India–Nepal Relations

India–Nepal Relations

• India and Nepal share a unique, multidimensional and deeply rooted relationship based on geography, history, culture, religion, economic interdependence and extensive people-to-people contacts.
• The relationship is distinguished by:
  
  • Open border
  • Free movement of people
  • Deep cultural and religious links
  • Cross-border marriages
  • Employment and migration
  • Defence cooperation
  • Economic interdependence.
• These close familial and social connections are often described as “Roti-Beti ka Rishta.”
• India and Nepal share an approximately 1,850-km-long border across:
  
  • Uttarakhand
  • Uttar Pradesh
  • Bihar
  • West Bengal
  • Sikkim.
• Nepal borders the Tibet Autonomous Region of China to its north.
• The India-Nepal Treaty of Peace and Friendship, 1950 remains the foundational framework of the special bilateral relationship.
• Nepal’s location between India and China gives it considerable strategic importance in India’s Himalayan security architecture.

Historical Background

Ancient Civilisational Links

• India-Nepal relations date back several centuries and are linked with:
  
  • Hinduism
  • Buddhism
  • Shared pilgrimage traditions
  • Language and culture
  • Historical trade routes.
• Lumbini in Nepal is the birthplace of Gautama Buddha.
• Important civilisational links include:
  
  • Pashupatinath
  • Janakpur
  • Ayodhya
  • Bodh Gaya
  • Varanasi
  • Lumbini.

Rana Rule and Democratic Transition

• The Rana oligarchy dominated Nepalese politics from 1846 to 1951.
• Nepalese political activists were influenced by India’s freedom struggle.
• The Nepali Congress played an important role in the democratic movement against Rana rule.
• The Rana system collapsed in 1951, beginning a prolonged struggle between monarchy and democratic forces.

Nepal’s Democratic Evolution

From Monarchy to Republic

• Nepal’s political evolution passed through several phases:
  
  • 1951: End of Rana rule
  • 1959: First parliamentary elections
  • 1960: King Mahendra dissolved Parliament and introduced the partyless Panchayat system
  • 1990: Multiparty democracy restored
  • 1996–2006: Maoist insurgency
  • 2006: Comprehensive Peace Agreement
  • 2008: Monarchy abolished; Nepal became a Federal Democratic Republic
  • 2015: New Constitution promulgated.

Constitution of 2015

• Nepal’s 2015 Constitution established the country as a:
  
  • Federal
  • Democratic
  • Republican
  • Secular state.
• However, sections of the:
  
  • Madhesi
  • Tharu
  • Janajati
  • Dalit communities
• The communities raised concerns over:
  • • Political representation
    • Federal boundaries
    • Citizenship
    • Electoral representation.
• The resulting political agitation significantly affected India-Nepal relations.

2015 Crisis and Its Impact on Relations

• India-Nepal relations deteriorated sharply during the 2015 Madhesi agitation.
• Nepal experienced severe shortages of:
  
  • Fuel
  • Medicines
  • Essential commodities.
• Sections of Nepalese society accused India of facilitating an “unofficial blockade.”
• India denied imposing a blockade and argued that movement was disrupted by protests on the Nepalese side.
• Nevertheless, the episode generated:
  
  • Strong anti-India sentiment
  • Greater emphasis on Nepalese nationalism
  • Nepal’s attempt to diversify connectivity away from India
  • Greater engagement with China.

Nepal’s Diversification towards China

• Following the 2015 crisis, Nepal sought to reduce excessive dependence on India.
• Nepal signed a Transit and Transportation Agreement with China in 2016.
• China subsequently became an increasingly important partner in:
  
  • Infrastructure
  • Roads
  • Connectivity
  • Hydropower
  • Telecommunications
  • Political engagement.
• Nepal also joined China’s Belt and Road Initiative (BRI).
• However, difficult Himalayan terrain means that India continues to remain Nepal’s most practical and important transit route.

