India remains a major trade and transit partner, and a number of Nepalis continue to earn their livelihood or pursue higher education here in India.
India–Nepal relations are the bilateral relations between the Republic of India and the Federal Democratic Republic of Nepal. Both countries initiated their relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship.
Since the China-Nepal borders pass through rugged terrain with limited road access, Nepal heavily relies on India for all its imports of goods. Two-thirds of Nepalese trade depends on India and Nepal has a trade deficit with India of $145 billion, as of 2024-2025.
Nepal shares a border of over 1,850 km with five Indian states – Sikkim, West Bengal, Bihar, Uttar Pradesh, and Uttarakhand.
As a landlocked country with India on three sides and China on the fourth, Nepal’s strategic significance cannot be overstated.
History and Evolution of the Indo-Nepal Ties:
India’s influence over Nepal increased throughout the 1950s. The Treaty of Trade and Commerce between the two countries was ratified in October 1950, wherein India acknowledged Nepal’s right to import and export commodities through the Indian territories and ports. As per the treaty, customs duties could not be levied on commodities that were in transit through India.
In 1969, relations between the two countries became stressful, as Nepal challenged the existing mutual security arrangement and asked that the Indian security check-posts and liaison group be withdrawn. India withdrew its military check-posts and liaison group consisting of 23 military personnel in 1970 from all but the Kalapani area of Nepal, although the treaty was not abrogated.
In 1989, Nepal decoupled its rupee from the Indian rupee, which had been circulating in Nepal freely. This further strained the relationship between the two countries. India retaliated by denying port facilities in Calcutta to Nepal, thereby preventing the delivery of oil supplies from Singapore and other source countries.
Shortly after the imposition of sanctions, Nepal experienced serious deficiencies of important goods such as coal, fuel, oil, medicine, and spare parts. Nepal also suffered economically from higher tariffs, the closure of border points, and the tense political atmosphere.
In 1990, a new government in Nepal, led by pro-India parties, sought a quick restoration of amicable relations with India. The special security relationship between New Delhi and Kathmandu was re-established during the June 1990 New Delhi meeting of Nepal’s Prime Minister and Indian Prime Minister V.P. Singh, after India ended its 13-month-long economic blockade of Nepal.
In 2008, Indo-Nepal ties got a further boost with an agreement to resume water talks after a 4-year hiatus.
Prime Minister of India Narendra Modi visited Nepal in August 2014, marking the first official visit by an Indian Prime Minister in 17 years.
When a devastating earthquake struck Nepal in 2015, India provided swift assistance by sending rescue teams, relief materials, and medical support. But that was seen as an interference and an uncalled intrusion of troops, though this action had been well-meaning.
Also, in 2015, Nepal promulgated its new Constitution, but the Madheshis felt they were marginalized and being left out of the new constitution. Some groups, the Madheshis in particular, then organized small-scale protests and blockaded a portion of border India-Nepal border. The Nepalese government accused India of deliberately blockading the entirety of the border by not allowing vehicles to pass from checkpoints where no protests were held. Fruits and vegetables were allowed to pass, but not oil, petroleum and gasoline. Thousands of people lined up for as long as 12 hours in the streets of different cities in the country for food, gasoline, cooking gas, and necessary commodities.
As a result, on March 21, 2016, Prime Minister Oli went to China and signed the Transit and Transportation Agreement. According to the agreement, China will give access to the sea via the Chinese port of Tianjin, which is 3,000 km away from Nepal. China, in addition to the transit and transportation treaty, made commitments to provide financial and technical support for the rail network
connectivity.
Territorial Dispute:
Ties between the two countries came under severe strain in 2020 after Kathmandu published a new political map that showed the three Indian territories – Limpiyadhura, Kalapani and Lipulekh – as part of Nepal.
The Sugauli Treaty, signed by Nepal and British India on 4 March 1816, locates the Kali River as Nepal’s western boundary with India. Subsequent maps drawn by British surveyors show the source of the boundary river at different places. This discrepancy in locating the source of the river led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims.
Ongoing Projects:
India has built several hydroelectric projects in Nepal, for eg, Western Gandak, Devighat, etc. Agreements have been signed for the development and implementation of 490.2 MW Arun-4 hydropower project. The project is expected to generate electricity for Nepal, India as well as Bangladesh.
Nepal’s willingness to export its hydro power and India’s need for energy have been one avenue in which the two sides have cooperated extensively. At present, as per some estimates, Indian companies have licenses for the generation of 4000 MW of hydropower.
In 2023, another long-term power trade agreement was signed between India and Nepal to export 10,000 megawatts of electricity from Nepal to India in the next 10 years. This was essential for Nepal to boost investors’ confidence in the hydro sector and ensure returns on their investment.
Also, a total of about 600 MW of power is currently being supplied by India to Nepal through different transmission lines, assisting Nepal to overcome its own power shortage. Nepal has also extended an invitation to Indian businesses to invest in the West Seti Hydropower Project.
The Motihari-Amlekhgunj petroleum pipeline was inaugurated in 2019. It is the first-ever cross-border pipeline in South Asia.
