India Diplomacy 
Facets of India-Nepal Politics

NATSRAT | 07/12/2023

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NatStrat is an independent, not-for-profit centre for research on strategic and security issues. It is headed by its Convenor, Pankaj Saran, and has Shantanu Mukharji as its Adviser.

The 21st century is upon us. The post-World War II global architecture is becoming unsustainable. The international security and strategic environment is changing. The centre of gravity of global influence is shifting, and new powers are emerging. India is one of them. Despite the odds, India has withstood internal and external challenges to preserve its democratic and constitutional ethos. Its diversity and pluralism have grown while being firmly rooted in its civilisational heritage. As a result, the states of India are more empowered today than before. More than half its population, larger than the combined size of Europe and the US, is under the age of thirty. The transformation underway in India will unleash powerful impulses beyond India’s borders. This will profoundly impact the world’s political, social, cultural and economic systems. As India rises and finds its rightful place on the world stage, its unique identity, traditions and value systems will become critical to global peace and stability.
India is looking ahead to mark the centenary year of its post-independence existence. How India thinks will matter. How India acts will matter even more.
The success of India is crucial to humankind. We seek to understand the domestic and external security challenges facing India and what drives India’s strategic calculations. We will ask the right questions without fear or favour and provide our views and insights fearlessly. We will bring an authentic Indian perspective to understanding the world. We aim to make India’s voice heard and count in the international community.

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About NatStrat
Nepal Institute for International Cooperation
and Engagement (NIICE) is an independent,
apolitical and non-partisan think tank based in
Nepal, which believes in freedom, democracy
and a world free from conflict. We envision a
world, where sources of insecurity are identified
and understood, conflicts are prevented or
resolved, and peace is advocated. It was
registered under the Companies Act 2006 of
Nepal in February 2016.
Nepal Institute for International Cooperation
and Engagement (NIICE) was formed to meet
the following objectives:
• To undertake independent research and
activities on issues of International Relations,
Foreign Policy, Security Studies and
Development, which are conducive to world
at large and Nepal in particular;
• To provide analyses and recommendations to
the governments, policymakers, researchers
and civil society;
• To nurture genuine scholarships and creativity
in the field of research;
• To forge strong interdisciplinary programmes
and engage in productive partnerships with
different research and academic institutions
around the world;
• To support independent research, enable
scholars to produce monograph, issue briefs,
articles, reports, books, and to hold
• To publish journals on the issues of global
significance and concern, and provide
up-to-date information and analysis about
world events.
NIICE’s mission is to advance the cause of peace
and harmony through analyses and debates on
fresh policy ideas, cooperation with global
institutes and think tanks, as well as direct
engagement and collaboration with decision
makers in government, business, and civil society.
Working together, NIICE aims at reaching the
inestimable benefits of multiple viewpoints for
bilateral, regional, and global issues.
India and Nepal occupy a common geographical,
cultural and historical space. Since India’s
independence, relations with Nepal have been a
key factor in New Delhi’s regional engagement.
The relationship has been largely free from major
irritants, though there have been challenges
which have been dealt with by the two sides in a
mutually beneficial way. Nepal has been
undergoing a political transition, with new forces
and a younger generation emerging. The ongoing
political and socio-economic changes in Nepal
are important not only for Nepal’s future but also
for its relations with India. To highlight some
aspects of the complex India-Nepal relationship,
NatStrat in collaboration with the Nepal Institute
for International Cooperation and Engagement
(NIICE), Kathmandu, has brought out a
compilation of essays by Indian and Nepali
writers and commentators.
This issue starts with a special feature by
Ambassador Pankaj Saran, who in his article
India-Nepal Relations: Regional,
Sub-regional and Bilateral Opportunities has
highlighted the useful role that initiatives like
BBIN and BIMSTEC can play in promoting
India-Nepal relations.
In the first section, experts from Nepal dwell on
some important issues in Nepal-India ties.
Anurag Acharya highlights importance of
economic, trade and development benefits in his
piece, Nepal-India: An Understated
Partnership. Binoj Basnayat in his piece,
Nepal – India Security Relationship in the
Making argues that failure to recognise the
Gurkhas as an integral part of the Indian Army
could weaken the ‘diplomatic bridge’ between
Nepal and India. Kamal Dev Bhattarai has
advocated the need for better media coverage in
his article The Role of Media in
Strengthening Nepal-India Relations.
In the next article, The Evolving Dynamics of
India-Nepal Economic Ties, Sunil Kumar
Chaudhary emphasises importance of tourism,
education and technology. Pramod Jaiswal, in
his article, The China Factor in Nepal-India
Relations has highlighted the depth of
India-Nepal relations while comparing
India-China engagement with Nepal. In the last
piece of this section, Soft Power Dimensions
of Nepal-India Relations, Sumitra Karki
highlights the importance of Bollywood and
religious tourism in Nepal-India relations.
In the second section, Indian experts have
written on India-Nepal engagement. In the first
article, Anuttama Banerji has highlighted
India’s humanitarian assistance to Nepal as an
important aspect of New Delhi’s
Neighbourhood First policy. In India-Nepal
Relations: Need to Address Youth
Aspirations, Sabyasachi Datta has highlighted
the need for youth engagement to further
strengthen India-Nepal ties. Avadhesh Mathur
in his piece India-Nepal: Rich History, Bright
Future has given a series of recommendations as
a way ahead. In his article India-Nepal
Hydro-energy Collaboration: Contemporary
Challenges and Negotiations, Nihar R.
Nayak makes a strong case for hydropower
cooperation. In the final article, India-Nepal
Relations in the Contemporary Geopolitical
Context, Ambassador Ranjit Rae provides a
strategic and overarching view of all major
aspects of the relationship.
Keywords: India-Nepal, Neighbourhood First Policy,
HADR, Hydropower, Connectivity
Table of Contents
Nepal-India: An Understated Partnership 08
Anurag Acharya
Nepal – India Security Relationship in the Making 11
Binoj Basnayat
The Role of Media in Strengthening Nepal-India Relations 15
Kamal Dev Bhattarai
The Evolving Dynamics of India-Nepal Economic Ties 18
Sunil Kumar Chaudhary
The China Factor in Nepal-India Relations 22
Pramod Jaiswal
Soft Power Dimensions of Nepal-India Relations 26
Sumitra Karki
Special Feature: India-Nepal Relations: Regional, Sub-regional
and Bilateral Opportunities 02
Pankaj Saran
Views from Nepal
Indian Humanitarian Assistance and Disaster Relief in Nepal:
Swift, Sure and Selfless 32
Anuttama Banerji
India-Nepal Relations: Need to Address Youth Aspirations 36
Sabyasachi Datta
India-Nepal: Rich History, Bright Future 39
Avadhesh Mathur
India-Nepal Hydroenergy Collaboration:
Contemporary Challenges and Negotiations 43
Nihar R. Nayak
India-Nepal Relations in the Contemporary Geopolitical Context 48
Ranjit Rae
Views from India
Special Feature
Pankaj Saran
Convenor, NatStrat
A lot of progress has been made in this direction
in the last few years, but much more could have
been made had Pakistan not blocked and derailed
the SAARC process that was initiated by
Bangladesh in the mid – 1980s.
It is amply clear that the Indian sub-continent
needs economic cooperation in order to uplift its
people out of underdevelopment.
It has been argued that the Indian subcontinent
has not been a fertile ground for regional
cooperation due to border disputes, security
concerns, economic disparities and frequent
political tensions. With only 3.5 percent of the
world's land surface area, South Asia hosts
one-fourth of earth’s population which makes it
the most densely populated region in the world.
According to a 2021 World Bank study,
intraregional trade in South Asia is 5-6 percent of
total trade while the intraregional investments are
low at 0.6 percent of the total inward Foreign
Direct Investment from other countries.1
exception that each of the countries
of the subcontinent is deeply
integrated with the Indian economy
rather than with each other. It is for
this reason that India is a natural
bridge and partner for each country
in the subcontinent, and has to drive
the process of regional integration.
The assertion of the subcontinent
being poorly connected and
integrated however overlooks the
disparities in the size and nature of
the economies and absence of both
complementarities and economies of
scale among them, with the
Pankaj Saran
Credits: The Week
Facets of India-Nepal Relations 02
Political obduracy and hostility
towards India by Pakistan have been
one of the main factors responsible
As part of these efforts, another regional
mechanism, the Bay of Bengal Initiative for
Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC) and sub-regional
arrangement, the Bangladesh, Bhutan, India,
Nepal (BBIN) Initiative have taken shape and
have a lot of potential. In 2017, India’s Ministry
of External Affairs clubbed the BIMSTEC
Division with that of the SAARC Division. From
India’s point of view, the above initiatives are
necessary alternatives to SAARC if any form of
regional cooperation is to move ahead. They are
also a reflection of India’s larger foreign and
economic policy initiatives such as the
Neighbourhood First Policy, Act East and
Indo-Pacific policies.