Areas of Cooperation between India and Nepal

Political Cooperation

• India and Nepal maintain regular dialogue through mechanisms such as:
  
  • India-Nepal Joint Commission
  • Foreign Secretary-level talks
  • Home Secretary-level meetings
  • Border mechanisms
  • Joint committees on water resources
  • Power and trade-related mechanisms.
• Prime Minister Modi’s 2014 visit to Nepal marked a renewed emphasis on India’s Neighbourhood First Policy.
• India has consistently stated its support for:
  
  • Nepal’s sovereignty
  • Stability
  • Democracy
  • Development.
• High-level exchanges have increasingly focused on economic deliverables rather than political rhetoric.

Economic Relations

• India is Nepal’s largest and most important economic partner.
• India plays a central role in Nepal’s:
  
  • Trade
  • Transit
  • Investment
  • Energy supply
  • Employment
  • Development assistance.
• Nepal’s economy is particularly dependent on Indian routes for access to seaports and international markets.
• Major Indian exports to Nepal include:
  
  • Petroleum products
  • Machinery
  • Iron and steel
  • Vehicles
  • Pharmaceuticals
  • Food products.
• Nepal’s exports to India include:
  
  • Electricity
  • Edible oils
  • Spices
  • Textiles
  • Agricultural products.

Trade Imbalance

• Nepal runs a large merchandise trade deficit with India.
• This creates periodic political concerns within Nepal regarding economic dependence.
• However, India also provides Nepal:
  
  • A large nearby market
  • Transit access
  • Duty concessions
  • Investment
  • Employment opportunities.

Trade and Transit Framework

Treaty of Trade

• India provides preferential market access to many Nepalese products under bilateral trade arrangements.
• Trade arrangements seek to:
  
  • Promote Nepalese industrialisation
  • Facilitate bilateral commerce
  • Reduce logistical barriers.

Treaty of Transit, 2023

• A new India-Nepal Treaty of Transit was signed on 1 June 2023.
• It replaced the previous transit treaty.
• It is valid for seven years and automatically renewable unless terminated according to agreed procedures.
• The revised framework expanded Nepal’s transit opportunities, including greater use of:
  
  • Railways
  • Indian ports
  • Inland waterways.
• This provides landlocked Nepal with more diversified access to global markets.

Connectivity Cooperation

Rail Connectivity

• Important cross-border railway projects include:
  
  • Jayanagar–Kurtha–Bijalpura line
  • Jogbani–Biratnagar railway link
  • Proposed Raxaul–Kathmandu railway.
• Rail connectivity is aimed at reducing:
  
  • Transportation costs
  • Border congestion
  • Trade delays.

Road Connectivity

• India supports:
  
  • Border roads
  • Integrated Check Posts
  • Bridges
  • Terai road projects.
• Improved connectivity is essential for both:
  
  • Trade
  • People-to-people movement.

Integrated Check Posts

• ICPs have been developed at important border points such as:
  
  • Birgunj–Raxaul
  • Biratnagar–Jogbani
  • Nepalgunj–Rupaidiha.
• These facilities improve:
  
  • Customs processing
  • Passenger movement
  • Trade efficiency.

Petroleum Connectivity

Motihari–Amlekhgunj Pipeline

• The Motihari–Amlekhgunj petroleum pipeline, inaugurated in 2019, was the first cross-border petroleum products pipeline in South Asia.
• It has:
  
  • Reduced transportation costs
  • Reduced tanker movement
  • Improved fuel security for Nepal.
• India and Nepal are expanding petroleum connectivity through additional pipeline and storage projects.

Hydropower Cooperation

• Hydropower has become one of the most transformative pillars of India-Nepal relations.
• Nepal possesses enormous hydropower potential because of:
  
  • Himalayan rivers
  • Steep gradients
  • High river discharge.
• India provides:
  
  • Investment
  • Transmission connectivity
  • Market access
  • Technical cooperation.

Long-Term Power Trade Agreement

• In January 2024, India and Nepal finalised a Long-Term Power Trade Agreement.
• It envisages increasing Nepal’s electricity exports to India to up to 10,000 MW within ten years.
• This represents a major shift from traditional donor-recipient relations towards energy interdependence.

