India-Nepal Bilateral Ties
Why in News?
Recently, Nepal's Finance Minister was on a visit to India, where he held meetings with India's Finance Minister and External Affairs Minister to discuss bilateral cooperation.
The Inter-Governmental Sub-Committee on Trade, Transit, and Cooperation to Control Unauthorized Trade concluded its deliberations. The meeting covered a wide range of issues, including market access, customs and trade facilitation, standards, food safety, border infrastructure, and rail and road connectivity. At the top of the agenda during the External Affairs Minister’s engagement were Nepal’s post-flood reconstruction plans and the reset of India-Nepal ties under the newly elected government.
Overview of India-Nepal Relations:
| Shared Border: | Nepal shares its border with five Indian states, such as Sikkim, West Bengal, Bihar, Uttar Pradesh, and Uttarakhand. Being land-locked, Nepal depends heavily on India for transport of goods and services and for access to the sea. |
| Treaty of Peace and Friendship 1950: | Signed in 1950, it forms the bedrock of special relations between India and Nepal. Under its provisions, Nepalese citizens are afforded facilities and opportunities on par with Indian citizens. |
| Defense Cooperation: | India assists the Nepal Army in modernization through equipment and training. Both countries conduct joint exercise, Surya Kiran, alternately. Since 1950, both Army Chiefs have been awarded the honorary rank of General by each other. Gorkha regiments of the Indian Army are partly raised from hill districts of Nepal. |
| Trade and Economic Ties: | In FY 2025-26, bilateral goods trade was about USD 9.38 billion, which is more than 60% of Nepal's total external goods trade. India is Nepal's biggest export destination, receiving over 80% of Nepal's exports, and the largest source of FDI, accounting for almost one-third of total FDI. |
| Connectivity and Development Partnership: | India is the largest development donor of Nepal in health, education, and connectivity. Major projects include Gauchar Airport (now Tribhuvan Airport), the East-West Highway, cross-border rail links, and integrated check posts. Since 2006, India has provided lines of credit worth USD 750 million. |
| Energy Cooperation: | India and Nepal have had a power exchange agreement since 1971 for border areas. The Joint Vision Statement on Power Sector Cooperation 2022 includes joint development of power projects in Nepal, cross-border transmission infrastructure, and coordinated grid operation. |
| Humanitarian Assistance: | India was the first responder during the 2015 earthquake and carried out its largest abroad relief operation, Operation Maitri. In August 2026, India again launched an HADR response after devastating flash floods in Nepal, showing its role as a first responder in the neighborhood. |
| Cultural Ties: | Leaders of both countries often refer to the age-old 'roti-beti' relationship, meaning cross-border marriages and deep people-to-people bonds. |
Areas of Concern between India and Nepal:
Treaty of Peace and Friendship 1950: The treaty was signed to strengthen ties and maintain peace. Over time, Nepal has felt it is asymmetrical and not fully compatible with its national interest. India has said it is open to reviewing the treaty in a constructive and forward-looking manner.
Kalapani Dispute: Kalapani is under India's control, but Nepal claims it on historical grounds. It remains the largest territorial dispute between the two countries.
Trust Deficit: There is a perception in Kathmandu that India interferes in Nepal's internal politics. At the same time, India is concerned about growing Chinese influence in Nepal's infrastructure, trade, and political decisions. Occasional political narratives in Nepal also portray India as hegemonic.
Security Concerns: Both countries share concerns related to cross-border terrorism, trafficking, and border security, which need close coordination.
Perception of Unequal Relationship: A section of Nepalese society feels the relationship is unequal, with concerns about economic dependence on India and lack of reciprocity.
Way Ahead:
Despite challenges and disputes, India and Nepal have historically shared close ties and continue to engage through dialogue and diplomacy to resolve bilateral issues.
Both sides recognize the importance of this relationship and remain committed to finding mutually acceptable solutions while promoting cooperation and friendship for the benefit of their people.
Conclusion
India and Nepal share a unique relationship rooted in geography, history, culture, and deep people-to-people ties. While issues like the 1950 Treaty, boundary disputes, and trust deficit remain, the strength of cooperation in defense, trade, connectivity, energy, and humanitarian assistance shows the resilience of this partnership. A forward-looking approach based on mutual respect, equality, and regular dialogue is key. With Nepal's post-flood reconstruction and reset in bilateral ties, there is an opportunity to move from historical grievances to a future-oriented partnership that ensures stability and prosperity for both countries and for the region.
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