India’s Military Ties with Nepal:
Nepal and India have long-standing military ties, and since 1950, we have a custom of awarding the honorary rank of General to each other’s Army Chiefs. India has been giving training and equipment to aid the Nepali Army (NA). Other facets of India’s defence cooperation with Nepal include assistance during disasters, joint military exercises, adventure activities, and bilateral visits.
Many Nepal Army personnel attend training courses at various Indian Army training facilities. India and Nepal engage in an annual joint exercise called ‘Surya Kiran’ with the latest edition being Exercise Surya Kiran XVIII, held between December 2024 and January 2025.
The Gorkha regiments of the Indian Army are raised partly by recruitment from the hill districts of Nepal. Currently, about 32,000 Gorkha Soldiers from Nepal are serving in the Indian Army.
Challenges in the Relations:
Apart from the cartographic aggression from Nepal, for many years, Nepal had a policy that its elected Prime Minister’s first official foreign visit was always to India. This has changed recently. Nepal is now preferring China for its first official foreign tour.
For many small and medium Nepali businesses, it is now easier to trade with China because our rules have made it harder to do business with India. Chinese investments are replacing Indian investments. In 2019, for instance, China accounted for approximately 40% of new FDIs against India’s 30%.
Nepal has been moving away from India’s sphere of influence in recent years, and China has been filling the void with investments, aid, and loans. China plans to invest in Nepal’s infrastructure as part of its ambitious BRI (Belt and Road Initiative) to increase global trade.
The trust deficit between India and Nepal has grown over time due to India’s notoriously slow pace of project implementation.
Some Nepalese ethnic groups dislike India because they think that India meddles too much in Nepal’s politics and interferes with their political sovereignty.
Nepal is a landlocked country heavily reliant on Indian ports and infrastructure for access to global trade. Seeking alternatives, Nepal has increasingly turned to China for connectivity. Agreements with China for access to its ports (such as Tianjin and Lianyungang) and participation in the Belt and Road Initiative (BRI) are part of this broader effort to diversify trade routes.
India’s Agnipath scheme has dealt a death blow to the longstanding military ties. The Gorkha connection, in particular, has been a bridge between the two nations. In principle, the Agnipath scheme is open to Nepali Gorkhas, as the eligibility criteria for Indian Army Agniveers include citizens of both India and Nepal. However, the recruitment of Nepali Gorkhas under the Agnipath scheme has been on hold since Nepal’s government blocked it in protest in August 2022. While the traditional long-term service grants Nepali Gorkha military personnel, benefits on par with their Indian colleagues, new recruits under the Agnipath scheme will be limited by the fixed four-year service, if not retained. They will not receive a military pension or long-term social security benefits. Since the launch of the Agnipath Scheme, no Gorkha has been recruited in the Indian army, as Nepal is unwilling to send its citizens to serve for merely four years.
Way Ahead:
We should make investments in Nepal and increase our percentage of FDI in Nepal. To overcome the roadblocks, all obstacles to starting up and investing in the Nepalese manufacturing and services sectors should be removed. Projects benefiting local people will help create goodwill for India. India’s investments should account for 45% of the total FDI in Nepal.
Building trust while maintaining distance and respect for each other is important. Border disputes between Nepal and India are not unresolvable. With proper negotiation, laying down proper defences and check posts wherever required, and decamping wherever not required, it can be done. This issue is not as difficult as that with Pakistan or China.
Under India’s ‘Neighbourhood First’ policy, the focus should be on working on the convergences. We have areas of convergence in terms of trade and security. We should focus on that. Nepal should not be allowed to fall into China’s lap.
It is also important for India to engage intensively with Nepalese political parties. Even as strong bonds with traditional friends continue, we should try to shape a cross-party consensus-based future for a steady growth trajectory in ties. MP-level meet and Lok Sabha speaker-level meet can precede the PM’s visit in the future.
We should do away with the Agnipath Scheme or modify it, especially in the area of Nepali Gorkha recruitment in the Indian Army to retain them for long term, and take Nepalese government into confidence.
We should focus on building cross-border rail links, air links, oil pipelines, electrical lines, along with hydro power projects.
India and Nepal are members of BIMSTEC and SAARC. We should leverage this position for India’s interests.
Nepalese students should be allowed to pursue studies in India with due protection and safety, without fear of being harassed.
Digital financial connectivity will facilitate cross-border payments to traders, tourists, pilgrims, students, and individuals traveling from Nepal to India for medical treatment.
Our military engagement should also increase with the Indian Army and Indian Air Force joint exercises with the Nepalese counterparts, without sounding interfering or posing a threat to Nepal’s sovereignty. This will also help in the intelligence gathering required to thwart any attack on India from Nepalese soil.
Conclusion:
India and Nepal are bound by geography, history, Buddhism, and centuries-old people-to-people ties. These shared bonds must be nurtured through pragmatism, mutual respect, and cooperation. By focusing on trust-building, connectivity, and equitable partnerships, India and Nepal can carry forward their relationship with the spirit of South Asian unity.
–YOGITA KADU