Major Hydropower Projects

• Important India-linked projects include:
  
  • Arun-III – 900 MW
  • Arun-IV
  • Lower Arun
  • West Seti
  • Seti River projects.
• Hydropower cooperation benefits:
  
  • Nepal through revenue and investment
  • India through clean electricity and energy security.

Nepal–India–Bangladesh Electricity Trade

• A major new development is the emergence of trilateral electricity trade.
• India has allowed Nepal to transmit electricity to Bangladesh through the Indian grid.
• The first such power transaction began in 2024.
• This is important because it creates the foundations of a future BBIN regional electricity market.

Digital Connectivity

UPI in Nepal

• UPI merchant payments became operational in Nepal in March 2024 through cooperation between NPCI International and Fonepay.
• Indian travellers can use UPI-enabled apps to make QR-based payments at participating merchants in Nepal.
• This strengthens:
  
  • Tourism
  • Small businesses
  • Retail payments
  • Cross-border economic integration.

Fast Payment System Integration

• In February 2024, RBI and Nepal Rastra Bank signed Terms of Reference for linking:
  
  • India’s UPI
  • Nepal’s National Payments Interface.
• The objective is to facilitate cross-border person-to-person and person-to-merchant payments.

Defence Cooperation

• Defence relations remain an important pillar of the bilateral relationship.
• India assists the Nepali Army through:
  
  • Training
  • Equipment
  • Capacity building
  • Disaster-response cooperation.

Exercise Surya Kiran

• Exercise Surya Kiran is the regular India-Nepal joint military exercise.
• Major areas include:
  
  • Counter-terrorism
  • Jungle warfare
  • Mountain warfare
  • Humanitarian Assistance and Disaster Relief (HADR).

Honorary General Tradition

• The Army Chiefs of India and Nepal traditionally receive the honorary rank of General of the other country’s army.
• This symbolises the exceptionally close institutional relationship between the two militaries.

Gorkha Connection

• Nepalese Gorkhas have served in the Indian Army for generations.
• Gorkha recruitment is not merely a defence issue; it also generates:
  
  • Employment
  • Pensions
  • Remittances
  • Social linkages.

Agnipath Issue

• The introduction of India’s Agnipath recruitment scheme in 2022 created uncertainty regarding recruitment of Nepalese citizens into Gorkha regiments.
• Nepal did not immediately permit recruitment under the new system.
• Consequently, traditional recruitment of Nepalese Gorkhas into the Indian Army has remained disrupted since 2022.
• This has become an important unresolved issue in defence relations.

Cultural and Civilisational Relations

Roti-Beti Relationship

• India and Nepal possess extensive cross-border:
  
  • Marriage ties
  • Family relationships
  • Religious connections
  • Shared linguistic communities.
• The open border has allowed these relationships to remain unusually strong.

Religious Links

• Important shared religious centres include:
  
  • Pashupatinath
  • Lumbini
  • Janakpur
  • Ayodhya
  • Varanasi
  • Bodh Gaya.
• Major initiatives include:
  
  • Ramayana Circuit
  • Buddhist Circuit.

Sister-City Partnerships

• Important city partnerships include:
  
  • Kathmandu–Varanasi
  • Janakpur–Ayodhya
  • Lumbini–Bodh Gaya.

India’s Development Assistance to Nepal

• India is one of Nepal’s major development partners.
• Assistance focuses on:
  
  • Education
  • Healthcare
  • Roads
  • Bridges
  • Power transmission
  • Drinking water
  • Community infrastructure
  • Post-disaster reconstruction.
• India has extended multiple Lines of Credit amounting to around US$1.65 billion for various infrastructure and reconstruction projects.

High Impact Community Development Projects

• India’s High Impact Community Development Projects (HICDPs) focus on locally identified projects such as:
  
  • Schools
  • Health centres
  • Drinking-water facilities
  • Community halls
  • Small infrastructure.
• Their significance lies in creating direct grassroots benefits rather than only large flagship infrastructure.