India-Nepal cooperation is a very important
element of these initiatives which has the
potential to bring fruits of real development to
the Himalayan country and also help its efforts to
achieve the Sustainable Development Goals.
Nepal’s economic connections with India’s
northern and north-eastern states are also being
given special attention.
During his first term as Prime Minister, Shri
Narendra Modi made serious efforts to
reinvigorate SAARC. In a bold move, he invited
all SAARC leaders for the swearing-in ceremony
of his government in 2014, but soon thereafter a
series of terror attacks were launched by Pakistan
in India, effectively nullifying the incipient peace
process. In 2019, Prime Minister Modi instead
invited the BIMSTEC countries to attend his
swearing-in ceremony. This marked a major shift
in his approach to the region and to regional
The idea of BIMSTEC is woven around the ‘Bay
of Bengal’ as a common neighbourhood which
could help landlocked countries like Nepal to
further increase their maritime trade and also find
connectivity to Southeast Asia. The increased
and diversified economic connectivity would not
only increase Nepal’s exports but also have the
potential to strengthen Nepal’s tourism sector by
attracting Buddhist pilgrims from Myanmar, Sri
Lanka and Southeast Asian countries.4
Hydropower and cross-border river transport are
other areas within BIMSTEC that could further
strengthen India-Nepal economic ties.
Sub-regional cooperation has a history in South
Asia that goes back to the 1990s. In 1996, Nepal
had proposed the establishment of the South
Asian Growth Quadrangle (SAGQ) that included
Bangladesh, Bhutan, Nepal and the north eastern
states of India. Later, the SAARC Summits in
Male (1997) and Colombo (1998) endorsed the
idea of sub-regional cooperation focusing on
trade, transit, water and energy.5 Domestic and
regional priorities in member states have
prevented the requisite enthusiasm towards
SAGQ which later received a new lease of life in
2014 at the Kathmandu SAARC Summit.
Pakistan blocked India’s proposal for the SAARC
Motor Vehicles Agreement at this meeting which
prompted New Delhi to push for the BBIN
Motor Vehicles Agreement that was signed in
BIMSTEC can emerge as a
springboard for Nepal for its
engagement in the Indo-Pacific, an
idea which is being pursued by South
and Southeast Asian countries with
varying degrees of enthusiasm.
Nepal should not fall behind in this
process as the Indo-Pacific is fast
emerging as a dynamic engine of
growth for the entire region.
Facets of India-Nepal Relations 03
for underperformance of SAARC.
The other countries in the region
have become collateral damage in
this process which deprives them of
better development and connectivity
opportunities. This has prompted
Indian policymakers to ‘reimagine’
the idea of the neighbourhood itself
in which alternatives to a
whole-of-South Asia neighbourhood
has been explored.3
In economic terms, Bangladesh is a success story
in the region while Nepal, Bhutan and India’s
north eastern states constitute a cultural
sub-region with many similarities, including in
food and cultural habits.6 Their geographical
proximity makes a strong case for economic
integration between them. One emerging area in
this regard is the establishment of a
hydroelectricity grid. Bangladesh is now investing
in the hydropower sector of Nepal and Bhutan
with an aim to import electricity via India. It has
finalised a power purchase agreement (PPA) with
Nepal to import 500 MW of electricity from the
proposed 900 MW run-of-the-river hydroelectric
power plant – Upper Karnali Hydropower
Project – which is supposed to be developed by
India's GMR Group.7
BBIN is attracting attention from the European
Union as well. The first EU-India Global
Gateway conference was held in June 2023 in
Meghalaya in order to explore opportunities for
connectivity and investments in India’s north
eastern states and the immediate sub-Himalayan
neighbourhood that includes Nepal and Bhutan.
There are, however, certain problems that need
attention such as inadequate border crossing
infrastructure, paper-based procedures,
restrictive regulations and policies and inefficient
cargo handling logistics. Due to these issues,
India’s unrealised potential for trade with BBIN
countries is 50 percent while the same figure for
Nepal stands at 76 percent.9 Organisationally,
most of the BBIN meetings take place at the
senior officer level. Summit level meetings and
formal organisation structures with a
well-defined charter would elevate BBIN’s profile
in the region and would also ensure speedy
implementation of projects.10 Bhutan has
India is planning to expand the
BBIN electricity grid to include
Southeast Asian countries that could
emerge as a unified market. For
Nepal, BBIN could also facilitate
multi-modal transport opportunities
via road, rail and inland waterways.
This would not only reduce costs but
also the carbon emissions.8
however yet to arrive at a domestic consensus on
its role in the BBIN.
Nepal’s Connectivity with
Indian States
In addition to the relationship between Delhi and
Kathmandu, Nepal’s economic, cultural and
social links with the Indian States of
Uttarakhand, Uttar Pradesh, Bihar, West Bengal
and Sikkim are extremely important. UP and
Bihar share a long border with Nepal while
Raxaul and Jogbani are among the most
important transit routes between India and
Nepal. These Indian states not only share similar
ecosystems and agro-climatic conditions with
Nepal but also have common and close historical
and religious traditions and practices in terms of
Hinduism and Buddhism.11 They also play an
important role in the Buddhist circuit.
Historical and socio-cultural ties between Nepal
and north eastern states of India hold a lot of
potential for sub-regional cooperation between
the two countries. Economic complementarities
between the two regions also indicate that such
cooperation would be successful.12
With the failure of SAARC, there is ample scope
for alternate regional and sub-regional
cooperation. India and Nepal cooperation would
be very important to ensure success of initiatives
like BIMSTEC and BBIN. Bordering Indian
States have a deep historical and religious
connection with Nepal. These states can and
have been at the centre of India’s connectivity
and economic plans for Nepal. Connectivity does
The first broad gauge passenger rail
service between Bihar and Nepal
started in 2022 which has been
successfully running. In 2019, India
and Nepal started the first
cross-border oil pipeline in South Asia
with a 69-km-long petroleum pipeline
between Motihari in Bihar and
Amlekhgunj in Nepal's Bara district.
Facets of India-Nepal Relations 04
not stop at these states. Indian sea ports along its
peninsula coastline and transit opportunities can
connect Nepal to the Indian Ocean and other
sub-regions of West, Central and South-East
Asia. There is a need to address challenges
through improving border infrastructure, use of
digitalisation and technology, cutting red tape and
public-private partnerships. These measures
would help Nepal in achieving its Sustainable
Development Goals.
Kathmandu is already part of India’s
‘Neighbourhood First Policy’ and an important
stakeholder in India’s Act East and Indo-Pacific
1. Sanjay Kathuria et. al. (2021). Regional Investment
Pioneers in South Asia- The Payoff of Knowing
Your Neighbours. URL: https://www.worldbank.
2. K Yhome. (2019). Beyond the South Asia-centric
notion of neighbourhood. URL:
4. Pramod Jaiswal. (2020). Exploring the BIMSTEC
Potential: Opportunities, Challenges and Way
Forward. URL:
5. V P Haran (2018). Regional Cooperation in South
Asia. Indian Foreign Affairs Journal Vol. 13, No. 3,
6. Smruti S Pattanaik. (2023). Subregional over regional
cooperation. URL:
But much more importantly, it is the
progress in the India- Nepal bilateral
relationship that holds the key for a
prosperous, secure and stable
sub-continent. The connections run
deep and are dictated by history,
culture, people to people linkages and
geography. India is a natural partner of
choice for Nepal. The well-being of
both countries is interdependent and it
is incumbent on all sections of society,
especially the intelligentsia and opinion
makers, to preserve and promote this
vital relationship, rather than leave it
only to the two governments.
Facets of India-Nepal Relations 05
7. Eyamin Sajid. (2022). Bangladesh likely to invest in
another Nepal hydropower project. URL: https://www.
8. Sugam Nanda Bajracharya. (2021). Challenges in the
implementation of the BBIN MVA for Nepal. URL:
9. Shomik Mehndiratta & Erik Nora. (2022). What will
it take to connect the Bangladesh, Bhutan, India,
Nepal (BBIN) sub-region?. URL:
10. V P Haran (2018). Op. Cit.
11. Hari Bans Jha. (2020). Sub-regional economic
cooperation between Nepal and Indian Northeast:
Challenges and prospects. URL: https://www.orfonline.
