cross-border Transmission Interconnection and Grid Connectivity” was signed between India and Nepal in 2014.
  • A Joint Technical Team (JTT) has been formed for preparation of long-term integrated transmission plan covering projects up to 2035.
  1.     Defense Cooperation
  • The Gorkha Regiments of the Indian Army are raised partly by recruitment from hill districts of Nepal.
  • Since 1950, India and Nepal have been awarding Army Chiefs of each other with the honorary rank of General.
  • Bilateral defense cooperation includes assistance to Nepal Army in its modernization through provision of equipment and training.
  • About 250 training slots are provided every year for training of Nepal Army personnel in various Indian Army Training institutions.
  • India and Nepal conducted a joint military exercise, Surya Kiran XIII from May 30 to  June 12 in Uttarakhand this year.
  1.     Infrastructure and connectivity
  • India provides development assistance to Nepal, focusing on creation of infrastructure at the grass-root level.
  • Recently a MoU was signed on Raxaul-Kathmandu railway line. A Postal highway project is also being undertaken.
  • Both the countries are also focused on inland waterways connectivity.
  1.     Culture and People to People cooperation
  • The Governments of India and Nepal have signed three sister-city agreements for twinning of Kathmandu-Varanasi, Lumbini-Bodhgaya and Janakpur-Ayodhya.
  • Direct bus service between Janakpur and Ayodhya under Ramayan Circuit under Swadesh Darshan Scheme was launched.
  • The Archaeological Survey of India (ASI) is involved in the renovation of the Pashupatinath Temple Complex in Kathmandu.
  • Nepal-Bharat Maitri Pashupati Dharmashala was inaugurated recently to meet the requirement of pilgrimage to Pashupatinath Temple.
  • Nepal and India share Hindu and Buddhist heritage. Lumbini, the birth place of Lord Buddha is in Nepal while Bodh Gaya where he attained enlightenment is in India. Similarly the hindu pilgrimage places are also spread in both countries.
  • Historically Indian and Nepali people have shared family ties. In indian mythology Goddess Sita married Lord Ram. Indian and Nepali royal families too have matrimonial relations.


  1.     Border issues:
  • Nepal and India must resolve contentious issues relating to the border, including the two major areas of dispute at Susta and Kalapani (IndiaChina-Nepal tri-junction).
  • Countries agreed to start talks at the foreign secretary-level in order to resolve the problem however, only a single talk has taken place in 2015.
  • There is a need for construction, restoration, and repair of boundary pillars, and the clearance of no man’s land on both sides.
  1.   Internal Security
  • There is an open border between India and Nepal which leads to illegal migration and human trafficking.
  • Indo Nepal border is used as launch pad by maoist, terrorist and drug traffickers.
  1.     Nepal’s new constitution and its aftermath
  • A new constitution was promulgated in Nepal in 2015.
  • It gave extensive political privileges to the ruling hill tribes and discriminated against the people living in plains including Madhesis.
  • The constitution gave representation to Madhesis which was not in proportion to their population.
  • It also made obtaining citizenship by Madhesis very difficult and discriminating.
  • India has objected to these discriminatory provisions and requested Nepal to rectify them.
  1.     Big Brotherly attitude
  • There is a widespread perception in Nepal that India does not respect the country’s sovereignty and that it often intervenes in Nepal’s domestic affairs.
  • India has been perceived to be playing a role of big brother in the region.
  • Nepal accused India of imposing an economic blockade including blockade of gas supply, fuel etc on them to put pressure to make certain amendments in their constitution.
  • There was much outrage in Nepal of the way Indian media covered the 2015 Nepal Earthquake rescue and relief operations. Many Nepali trended hashtags like #gobackIndia on social media to express their outrage.
  1.     Trade
  • Nepal’s trade deficit with India has surged in recent years with continuously rising imports and sluggish exports.
  • The current deficit in trade with India is 689.85 billion in Nepali Rupee. The country earned Rs 42.46 billion from its exports to India while paying the import bills worth Rs 732.31 billion
  • Indo-Nepal trade continues to remain massively in India’s favor.
  1.     Peace and friendship treaty
  • The India-Nepal treaty of 1950 has been criticized by the Nepali political elite as an unequal one.
  • Treaty obliged Nepal to inform India and seek its consent for the purchases of military hardware from third countries. Nepal wants to change this provision.
  • The Nepal-India Eminent Persons’ Group (EPG) is revisiting all bilateral agreements to submit a comprehensive report to both governments on how to reset bilateral relations.
  • PM Modi has expressed his readiness to revise and update the 1950 treaty to bring in line with the changing times while keeping in mind the interest of both  countries.


  1.    Nepal’s growing proximity to China


  • Nepal’s attempt to balance the overwhelming presence of India next door by reaching out to China is resented by India as such actions heighten India’s security concerns.
  • Chinese are building a number of highways from the Tibetan side into Nepal, all the way down to East-West highway that traverses Nepal.
  • China plans to extend the Tibet railway to Kathmandu across the border in the next few years.
  • Nepal signed the Belt and Road Initiative (BRI) Framework agreement with China last year.
  • China is trying to contest Indian interests by cultivating local interest groups that could advance China’s interests in Nepal.

8.    Demonetization:

  • Demonetization has badly affected Nepali nationals because those notes were legal tender in Nepal too.
  • Nepal has time and again requested that the Indian government make arrangements for the exchange of those notes held by Nepali nationals and its central bank.

 Recent developments

China proposed 2+1 format for India talks:

  • This is different from a trilateral mechanism.
  • Under the Chinese proposal, China and India can jointly conduct a dialogue with a third regional country and can be applied to any other country in South Asia.
  • India has been reluctant to directly take up any kind of trilateral cooperation in Nepal with China.
  • PM Oli on his visit to China quoted Panchsheel — the five principles of peaceful coexistence as the template for an independent foreign policy that would include a simultaneous engagement of India and China

Transit and Transport deal.

  • Nepal and China finalized the Protocol of Transit and Transport deal. As per the agreement Nepal can access four ports and three dry ports paving way for the use of Chinese ports for trade.
  • This will reduce Nepal’s dependency on India for its trade
  • One important impact of the Nepal-China Transit and Transport deal is that Nepal’s access to Chinese ports will be through six checkpoints.
  • These and other road and railway projects between China and Nepal will allow China to potentially project power against India on a different section of the Sino-Indian boundary.

Boycott of BIMSTEC Military exercise

  • Nepal declined to participate in the first BIMSTEC military exercise MILEX-18 organized by India, but at the same time Nepal plans to participate in a joint military exercise with China.

Why China cannot replace India vis-à-vis Nepal?

  • India has an advantage of geography on its side. Chinese rail and port connectivity projects are not very feasible owing to the difficult terrain.
  • The nearest Chinese ports will be over 3000 km away while Kolkata and Visakhapatnam ports which Nepal currently uses are relatively closer.
  • Funding is a major concern in Chinese infrastructure projects. Nepal is asking to build the Railway line as a grant but China is insisting on soft loan.
  • Nepal has signed BRI framework agreement with China last year, but Nepal is hesitant in choosing projects fearing debt trap.

 Way forward

  • India must respect Nepal’s sovereignty; mutual respect is a key in bilateral relations; and India should not meddle in the internal political affairs of Nepal
  • Our engagement with Nepal tends to be episodic and crisis-driven, and not backed by the human and material resources that our neighbor deserves.
  • India should counter Chinese hard power by projecting soft power. In contrast to China’s efforts to muscle its way into Nepal, India should emphasize on its historically close cultural, religious, and people-to-people relations with Nepal.
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