Disaster Cooperation

2015 Nepal Earthquake

• After the devastating April 2015 earthquake, India launched Operation Maitri.
• India provided:
  
  • Search and rescue teams
  • Medical assistance
  • Relief supplies
  • Reconstruction assistance.
• India subsequently committed a US$1 billion reconstruction package.
• Disaster-response cooperation strengthens India’s role as a first responder in its neighbourhood.

Multilateral Cooperation

• India and Nepal cooperate through:
  
  • BIMSTEC
  • BBIN
  • SAARC
  • United Nations
  • Non-Aligned Movement.
• The BBIN framework is particularly important for:
  
  • Connectivity
  • Energy
  • Transport
  • Sub-regional economic integration.

Significance of Nepal for India

Strategic Importance

• Nepal lies directly between India and China.
• Political instability or excessive strategic presence of an external power in Nepal could directly affect India’s Himalayan security.
• Nepal is therefore an important component of India’s northern strategic frontier.

Security Importance

• India and Nepal share an open border, which facilitates legitimate movement but can also be misused for:
  
  • Smuggling
  • Trafficking
  • Counterfeit currency
  • Criminal activity.
• Effective intelligence and border-management cooperation is therefore essential.

Economic Importance

• Nepal provides opportunities for Indian investment in:
  
  • Hydropower
  • Infrastructure
  • Banking
  • Tourism
  • Telecom
  • Manufacturing.

Water Resources

• Rivers originating or flowing through Nepal are crucial for northern India.
• Important shared river systems include:
  
  • Kosi
  • Gandak
  • Mahakali.
• Cooperation is important for:
  
  • Flood control
  • Irrigation
  • Hydropower
  • Climate resilience.

Connectivity

• Nepal can help deepen India’s integration of the Himalayan region and BBIN sub-region.
• Enhanced infrastructure can also support economic development in:
  
  • Bihar
  • Uttar Pradesh
  • Uttarakhand
  • West Bengal.

Significance of India for Nepal

• India provides Nepal with:
  
  • Closest access to the sea
  • Largest nearby market
  • Transit facilities
  • Employment opportunities
  • Energy supplies
  • Development finance
  • Investment.
• India remains one of Nepal’s most important sources of:
  
  • Petroleum
  • Food products
  • Medicines
  • Machinery.
• Millions of Nepalese citizens have historically lived, worked or studied in India under the open-border framework.

Major Challenges in India–Nepal Relations

Border Disputes

• The India-Nepal boundary has been largely demarcated, but disputes remain primarily around:
  
  • Kalapani
  • Lipulekh
  • Limpiyadhura
  • Susta.

Kalapani–Lipulekh–Limpiyadhura Dispute

• The dispute arises from different interpretations of the 1816 Treaty of Sugauli.
• The treaty identified the Kali River as part of the western boundary.
• The disagreement concerns the actual source of the Kali River.
• Nepal argues that the river originates near Limpiyadhura, placing:
  
  • Limpiyadhura
  • Kalapani
  • Lipulekh
    within Nepal.
• India maintains that these territories form part of Uttarakhand.

Nepal’s New Political Map

• In 2020, Nepal adopted a revised political map incorporating:
  
  • Kalapani
  • Lipulekh
  • Limpiyadhura.
• India rejected the map as a unilateral alteration of territorial claims.
• The dispute remains unresolved and requires bilateral diplomatic negotiation.

Susta Dispute

• Susta lies near the Gandak/Narayani River.
• The dispute arose partly because of shifts in the river’s course.
• Unlike Kalapani, it is linked primarily to:
  
  • River morphology
  • Historical boundary interpretation.
• Technical boundary mechanisms are better suited to address such disputes than political mobilisation.