Pankaj Saran
Pankaj Saran is a former diplomat with forty years of experience in foreign, strategic and
national security affairs. He has served in key positions within the Government of India in
the Prime Minister’s Office, the National Security Council Secretariat, Ministry of External
Affairs and in Indian Missions abroad. He has served as India’s Ambassador to Russia and
India’s High Commissioner to Bangladesh, and as Head of the Northern Division in the
Ministry of External Affairs dealing with Nepal and Bhutan.
He has served in different capacities in the Prime Minister’s Office contributing to
decision-making at the highest levels in a diverse range of sectors, including foreign affairs
and national security. From 2018 to 2021, he served as the Deputy National Security
Adviser for Strategic Affairs under Prime Minister Narendra Modi dealing with regional
and global strategy formulation, including maritime security and Arctic affairs,
neighbourhood policies and technology and economic security.
Pankaj Saran is presently Convenor of NatStrat and a commentator on security and
strategic issues and a Distinguished Fellow of the National Maritime Foundation.
Views from Nepal
Nepal of the 1950s comprised inaccessible hills
and mountains as the country struggled with
limited infrastructure in the form of highways,
airports, hospitals or even universities. In fact,
Nepal was beset with multiple socio-economic
issues like Poverty, food-shortages, epidemics
which occurred with grave frequency reducing
life expectancy – in a country where life
expectancy was less than 60 years. Considering
Nepal’s proximity to India, as the latter
surrounds Nepal from three sides, it was only
proper that India would support Nepal in its
initial years of development following the end of
Rana autocracy and Nepal’s self-imposed
isolation. It was not as if India was a
highly-developed nation back then. The country
had just liberated itself from British colonialism,
and had endured a painful partition, deeply
affecting society and the economy. But
democratic India never forgot the support
Nepali leaders and its people had provided
during their independence movement.
Anurag Acharya
Tribhuvan University, Kathmandu
India generously invested in building not one but
six airports, including its first international
airport in Kathmandu. India also supported
construction of the East-West highway that
connects different parts of the country with
Kathmandu. Other infrastructure projects that
saw Indian support during the early decades
included the construction of Nepal’s oldest
Tribhuvan University campus, 14MW Devighat
Hydropower and Irrigation Project and the
extension of cross-border railway services to
Janakpur. These infrastructure initiatives were
pivotal in enabling Nepalese development in its
initial years.
Indian Imperatives in
Nepalese Infrastructure
Although India’s decision to support Nepal’s
development was not entirely altruistic and
Facets of India-Nepal Relations 08
Nepal should rely on its diplomatic skills and
leverages and engage in diplomatic manoeuvres
that protect its interests. Given the rise of an
economically and militarily powerful China that is
competing for influence in South Asia in general
and Nepal in particular, it is understandable that
India will eschew the use of the ‘Gujral doctrine
of non-reciprocity’.
Nepal must rely on smart diplomacy that brings
to the negotiating table a compelling set of
incentives, for India to consider deeper
engagements that mutually benefit both
To begin with, Nepal must acknowledge that it
has benefitted immensely from an unrestricted
movement of goods and people through the
open borders. But when it comes to bilateral
trade, the numbers suggest that India has
disproportionately benefited from its exports. In
2021, Indian exports to Nepal stood at over USD
9.5 billion, while Nepali exports to India was
approximately USD 1.3 billion. With
approximately 65 percent market share that India
enjoys, Nepal is among the largest consumers of
Indian goods and services in South Asia. Hence,
there is a strong merit in arguing that increased
physical connectivity between the two countries
through highways and railways will benefit India
more in the future.
However, there may be an element of robust
complementarity in the hydropower trade, where
the export of electricity to India and to
Bangladesh could potentially benefit Nepal in the
future. Currently, the volume of energy trade still
favours India, as Nepal imports more than it
exports in the Indian market. This does not help
to balance the trade deficit between the two
countries, and is therefore not sustainable.
national interest and security were abiding
considerations for India — Indian interest in
Nepalese infrastructure was linked to the
protection of its northern frontiers in the
aftermath of the Cold War and India’s own
military engagements and war making efforts
with Pakistan and China.
Furthermore, India has enduring border disputes
with China in the north, but the roughly 1500
kilometres of buffer that Nepal provides is of
vital importance to New Delhi that drives its
foreign policy vis-à-vis Kathmandu. Additionally,
Nepal’s snow-fed rivers are an important source
of irrigation and drinking water for India’s
bordering states of Bihar and Uttar Pradesh. But,
until the 1950s these rivers annually flooded large
parts of these states, which led to India
negotiating water sharing and flood-control
treaties. Although Nepal had also benefited from
irrigation water and flood control, the Koshi,
Gandak and the Mahakali river treaties have
undoubtedly benefited India more. But, the
trade-offs cannot be simply ascertained without
taking into account Nepal’s pressing needs back
then and the limited options it had.
Therefore, India has reciprocated and supported
infrastructure development in Nepal across
different sectors. Moreover, it is believed that the
construction of a Trauma Centre Hospital in
Kathmandu, petroleum pipelines in Amlekhgunj,
the ongoing extension of East-West railway
network and construction of multiple
hydropower projects will facilitate more robust
trade, connectivity and development partnership
between the two countries in the years to come.
Nepal’s Options
It is evident that India wants to
consolidate its influence in Nepal
through these new development
projects and Nepal must tactfully
protect its national interest by
engaging in hedging practices —
without irking either India or China
as a small state within South Asia.
Nepal must negotiate with India for
greater access to its energy market,
and to facilitate trade with
Bangladesh. India, on the other hand,
must take stock of the existing
geopolitical realities to ensure the
government in Kathmandu remains
Facets of India-Nepal Relations 09
However, past assessments or ongoing
development partnerships suggest, India is by far
Nepal’s most reliable development partner
despite the strained ties at different interludes.
This is the result of the sum of historical, social
and geopolitical realities that make the two
countries all-weather allies.
Although existing disputes and diplomatic
differences may continue to exist, these
differences will pale in comparison to the
economic, trade and developmental benefits that
both sides will accrue on account of a
burgeoning bilateral partnership.
For instance, facilitating goods trade between
Nepal and Bangladesh, in addition to the
electricity trade, could provide New Delhi with a
strong leverage vis-à-vis both the countries.
Indian foreign policy architects must get-over
their Cold War era mind-set, and be more
pragmatic in their thinking. After all, if India
espouses a ‘neighbourhood-first’ policy, it must
first exhibit greater trust and consideration for
developmental priorities of its closest
incentivized for deeper physical and
trade connectivity.
Like any other developing countries
in need of aid and investments to
propel their growth, Nepal continues
to seek both bilateral and multilateral
development partnerships. Countries
like India, China, United States and
Japan have contributed immensely to
building Nepal’s large physical
infrastructures, besides the support
of multilateral institutions like the
World Bank and the Asian
Development Bank. In that sense,
Nepal maintains a fairly open and
balanced outlook in its aid and
infrastructure diplomacy.
The two countries can still take this
friendship to the level that translates
into unprecedented benefits for both.
Greater connectivity and genuine
integration of Nepal, with the
markets in India and beyond, will
offer stronger incentives to present
and future governments in
Kathmandu to maintain deeper ties
and engagements. In return, New
Delhi will wield a stronger leverage
and reputation across the political
and social spectrum in Nepal.
Anurag Acharya
Anurag Acharya is a former journalist and currently Director at Kathmandu-based
think-tank. He has a decade and half long professional experience working with different
national and international organizations. His expertise and research interests include
governance and geopolitics; focusing primarily on Nepal and South Asia. Acharya
graduated in Development Studies from Kathmandu University and has a Master’s degree
in International Relations from Jawaharlal Nehru University, India.
Facets of India-Nepal Relations 10
The fortitude of defence diplomacy has been
held back with Nepal’s reluctance to permit the
most decorated Nepali Gurkhas recruitment in
the “Agnipath Scheme” that is going on since
September 2022 with disagreements for the
process is in variance with Nepal’s diplomatic
posture within the new geopolitical environment.
Interestingly, the 40 battalions of seven Gurkha
regiments comprising 42,000 soldiers are both
Nepali and Indian Gurkhas.
