Rebooting India-Nepal relations


  • The young republic (Nepal) has no choice but to ramp up its economic ambition if it aims to match the tall political achievements of recent years.

What is the current scenario?

  • Nepal today is a progressive country, propelled by the democratic mass movements of 1950, 1990 and 2006, heading in earnest towards building a deeply inclusive state.
  • Despite modest economic growth, Nepal halved absolute poverty in the past two decades. It dramatically reduced rates of child and maternal mortality.
  • Primary school enrolment, with gender parity, exceeds 97 per cent, and average life expectancy has crossed 70.
  • Nepal also stands out on several measures of civic engagement, from well-managed community forests to community radio.

What needs to be done?

  • Nepal is envisioned as an enterprise-friendly middle-income country by 2030, peopled by a vibrant middle-class.
  • Mobilizing an unprecedented volume of public revenue and private investment, domestic and foreign, by signaling credible economic reforms, relaxing binding infrastructural constraints, and designing inclusive institutions is the need of the hour.

Where India-Nepal needs to focus?

Tapping new economic possibilities

  • Nepal today faces an enormous trade deficit with India, as production competencies shrink and large inflows of remittances fuel growth in imports.
  • India and Nepal must build on the socio-cultural foundations of their relationship to meet the economic and ecological challenges of the 21st century
  • After years of policy paralysis, there is broad realization now that the country needs to project a clear roadmap to prosperity.

Augmenting Productivity

  • Nepal and India are among the closest of neighbors in the world.
  • Both India and Nepal needs to mold its thinking to the possibilities and challenges of the 21st century.
  • Nepal today faces an enormous trade deficit with India, as production competencies shrink and large inflows of remittances fuel growth in imports
  • The share of Nepal’s manufacturing sector has plunged from a peak of 10 per cent of GDP in 1996 to around 5 per cent today

Wider connectivity

  • When Prime Minister Narendra Modiaddressed Nepal’s Parliament three years ago, he spoke of the importance of highways, infoways and transways (HIT).
  • To reduce trade and business costs, to deepen people-to-people ties and to open up new economic opportunities, Nepal needs to connect with growth poles in the region through 21st century electric railways, expressways and expanded air routes directly connecting more cities in Nepal to more cities in its neighboring countries.

Applying mass social innovation

  • Nepal is an early champion of welfare schemes even at a low stage of development, spending about 4 per cent of national income on social transfers.
  • India’s ambitious embrace of modern information and communication technologies, affordable insurance and pension schemes and guaranteed employment are breakthroughs in social innovation that could be emulated in the region.

 Protecting the regional commons

  • The Himalayas are one of Nepal’s — and the world’s — greatest natural assets and South Asia will face a major shortfall in the supply of fresh water over the next decade
  • This crisis will further directly hit subsistence, morbidity and the survival of tens of millions of people.

Prime Ministers visit

  • During the visit to India this week by the Prime Minister of Nepal, Sher Bahadur Deuba, it will be a mark of departure to look to the future, not just the past, and to pledge a pursuit of a forward-looking development agenda where each country helps the other on initiatives that are transformative in nature.
  • Nepal’s formidable topography makes material access to world markets costly.
  • The availability of clean energy, an affordable workforce and the unexploited bounties in niche sectors with high value-to-weight ratios make Nepal uniquely tempting to investors.
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