Water Issues

• India-Nepal water relations have sometimes been affected by disagreements over:
  
  • Kosi Agreement
  • Gandak Agreement
  • Mahakali Treaty
  • Flood management
  • Hydropower benefit-sharing.
• Nepal has sometimes perceived earlier agreements as providing disproportionate benefits to India.
• India, meanwhile, emphasises:
  
  • Flood control
  • Irrigation
  • Power generation
  • Joint development.

Pancheshwar Multipurpose Project

• The Pancheshwar Multipurpose Project arises from the Mahakali Treaty of 1996.
• It has enormous potential for:
  
  • Hydropower
  • Irrigation
  • Flood management.
• However, the project has faced repeated delays over:
  
  • Benefit sharing
  • Water valuation
  • Technical issues.

Open Border: Opportunity and Challenge

Opportunities

• The India-Nepal open border is a unique strategic asset.
• It facilitates:
  
  • Labour mobility
  • Trade
  • Family links
  • Pilgrimage
  • Tourism.
• But it can also be exploited for:
  
  • Human trafficking
  • Narcotics trafficking
  • Smuggling
  • Criminal movement.
• The policy challenge is therefore:

Keep the border open for legitimate movement while making it smarter and more secure.

1950 Treaty of Peace and Friendship

• The treaty remains the institutional foundation of the special bilateral relationship.
• It recognises:
  
  • Sovereignty
  • Territorial integrity
  • Close security cooperation
  • Special privileges for citizens.
• However, sections of Nepal’s political class regard the treaty as:
  
  • Outdated
  • Asymmetrical
  • Symbolic of excessive Indian influence.
• Both countries have discussed reviewing and updating the treaty, but no revised treaty has been concluded.

Eminent Persons Group

• An Eminent Persons Group (EPG) consisting of representatives from both countries was established to review the overall relationship, including the 1950 Treaty.
• The EPG completed its report in 2018.
• However, the report has not been formally acted upon.
• The continuing debate reflects the need to modernise bilateral frameworks while preserving the open-border and people-centric character of the relationship.

Challenges

China Factor

• China’s growing role in Nepal is one of India’s major strategic concerns.
• Chinese engagement includes:
  
  • BRI projects
  • Roads
  • Infrastructure
  • Digital networks
  • Political engagement
  • Security cooperation.
• Nepal seeks to balance relations with both India and China, rather than depend completely on either.

India’s Appropriate Response

• India should avoid treating every Nepal-China engagement as a zero-sum contest.
• A stronger response is to compete through:
  
  • Faster delivery
  • Grants
  • Connectivity
  • Hydropower markets
  • Digital integration
  • Education
  • People-to-people relations.
• India’s geographical proximity and social links remain advantages that China cannot easily replicate.

Madhesi Issue

• Madhesis are communities primarily inhabiting Nepal’s Terai region along the Indian border.
• During the 2015 constitutional process, Madhesi groups raised concerns regarding:
  
  • Political representation
  • Provincial boundaries
  • Citizenship
  • Inclusion.
• Because of deep familial and ethnic links across the border, developments in the Terai have direct social and political implications for India.
• India’s involvement, however, has sometimes been perceived in Nepal as interference in domestic politics.
• The lesson for India is to favour quiet diplomacy and institutional engagement rather than public political pressure.

Trust Deficit and Anti-India Sentiment

• Sections of Nepalese society periodically accuse India of:
  
  • Political interference
  • Project delays
  • Economic dominance
  • Excessive influence.
• Anti-India sentiment can also be used by political parties for domestic nationalist mobilisation.
• India therefore needs to replace perceptions of a “big brother” with those of an equal and reliable partner.

Challenges in Project Implementation

• India’s development projects have sometimes suffered from:
  
  • Administrative delays
  • Slow land acquisition
  • Coordination problems
  • Project cost escalation.
• Delayed implementation can weaken India’s credibility relative to external competitors.
• Faster project delivery is therefore a strategic requirement, not merely an administrative concern.