The Agnipath scheme launched with the
intention of lessening the average age of the
armed forces as well as reducing defence
expenditure of India has failed to impress the
political elite of Nepal as it has impacted job
opportunities while curtailing an important
source of Indian currency for the economy and
imports that Nepal is desirous of. The scheme is
about a quarter of the total strength to continue
in service after four years with the others with a
golden handshake of USD 15,000 (INR 1.7
Binoj Basnayat
million). It is a trilateral arrangement with
bilateral agreement between India and UK with
Nepal as an observer as well as Nepal’s
recommendation on the employment of the
Political Citations
The Agnipath Scheme was not
originally part of the tripartite
agreement and it does not address
the question of the rights of the
Gurkhas — the longevity of their
military career; as well as the existing
problem of unemployment within
Nepal. Finally, it is possible that the
weapon trained returnees could be
vulnerable to non-state actors as well
who could use them as a resource in
Facets of India-Nepal Relations 11
15th India-Nepal Joint Military Training Exercise ‘Surya Kiran’ at Pithoragarh, Uttarakhand, in September 2021 | MoD
The Gurkhas’ presence in various military forces,
has played a role in influencing and maintaining
geo-political stability beyond the Indian
subcontinent and global reputation. The global
recognition for exceptional military abilities and
professionalism is highly regarded globally.
Historical Precedents
The longstanding recruitment ties have fostered
close bilateral relations between Nepal and India.
Both countries share an enduring historical and
cultural connection. During the ratification of
the Tripartite Agreement, Nepal wanted to
ensure that there would be no discrimination
between Gurkhas and the host army and that
Gurkha troops would not to be treated as
The Tripartite Treaty followed by the 1950 Treaty
of Peace and Friendship underpinned Nepalese
nationals the right to work in India and for equal
national treatment but short of any provisions of
engagement or benefits.
The “Maoists 40 points demand” put forward on
February 4, 1996, revealed the closure of the
Gurkha recruitment centres and the introduction
of a work permit system for foreign workers.
the future – potentially altering the
security dynamics within South Asia.
The absence of Nepali Gurkhas
within the Indian armed forces could
potentially alter the bilateral
relationship, balance of power and
have serious implications for the
region. Additionally, the international
community’s perception of Nepal
and India’s bilateral ties might be
affected, potentially hampering
diplomatic cooperation on various
issues impacting the scope of
national and International Relations.
Bhim Rawal, former Defence Minister in the past
KP Oli government called for the termination of
the Tripartite Treaty in the parliament as the
Agnipath Scheme had violated the essence
assembling it the bedrock substratum for politics.
But for many, it has provided an opportunity of
global repute and a military career.
Limited Political Consensus
Defence Minister Rajnath Singh said that the
Scheme is a ‘transformative reform to enhance
the combat potential of Armed Forces with a
younger profile and technologically-adept
Although the government of Baburam Bhattarai
in 2012 attempted to put an end to further
enlistment in the Indian Army, it was viewed as a
lucrative employment opportunity by the
However, Nepali Foreign Minister NP Saud
obliquely said that the recruitment of Gurkhas
would be postponed “We have a policy that if
there is any change made to a tripartite treaty,
then it should be implemented through a political
Pradeep Kumar Gyawali, a senior leader of the
main opposition Communist Party of Nepal
(UML) and former Foreign Minister added, “We
are not going to accept the new plan. If India is
ready to revert back to the older Gurkha
recruitment process, then it can be resumed.”
There is limited political consensus for the
resumption of modified recruitment as most of
the political parties oppose the unilateral decision
in the recruitment scheme that the government
of India has implemented.
Nepalese Opposition to
The June 2022 approved Scheme trails Nepal’s
official proposal with Britain on 12 February
2020 for a review of the 1947 Tripartite
Agreement on Gurkha soldier’s incentives and
Facets of India-Nepal Relations 12
conveniences that is old and does not serve the
present needs in the changed context. The
proposal raised inconsistency when Pradeep
Gyawali then Foreign Minister said that the
British Government responded “positively”
while KP Oli then Prime Minister revealed “We
want to review it and make it a bilateral one, in
this spirit, I proposed a review but the British
side did not accept it”. The House Committee in
March 2019 has also directed the Government of
Nepal to take up the Tripartite Agreement and
the issue of Gurkha veterans with the British
government on a priority basis.
Financial Remuneration
Remittance flows remain a major source of
external income with 23 percent of the GDP of
Nepal in 2022 being accounted for by remittance
with USD 9 billion, an increase of USD 1 billion
from 2021. At the same time more than four
hundred thousand youth travel abroad for work
opportunity. Based on Agreement and Treaties,
Brunei, India, Singapore and the UK have been
destinations for Gurkhas. But recently, Nepali
youth have been part of Russian forces fighting
in Ukraine as well as other countries. Despite the
fact that it is about an individual’s freedom of
choice enshrined in the Declaration of Human
Rights as well as the lack of domestic
opportunities for employment, it goes against the
essence of Nepal’s policies.
India: Nepal’s Preferred
India is the main destination of choice for
Nepalese due to existing bilateral arrangements,
open borders, close proximity, similar culture and
contemporary reality. The Indian Embassy in
Kathmandu states that 8 million Nepalese
citizens live and work in India and 600,000
Indians live in Nepal, which is different from
other estimates of 1 to 3 million Nepalese
working in India. The difficulty in gauging the
actual numbers is due to the high mobility of
Nepali workers; pervasiveness of cross-border
marriages; the Indian population with ancestries
in Nepal and the Nepalese obtaining domicile
status in India.
According to the World Bank’s Bilateral
Remittance Matrix of 2017, the value of
remittance from India to Nepal by Nepali
workers was USD 1 billion, while remittance
from Nepal to India in the same year was USD 3
The salaries of the serving and the pensions of
about 1,22,000 Indian Gurkha veterans living in
Nepal and the remittances sent by them have
provided Nepal with an economic cushion. Their
contribution and other benefits accrued
amounted to around USD 620 million (INR 45
Crores), equivalent to 3.7 percent of Nepal’s
GDP in 2015 and more than the military budget
of Nepal of USD 450 million (around Rs 60
billion), amounting to 3.5 percent of the total
government expenditure.
Shifting geostrategic dynamics, global rivalry, rise
in global migration and conscription through
different methods and routes are a matter of
Therefore, engaging vulnerable youth, and focus
on traditional features and rich historical
relationships is important for political-security,
political-economy and political-cultural growth.
Additionally, recognising the financial
implications and cultural connections attached to
the Gurkhas’ service is vital to ensure the
well-being of individuals, their communities and
contributes to upholding regional stability by
bolstering Nepal’s defence capabilities for
The likelihood of Indian Gurkhas
replacing the Nepali Gurkhas could
be a temporary choice for the Indian
Armed forces due to traditional
linkages and bonds dating from the
18th century. Such a move will also
have long standing strategic
implications within an ever altering
geopolitical landscape.
Facets of India-Nepal Relations 13
national security.
Recognising the Gurkhas as an integral part of
the Indian Army reinforces the national interests
of both the countries as its absence would
weaken the ‘diplomatic bridge’ between Nepal
and India.
Binoj Bisnayat
The author is a Strategic Analyst, Major General (Retd) of the Nepali Army, and is
associated with Rangsit University, Thailand.
Facets of India-Nepal Relations 14
Media significantly influences the conduct and
shaping of foreign policy in any country. Media
content affects all aspects of the relationship
between the media and public opinion. In both
domestic and foreign policy, public opinion is a
primary driver that influences the decisions of
political parties and the government of the day.
Therefore, how the media frames bilateral issues
immensely affects the trajectory of bilateral
When it comes to Nepal-India relations, there
has not been much discussion among the media
fraternity and academicians about the role that
the media is playing or how the media is framing
bilateral issues.
Kamal Dev Bhattarai
Nepal-India’s relations are
characterized by an open border,
people-to-people ties, strong
civilizational connections, and
economic and political ties. This
relationship is undoubtedly one of
the unique relationships in the world
and does not match any other
relationship. There are no visa
provisions for travel, and there are no
restrictions on traveling and leaving
each other’s countries. This
uniqueness and closeness has made
the bilateral relation a complex one as
well. If this complex relation is not
handled properly, it can lead to
frictions in the bilateral relationship.
In the past seven decades,
Nepal-India relations have seen
several ups and downs.
Facets of India-Nepal Relations 15
Credits: Nepal News Industry
Media Reportage on
Nepal-India Relations
This write-up sheds light on how both media in
Nepal and India are reporting bilateral issues and
how it is affecting the entire bilateral relationship.