Climate and Environmental Challenges

• India and Nepal share the fragile Himalayan ecosystem.
• Common threats include:
  
  • Glacial retreat
  • Glacial Lake Outburst Floods (GLOFs)
  • Landslides
  • Flash floods
  • River sedimentation
  • Climate-induced disasters.
• Joint cooperation should include:
  
  • Glacier monitoring
  • Early-warning systems
  • Flood forecasting
  • Watershed management
  • Climate-resilient infrastructure.

Measures Needed to Strengthen India–Nepal Relations

Modernise the Relationship

• Both countries should review outdated arrangements through mutual consultation and sovereign equality.
• A modernised relationship should preserve:
  
  • Open border
  • National treatment advantages
  • Security cooperation
    while addressing Nepal’s concerns over asymmetry.

Resolve Border Disputes Technically

• Kalapani, Lipulekh, Limpiyadhura and Susta should be addressed through:
  
  • Historical maps
  • Treaty documents
  • Survey data
  • Geospatial technology
  • Sustained diplomatic negotiation.
• Border disputes should not be allowed to dominate the entire relationship.

Expand Hydropower Integration

• Implement the 10,000 MW power trade target.
• Promote:
  
  • Joint ventures
  • Transmission corridors
  • Renewable-energy cooperation
  • BBIN electricity trade.
• Energy interdependence can become the strongest stabilising factor in bilateral relations.

Strengthen Digital Integration

• Expand:
  
  • UPI connectivity
  • Remittance platforms
  • Cross-border banking
  • FinTech cooperation.
• Digital integration can directly benefit:
  
  • Migrant workers
  • Traders
  • Tourists
  • Students.

Improve Connectivity

• Accelerate:
  
  • Rail links
  • Roads
  • Petroleum pipelines
  • Integrated Check Posts
  • Inland waterways.
• Connectivity should transform the open border into an economic growth corridor.

Resolve the Gorkha Recruitment Issue

• India and Nepal should seek a mutually acceptable framework concerning recruitment of Nepalese citizens into the Gorkha regiments.
• The issue has:
  
  • Defence
  • Employment
  • Pension
  • Social-security implications.

Strengthen Sub-Regional Cooperation

• India and Nepal should use:
  
  • BBIN
  • BIMSTEC
    to promote:
  • Energy integration
  • Connectivity
  • Trade
  • Disaster management.

Promote Climate Cooperation

• Establish stronger bilateral mechanisms for:
  
  • GLOF monitoring
  • Flood management
  • Himalayan research
  • Climate-resilient infrastructure.

Focus on People, Not Only Governments

• India-Nepal relations are strongest when centred on:
  
  • Students
  • Migrant workers
  • Pilgrims
  • Businesses
  • Border communities
  • Cultural institutions.
• The relationship should therefore remain people-centric rather than exclusively elite-driven.

Way Forward

• The future of India-Nepal relations should rest on four interconnected pillars:

Connectivity + Energy + Development + Mutual Sensitivity

• India should:
  
  • Respect Nepal’s sovereign choices
  • Avoid unnecessary involvement in domestic politics
  • Accelerate project implementation
  • Expand non-reciprocal developmental benefits where feasible.
• Nepal should recognise the unique advantages offered by:
  
  • Open-border arrangements
  • Access to Indian markets
  • Transit to the sea
  • Employment opportunities
  • Energy trade.
• Both countries should transform their relationship from one based primarily on historical sentiment into one of institutionalised economic interdependence.

Conclusion

• India-Nepal relations are among the most unique relationships in South Asia because they connect states, societies, economies and families simultaneously.
• Periodic disputes over:
  
  • Borders
  • Political interference
  • China
  • The 1950 Treaty
    should not be allowed to overshadow this structural interdependence.
• The strongest contemporary opportunities lie in:
  
  • 10,000 MW electricity trade
  • Cross-border railways
  • Petroleum pipelines
  • Digital payments
  • BBIN energy trade
  • Climate cooperation.
• The long-term objective should be:

“From Roti-Beti relations to Connectivity-Energy-Digital Interdependence.”

• A relationship based on mutual respect, sovereign equality, faster delivery and deeper economic integration can make India-Nepal ties more resilient to political fluctuations.