Both Nepal and India are democratic countries,
so there are no restrictions on the media. The
media itself should be responsible while
reporting bilateral issues. Obviously, in many
instances, the media has played a constructive
role, but it is a reality that flawed media reporting
can negatively contribute to the bilateral
relationship, sometimes causing frictions. The
news reporting from both Kathmandu and New
Delhi often lacks ground reporting and
local-perspective from the bordering areas. If
something unpleasant happens across the
bordering areas, Kathmandu and New Delhi
media tend to amplify the issues without a proper
understanding, thereby misrepresenting them.
Based on some flawed reporting by the media,
governments and politicians formulate their
positions and advance their political agendas.
Therefore, media houses and journalists should
improve the quality of their reporting on local
issues. It is often said that Nepal and India are
close, but it often seems that journalists working
in both Kathmandu and New Delhi lack an
understanding of each other’s issues and
concerns. For instance, many Indian media
reports on Nepal’s internal and bilateral issues are
problematic and distort facts. Very few Indian
journalists are dedicated to reporting on Nepal’s
issues; they only pay attention to Nepal when
some bilateral meetings take place or political
events happen.
Kathmandu’s media faces similar problems. Few
journalists in Kathmandu understand India’s
internal politics, decision-making process, and
how the Indian government functions. Due to
this lack of knowledge, many issues have been
misrepresented and underrepresented. For
instance, if a former diplomat or politician makes
some remarks about Nepal, it is sometimes taken
as an official statement of the Indian
Governments of both countries are partially
responsible for this. They have done little to
empower journalists by providing information
and perspectives on bilateral relations. Apart
from a short press release of meetings, both
countries have not taken the initiative to provide
background information to journalists on
domestic and bilateral issues. There are many
mechanisms and bilateral issues between the two
countries, but the media is not well-informed
about all these issues. Although there are some
journalist-exchange programs, they have not
been fruitful and systematic. In fact, there has not
been sufficient reporting on the entire gamut of
bilateral issues. Many issues, from border points
to the national level, require in-depth and
qualitative reporting to inform the public and
politicians about key bilateral issues.
Primarily, news reporting tends to focus on
activities and incidents in the bordering areas,
which often dominate national headlines. There
is also reporting when high-level visits occur
between the two countries and during meetings
of bilateral mechanisms. This means that most
reporting centres on events and incidents, with
very little attention given to the bilateral issues.
Therefore, media in both New Delhi,
Kathmandu, and local media should
revaluate the current pattern of
reporting and shift their focus
towards more issue-based,
field-based, and research-based
reporting. When something
unpleasant occurs in the bordering
areas, media outlets should send their
news teams for local reporting
instead of providing flawed reporting
from the central offices. This is a
less-considered but vital issue
between the two countries, as
border-centric incidents frequently
create irritants in the bilateral
Facets of India-Nepal Relations 16
Another important aspect is issue-based,
objective, and impartial reporting. There are
hundreds of bilateral issues on which very few
in-depth reports have been produced. For
instance, there has not been proper and in-depth
reporting regarding border issues between the
two countries. There are several issues and
separate mechanisms to address various
dimensions of the border, but they have not been
adequately reported. The list goes on, as there is
a lack of comprehensive reporting on energy
cooperation between the two countries.
This lack of comprehensive reporting is reflected
in the decisions and speeches of politicians when
it comes to bilateral relations. There are many
instances where governments base their
positions on media reporting, even though the
media fails to provide the actual and complete
picture of events. Similarly, politicians in both
Kathmandu and New Delhi make comments on
specific issues based on media coverage.
Sometimes, even a minor issue is blown out of
proportion, creating unnecessary tensions
between the two countries.
Reporting on foreign policy issues is a delicate
and sensitive matter. Media houses should
empower journalists with the necessary
knowledge and resources before they are
assigned to report on bilateral issues. Even a
small mistake can damage bilateral relations.
While the media is free to report on any issue,
they should avoid reporting on issues that
negatively affect bilateral relations and
consequently the people. Media outlets in both
Nepal and India should carefully review their
current reporting patterns and make corrections.
There are many sensitive issues between India
and Nepal that require constructive debate and
discussion through the media.
At the same time, media and journalists should
not rely solely on reporting from Western media
on Nepal-India matters, as they may not always
reflect reality.
Media in India and Nepal should
create their own narrative instead of
following what Western and other
international media reports.
Additionally, journalists need to be
vigilant about misinformation and
disinformation that aim to damage
bilateral relationships. Both
governments should launch more
journalist-exchange programmes in
order to help journalists under the
bilateral issues and those visits
should also take place on border
areas. At the same time, think-tanks
in Kathmandu and New Delhi should
pay attention to these issues
Kamal Dev Bhattarai
Kamal Dev Bhattarai is an Editor of The Annapurna Express, Kathmandu-based
newspaper. He writes about Nepal's domestic and international issues, with a focus on
politics, international relations, and climate change.
Facets of India-Nepal Relations 17
The economic relations between India and Nepal
are significant and multifaceted, driven by their
geographical proximity and historical, cultural,
and economic ties. India and Nepal, two
neighbouring countries in South Asia, share a
unique and complex economic relationship that
has evolved significantly over the years. Nepal’s
geographical configuration lacks natural barriers
along its borders with India, resulting in
traditionally open and accessible boundaries.
Economic ties between India and Nepal have
long-standing historical roots. The 1950
Indo-Nepal Treaty of Peace and Friendship and
Treaty of Trade and Transit signed in 1960 and
other bilateral agreements have played a
significant role in enhancing trade and
institutionalising a prominent aspect of
economic relations. India entered into peace and
trade agreements with Nepal, driven by shared
interests, thereby granting landlocked Nepal
unrestricted access to global markets for its
Both nations are participants in regional entities
such as the South Asian Association for Regional
Cooperation (SAARC) and the Bay of Bengal
Initiative for Multi-Sectoral Technical and
Economic Cooperation (BIMSTEC). These
organisations actively foster economic
integration and collaboration within South Asia
and the broader regional context.
India and Nepal’s economic relations
are an integral part of their overall
bilateral relationship, which
encompasses not only economic
aspects but also cultural, political,
and social ties. While there may be
occasional challenges, both countries
have a mutual interest in enhancing
Sunil Kumar Chaudhary
Facets of India-Nepal Relations 18
The India-Nepal border gate at Sonauli, Uttar Pradesh, India
Trade Relations
The two nations have an open border, and trade
is regulated by a bilateral trade treaty. The
Nepal-India Treaty of Transit (1999), Treaty of
Trade (2009), the Agreement of Cooperation to
Control Unauthorised Trade (2009), and the Rail
Services Agreement (2004) jointly lay the
foundation for a bilateral framework governing
trade and transit between the two countries.
Under the Treaty of Trade (2009),
Nepali-manufactured goods enjoy duty-free
access to the Indian market on a non-reciprocal
basis. The Agreement for Cooperation between
India and Nepal to Control Unauthorised Trade,
signed in 2009, provides the legal framework for
combating illegal trade. The India-Nepal Treaty
of Transit, renewed every seven years, grants
port facilities to Nepal at Kolkata/Haldia and
Visakhapatnam, specifying various transit routes
between Kolkata and Visakhapatnam and the
India-Nepal border. For bilateral trade, 27
entry/exit points are designated along the
Indo-Nepal border.
The Rail Services Agreement of 2004 delineates
the operational and managerial specifics of rail
services between India and Nepal. Initially, the
connection was established from Kolkata/Haldia
port to the Raxaul/Birgunj transit point in Nepal.
In 2016, Visakhapatnam Port was incorporated
as an additional designated point for
Nepal-bound transit trade, expanding the reach
of the rail service to include the port. On 9 July
2021, a Letter of Exchange (LoE) was officially
signed for the Rail Service Agreement (RSA)
between Nepal and India. This agreement opens
avenues for all cargo train operators to utilise the
extensive Indian railway network for transporting
containers to and from Nepal. This includes
facilitating bilateral freight between India and
Nepal, as well as accommodating third-country
freight from Indian ports to Nepal. The
implementation of this arrangement is
anticipated to improve efficiency and
cost-competitiveness, ultimately bringing
benefits to consumers in Nepal.
These treaties allow for the smooth exchange of
goods and services between the two nations.
Nepal primarily exports goods like carpets,
textiles, tea, and handicrafts to India, while it
imports a wide range of products including
petroleum products, machinery, electronics,
pharmaceuticals, and agricultural products.
Nepal’s most significant trading partner is India,
and the open border shared between the two
nations serves as a facilitator for seamless trade
and commerce.
their economic cooperation, fostering
regional stability, and promoting
economic development in the region.
Nepal’s Trade with India and the World
Exports (US Dollars, Millions)
Source: Direction of Trade Statistics (DOTS), International Monetary Fund
Imports (US Dollars, Millions) Trade Deficit (US Dollars, Millions)
Facets of India-Nepal Relations 19
India has played a crucial role in infrastructure
development projects in Nepal, such as road and
railway construction and hydropower generation.
India provides economic and development
assistance to Nepal through various projects,
grants, and concessional loans. This assistance is
aimed at supporting Nepal’s economic growth,
infrastructure development, and social sectors
like education, healthcare, and rural
Recent Developments
In recent years, there have been notable changes
in India-Nepal economic relations. For instance,
infrastructure development projects, such as
roadways and railways, have been initiated to
enhance connectivity between the two countries.
These projects aim to facilitate smoother trade
and movement of people.
Indian investment has played a
crucial role in Nepal’s economic
development and infrastructure
projects. India has been a significant
source of foreign direct investment
(FDI) in Nepal. Indian companies
have invested in various sectors,
including hydropower,
manufacturing, and infrastructure
development, telecommunications,
banking. These investments have
contributed to Nepal’s economic
growth and development. Several
leading Indian companies are
actively conducting business in
Nepal, including ITC, Dabur,
Hindustan Unilever, VSNL, TCIL,
MTNL, State Bank of India, Life
Insurance Corporation of India,
Asian Paints, Tata Projects, and GMR
India, among others.
India and Nepal collaborate on
various economic cooperation
initiatives, including cross-border
trade, transit, and the development of
special economic zones. These
initiatives aim to promote economic
growth and development in both
countries. Economic cooperation and
interdependence between India and
Nepal continue to be vital aspects of
their bilateral relationship. While
there have been occasional
challenges and disputes, both
countries recognize the mutual
benefits of close economic ties and
cooperation, which contribute to the
overall development and stability of
the region.
Investment and Development
Additionally, both countries have shown a
growing interest in energy cooperation,
particularly in the hydropower sector. The energy
sector presents significant opportunities for
cooperation. Cross-border energy trade and
hydropower projects have the potential to
redefine the economic landscape. Joint ventures
and partnerships in the energy sector are steps
toward achieving mutual energy security and
sustainability. Hydropower is a significant area of
economic cooperation. Indian companies have
been involved in developing hydropower projects
in Nepal, which aims to harness its vast
hydropower potential and meet its energy
Challenges and Prospects
While the economic relations between India and
Nepal have seen positive developments, they are
not without challenges. Trade imbalances,
bureaucratic hurdles, and disputes over water
resources are some of the challenges that need to
be addressed for a more robust economic
partnership. While the relationship is
characterised by cooperation, challenges exist.
Nepal and India have to address trade imbalances
and work on improving the efficiency of
Facets of India-Nepal Relations 20
cross-border trade. Furthermore, water resource
management and disputes over shared rivers
remain complex issues.
Despite their close economic ties, India and
Nepal have faced trade disputes and tensions at
times. These disputes have included issues related
Opportunities for collaboration exist
in various sectors, such as tourism,
education, and technology.
People-to-people ties, cultural
exchanges, and mutual investments
hold the potential to foster deeper
economic relations. On the positive
side, there are numerous prospects
for collaboration in education,
tourism, technology, and culture.
Enhanced people-to-people ties,
cultural exchanges, and bilateral
investments hold the potential to
deepen economic relations and foster
sustainable development.
to trade imbalances, non-tariff barriers, and trade
restrictions. Resolving these issues is an ongoing
challenge in their economic relationship.
India and Nepal share a multifaceted economic
relationship that continues to evolve. While
challenges persist, both countries have a vested
interest in further enhancing their economic ties.
The recent focus on infrastructure development
and energy cooperation signifies a positive shift
in the relationship. With a mutual commitment to
address challenges and explore opportunities, the
future of India-Nepal economic relations
appears promising. This evolving partnership
serves as a testament to the enduring bonds
between these neighbouring nations.
Sunil Kumar Chaudhary
Sunil Kumar Chaudhary works as a Visiting Fellow at the Nepal Institute for International
Cooperation and Engagement (NIICE), Kathmandu, Nepal. He is also a Senior Research
Associate at the Foundation for Organizational Research and Education (FORE School of
Management), New Delhi. He works on the economic policy of South Asia and China. His
research interests are International Economics, Development Economics, Business and
Economic Policy. He holds a Master’s Degree in World Economy from the School of
International Studies, Jawaharlal Nehru University, India. He has presented papers at
several national and international conferences and has published research articles in
international journals.
Facets of India-Nepal Relations 21
Both countries have a longstanding relationship
in trade and commerce. India is Nepal’s largest
trading partner both in terms of import and
export trade, where India accounts for over
two-third of Nepal’s merchandise trade, about
one-third of trade in services, one-third of
foreign direct investments, 100% of petroleum
supplies, and a significant share of inward
remittances on account of pensioners,
professionals and workers working in India.
Similarly, the security interests of Nepal and
India overlap as they enjoy an open border which
allows free movement of people, making it
special and exceptional. However, in recent times,
China is working to expand its influence in Nepal
Nepal and India are two countries bound
together in a complex web of linkages and
contiguities that span across civilisational,
historical, sociocultural, economic, geostrategic,
and political terrains.
Pramod Jaiswal
The bedrock of the Nepal-India
‘unique’ relationship lies in the 1950
Indo-Nepal Treaty of Peace and
Friendship that acknowledges
mutual ancient relations and intends
to take them to greater heights. India
has played an important role in all the
major political transitions of Nepal
such as overthrowing the Rana
regime in 1951, the introduction of
democracy in 1959, the reintroduction
of democracy in 1990, bringing
Maoists to mainstream politics
through the Comprehensive Peace
Accord in 2007, and others. It is also
Nepal’s largest security provider and
the country that stands together in
times of need.
Facets of India-Nepal Relations 22
Credits: Chanakya Forum
leading to competition with India.
India-China Competition for
Influence in Nepal
With the changing geopolitical landscape of
South Asia, Chinese interests and their policies in
Nepal have also changed. In the past, Chinese
interests in Nepal were limited to safeguarding
their own security from issues emanating from
Tibet and bringing some economic gains through
bilateral trade. However, in recent times, China
wants to gradually dilute India’s pre-eminent
position in Nepal by increasing its influence.
Hence, China has adopted a proactive and
interventionist policy in Nepal unlike their
‘pro-establishment’ policy of the past.
In April 2018, India proposed to connect Raxaul
of India and Kathmandu through an electrified
rail line with Indian assistance. On the other
hand, China is aggressively expanding its air
connectivity in Nepal. Nepal is connected to
Beijing, Shanghai, Lhasa, Guangzhou, Kunming,
Chengdu and Xi’an via air while very few cities of
India are connected by air, namely Delhi,
Kolkata, Mumbai and occasional flights to
Varanasi and Bangalore. With the inauguration
of two new international airports at Pokhara and
Lumbini, it is believed that more Chinese cities
will be connected to Nepal in the coming days.
There have been very strong cultural and
people-to-people ties between India and Nepal,
which is the strongest aspect of their relations
that China can never replace. However, to begin
with, China has been conducting many social and
cultural activities in Nepal through China-funded
NGOs, media outlets and study centres to
promote Chinese language and culture to
enhance people-to-people ties. Like India, China
has also been proactive in engaging with the
political parties of Nepal in recent times. Media
reports also suggest that China played an active
role in bringing the leftist Communist Party of
Nepal-Unified Marxist Leninist and Communist
Party of Nepal-Maoist Center together and
initiating a merger.
In order to accelerate their economic
engagement by increasing trade volume, China
and Nepal have opened six trade points along the
Nepal-China border. In April 2019, Nepal and
China signed the protocol on implementing the
Agreement on Transit and Transport. It allows
Nepal to use four Chinese seaports in Tianjin,
Shenzhen, Lianyungang and Zhanjiang, and three
land ports in Lanzhou, Lhasa and Shigatse for
third-country imports. Although it has ended
Nepal’s total reliance on India for trade and
transit as Nepal could use six dedicated transit
points, the feasibility of Chinese ports can be
Traditionally, India has been the
major country to provide for the
development needs of Nepal such as
Tribhuvan Airport, Tribhuvan
Highway, Tribhuvan University, and
several roads, irrigation projects,
power and water supply projects, and
others. But in recent times, China has
also intensified its engagement in
Nepal for influence through
connectivity and mega development
projects. It has constructed
convention centres, hospitals,
highways and others. It has also
conducted the feasibility study to
connect Kathmandu, Pokhara and
Lumbini of Nepal with its Qinghai
Railway, which connects Beijing and
Shigatse through Lhasa. This comes
at a time when India is working to
extend its railway connectivity to six
points along the India-Nepal border
in Nepal – namely – Raxaul in India
with Birgunj in Nepal, Jogbani in
India with Biratnagar in Nepal,
Jayanagar in India with Bardibas in
Nepal, Nautanwa in India with
Nepalgunj in Nepal, and New
Jalpaiguri in India with Kakarbhitta
in Nepal.
Facets of India-Nepal Relations 23
China and India also compete in the security
sector. Strategic ties and military-to-military
relations between Nepal and India have been
deep-rooted and historic. Nepalese Gurkhas have
participated in all the major operations
undertaken by the Indian Army since its
independence. The Chief of Army Staff (CoAS)
of Nepal Army is honorary CoAS of Indian
Army and vice-versa. Since 1962, India has been
providing weapons to the Nepal Army with 70%
of the aid in the form of grants. Following the
conclusion of the Comprehensive Peace Process
and with the integration of former Maoist
combatants into the Nepal Army, Nepal sought
$18.33 million worth of military supplies from
India. India has also supported the construction
of the National Police Academy as well as several
other military infrastructure and training systems
in Nepal.
Likewise, a major portion of Chinese assistance
is also in the security sector as it wants Nepal to
curb ‘pro-Tibetan’ activities in Nepal. Nepal
houses the second largest number of Tibetan
refugees in the world and China looks at them
with concern. Thus, since February 2001, there
has been a sharp increase in Chinese assistance in
the security sector of Nepal. In October 2018,
China increased military support to Nepal by
50% to strengthen the Nepal Army’s disaster
management capabilities and to better equip
Nepal’s United Nations Peacekeeping Missions.
Furthermore, in response to the regular joint
military exercise between India and Nepal, China
began the first ever joint military drill
‘Sagarmatha Friendship’, which was a major
turning point in bilateral defence cooperation.
The second such exercise was conducted in
September 2018. In the past, the Nepal Army
had held military exercises with India and the US
However, the 2015 ‘unofficial economic
blockade’, the recent border row between India
and Nepal and new irritants have led to anti-India
feelings in Nepal which has worked to China's
advantage at times, which India needs to address.
India is Nepal’s largest trade partner
while China is its second. India
accounted for 62% of Nepal’s total
trade in FY 2019/20, while China
accounted for 14%. India ranked as
Nepal’s third largest bilateral
development partner by
disbursement in FY 2019/20, after the
United States and the United
Kingdom; China occupied the fourth
place. Similarly, there is competition
between China and India in terms of
investment as their investment
sectors overlap in Nepal. In recent
days, most of the construction
contracts in Nepal goes to the
Chinese companies as they are the
lowest bidder.
Nepal-India relations are unique and
exemplary. India is the first country
that comes to Nepal’s rescue at the
time of need. However, in recent
times, China is increasing its
influence in Nepal through its
economic and political engagement
which has led to competition in
Nepal. In spite of that, there is a long
way for China to go to match with
India as the India-Nepal relations are
deep rooted and it goes back
Facets of India-Nepal Relations 24
Pramod Jaiswal
Dr. Pramod Jaiswal is a Research Director at Nepal Institute for International Cooperation
and Engagement.
He has been a regular and visiting faculty at different universities in Nepal like Tribhuvan,
Kathmandu and Pokhara Universities and Army Command and Staff College and China’s
China Foreign Affairs, Fudan and Tongji Universities, and Qinghai University of
Nationalities. Dr Jaiswal is also a Visiting Fellow at American, Indian and Thai institutions.
He is the Member of the Editorial Board, Journal of International Affairs, Kathmandu;
Member of the Academic Committee at the Pangoal Institution, Beijing; Member of
International Advisory Committee, Journal of Liberty and International Affairs,
Macedonia; and the Editor in Chief of Journal of Security and International Studies and
member of Subject Committee of International Relations and Diplomacy, Tribhuvan
He holds Masters, M. Phil and PhD from School of International Studies, Jawaharlal
Nehru University, New Delhi. He is the recipient of Silver Jubilee Scholarship and SAARC
Doctoral Fellowship from Indian Council for Cultural Relations, Government of India. He
has authored, edited and co-edited dozens of books on China and South Asia affairs.
Facets of India-Nepal Relations 25
Power is not a simple concept as we may have
thought, there are many types of power and there
are many competing theories on power. A
famous American political scientist, Joseph Nye,
differentiates between two types of power, hard
and soft power. Eventually, Nye introduces smart
power as the ‘balance of hard and soft power’.
According to him, ‘soft power’ is the ability to get
‘others to want the outcomes that you want’, and
more particularly ‘the ability to achieve goals
through attraction rather than coercion’. There
are three measures of soft power: familiarity,
reputation and influence. Culture, diplomacy,
education, business/innovation, and government
are the particles to understand the soft power of
the countries. This article looks at the soft power
of India and Nepal that shapes their relations.
Sumitra Karki
India’s Soft Power in Nepal
India is the fourth most powerful country in Asia
pursuing a regional leadership role in South Asia.
The influential role it has nurtured over the
decade can play as a game changer for the region.
To match the footsteps with the changing world,
India has used different bilateral and multilateral
strategies to navigate the region towards a
well-balanced future of prosperity and peace. In
the 1990s, India supported peaceful advancement
and a friendly policy towards its neighbours and
the soft power to cater to India’s foreign policy to
support its legitimacy in South Asia. India’s soft
power has traditionally been characterised by
diversity. India was appreciated as the ‘Golden
Bird’ between 1 and 1000 AD for its GDP, which
was also ahead of China at the time. This
Facets of India-Nepal Relations 26
Lumbini, the birthplace of Lord Gautama Buddha | Tusk Travel
scholarships are provided to Nepali students
every year by the Government of India for
various courses at the PhD, Masters and
Bachelors levels for study in India. Over the
years, India’s input to the growth of human
resources in Nepal has been one of the key
aspects of India-Nepal collaboration. This will
also mean Indian educational institutions
springing up across Nepal will bolster the
educational infrastructures of Nepal, also
bolstering ties between the two states. Similarly,
several go to India for better medical facilities at
reputed hospitals. India has supported Nepal in
many disasters and natural calamities by
providing medical support equipment and
medicine. Thus, health and education can be seen
as another major source of India’s soft power in
There is huge interest in Indian music, cinema
and television serials in Nepal. There are many
artists and professionals who visit each other's
country and create a bond of friendship. So far,
India has portrayed Nepali characters as often
being submissive to the protagonists of the
movies. A new movie, “Sam Bahadur” which is
based on the life of Field Marshal Sam
Manekshaw, is expected to show the sacrifices
and contributions of the Gurkha soldiers from
Nepal in various wars of India.
Nepal’s Soft Power in India
Nepal has already established itself as a
benevolent state on the world stage which further
strengthens its motive to identify and pursue soft
power. Nepal is a country which finds ease in
settling for soft power as opposed to power.
Some of the most notable and recurring themes
of soft power that Nepal possesses are tourism,
Ayurveda, the Gurkha Regiment, Himalayas and
Buddhism. Nepal’s Dog Festival (Kukur Tihar
celebrated during Diwali) can also be developed
as its soft power. Nepal is the birthplace of Lord
Buddha which has been able to generate great
goodwill for Nepal, not only in the country but
around the world.
eventually brought migrants, brokers and raiders
like ‘Alexander the Great’ to India. India’s soft
power has spread in her extensive social and
refinement inheritance over millennia; it
demonstrates her purposes of secularism,
liberalism and inclusiveness of cultures that are
more perilous in today’s complex society.
India has been pushing Yoga and Ayurveda as a
major source of its soft power which has been
quite successful. Nepal can reap benefits from
this initiative all while further strengthening the
relationship between the two. India has practised
Yoga from the primordial eras, but after Indian
Prime Minister Narendra Modi leads large
congregations in yoga practice, Nepalese and the
people around the world also started to practice
it. Nepal has organised a series of such initiatives
in the country.
India and Nepal share an open border, people
from both sides can move easily, get married and
settle down. Similarly, both the countries have a
huge number of people who follow common
religions – Hinduism and Buddhism. Thus,
diaspora and religion are another most influential
aspect of soft power. Moreover, religious tourism
is the unsurpassed tool of soft power between
India and Nepal because there are various
commonalities in religion between the two
Thousands of Nepali students go to India for
higher education, especially in the field of
medicine and engineering. About 3000
After Prime Minister Narendra Modi
came into power in 2014, India has
invested substantial resources into
building up its soft power. We can say
India has been more innovative in
using its soft power since then. Yoga,
diaspora, medical tourism,
Bollywood, education, space
diplomacy, religion, tourism and
Gorkha regiments are some major
sources of India’s soft power in
Facets of India-Nepal Relations 27
However, due to India’s newly introduced
Agnipath recruitment policy, the future of the
Gurkha recruitment tradition remains uncertain.
It needs immediate attention of both the
Bollywood is another source of India’s soft
power which has the ability to draw narratives. It
can be a powerful tool to build linkages among
the people and at the same time can be a
powerful tool that can shape Indian perception in
Nepal. India should produce more Bollywood
cinema that can portray the special relations that
lie between the two countries. Filming in
beautiful avenues of Nepal can also promote
Nepali tourism, bringing the people of both the
The recruitment of Gurkha soldiers
into the regiments of the Indian
Army is one of the major sources of
soft power of Nepal for India. This
soft power for Nepal transforms into
hard power for India when they are
recruited. The Gurkha Regiments are
one of the foremost sources of
revenue into Nepal and have also
served as a long-standing
intersection between the Indian
Army and Nepal Army.
Nepal and India can leverage on their
soft power to enhance their relations.
At a time when China has been
exerting influence in Nepal through
their scholarship and educational
engagement, India wants to counter
them with its own initiatives by
increasing scholarship quotas for
Nepali students and increasing
funding for Nepali educational
countries together.
Apart from adventure tourism which Nepal is
famous for, religious tourism for Buddhists and
Hindus can be a powerful tool for robust
engagement. Both countries should work on
developing the Buddhist and Hindu tourism
circuit that will also generate huge economic
gains. There are several religious places in India
and Nepal where thousands of pilgrims from
both the countries visit annually and hold great
value, such as Pasupatinath, Muktinath and Janaki
Mandir of Nepal and Haridwar, Banaras,
Tirupati and others of India. Nepal, which is a
home to a variety of herbs that has been used in
the practice of Ayurveda for centuries, can also
be an ideal location for hosting Yoga conventions
and retreats. The recent historic achievement of
India successfully landing Chandrayaan-3 has
also earned India tremendous soft power. Thus,
India’s aim to develop a satellite for SAARC
member states for its neighbours is significant as
it will enhance its soft power in the region.
Facets of India-Nepal Relations 28
Sumitra Karki
Sumitra Karki works as Program Coordinator and Research Associate at Nepal Institute
for International Cooperation and Engagement (NIICE). She focuses on issues related to
China and South Asia. She was a Faculty at Modern Kanya Multiple College, Kathmandu
and holds Master’s in Sociology from Tribhuvan University. She has co-edited “Human
Rights and Human Security in South Asia” published by Adroit Publishers and contributes
regularly at national and international dailies and journals.
Facets of India-Nepal Relations 29
Views from India
In November 2023, it was reported that India
had provided emergency assistance to Nepal in
the form of essential medical and auxiliary
supplies after a massive earthquake measuring 6.4
on the Richter scale hit Jajarkot in Nepal.1 This
news came close on the heels of India providing
Nepal with economic assistance worth $1 billion
as part of Indian efforts for post-earthquake
reconstruction in Gorkha and Nuwakot districts
in Nepal.2
These recent developments demonstrate the
importance that HADR has acquired within the
larger Indian foreign policy discourse. It also
enables us to understand that HADR has
emerged as a key aspect of Indian foreign policy
— as India has emerged as the first responder to
humanitarian crises within its immediate
neighbourhood and beyond. These
developments also demonstrate India’s far
Anuttama Banerji
reaching HADR capabilities as well as its
engagement in responsible state behaviour within
its neighbourhood. Finally, India’s prompt
assistance to Nepal enables foreign policy
practitioners to appreciate that Nepal is a close
neighbour of India and a key beneficiary of
Indian HADR.
Indian HADR capabilities
HADR is a peacetime operational
activity collectively carried out by the
Indian Armed Forces. Its salience
within the diplomatic toolkit of India
came to the fore for the first time
after the Indian Ocean tsunami in
2004, when the Indian Navy (IN)
Facets of India-Nepal Relations 32
Indian HADR assistance to Nepal during the November 2023 earthquake
Indian Air Force at the international level.
India and Nepal share a 1,751 kilometre border at
present.4 While the open border provides
opportunities for friction, it also provides a
conducive environment for mutual cooperation.
Indian emergency assistance and its HADR
operations in Nepal, viewed within the rubric of
India’s ‘Neighbourhood First Policy’ fall within
the latter category – as India envisages a peaceful
neighbourhood where mutual cooperation
trumps conflict.
More importantly, India’s actions to assist its
neighbours during humanitarian emergencies is a
concrete manifestation of its philosophy of
“Vasudhaiva Kutumbakam”. In fact, Nepal
enjoys a high priority within Indian diplomatic
discourse with India viewing itself as “Nepal’s
foremost friend and development partner”
according to a leading practitioner of the
discipline of international relations.5
Operation Maitri
Within this context, Indian HADR operations in
Nepal have been all encompassing in nature.
India has participated in HADR operations
providing relief during ecological disasters and
natural hazards while also engaging with Nepal’s
citizenry through evacuation missions in
different politically volatile countries at different
points in time. Indian assistance to Nepal during
the April 2015 earthquake is a case in point. India
responded with great agility and swiftness after
Indian HADR operations across Sri Lanka,
Maldives, and Indonesia during the Indian Ocean
tsunami enabled India to project its soft power
capabilities within the neighbourhood as India
assisted other regional Navies in disaster
mitigation efforts — as India refused foreign aid
during the crisis and employed indigenous
resources such as naval ships, helicopters and
other relief equipment to provide humanitarian
Over the years, India has used HADR as a tool to
mitigate the impact of disasters in the
disaster-prone South Asian region as well as the
Indian Ocean Region (IOR). Since climate
change has made several States vulnerable to
climatic disasters, India has made HADR a key
foreign policy priority in a bid to ensure that
States within its immediate and peripheral
neighbourhood are not severely impacted by
natural disasters and climate induced
Indian HADR in Nepal
India has emerged as a ‘net responder to crisis’ in
the Indian subcontinent, assisting its continental
and maritime neighbours in mitigating the
debilitating impact of natural disasters and
climate emergencies.
India has provided relief and assistance to its
neighbours – Bhutan, Bangladesh, Sri Lanka and
Nepal as and when these states have faced natural
disasters like cyclones and floods in recent years.
In this quest, India has carried out humanitarian
relief operations through its key institutions such
as the National Disaster Response Force
(NDRF) at the domestic level and the Indian
Armed Forces, effectively led by the Indian Army
and Indian Navy and duly supported by the
participated in Search and Rescue
Operations (SAR), task
disaggregation, and reconnaissance
activities to assist millions of people
in different countries affected by the
While these HADR operations have
given India operational visibility, they
have also enabled India to
demonstrate its commitment to
humanitarian needs. This is
especially true in the case of its
immediate neighbourhood — where
countries like Nepal and Bangladesh
have continued to face ecological
disasters due to their vulnerable
geological and geographical
Facets of India-Nepal Relations 33
the incident, as Nepal reeled under the impact of
a powerful earthquake of 7.8 magnitude on the
Richter scale.
The Indian Army also operated 13 helicopters
between Kathmandu and Pokhara to provide
relief while the National Disaster Reaction Force
(NDRF) and its 500+ personnel provided
immediate relief to the afflicted and affected.7 In
fact, under the rubric of Operation Maitri,
India covered the length and breadth of Nepal
while assisting civilian populations during this
operation and saving more than 5000 lives.
Nepal’s importance in Indian foreign policy
priorities can be gauged from the fact that
Operation Maitri was amongst the biggest
humanitarian assistance efforts ever undertaken
by India.8
In the long term, India assisted Nepal by
engaging in the construction of large-scale
critical civilian infrastructure projects. For
instance, India played a key role in rebuilding
schools and educational institutional in the
aftermath of the earthquakes. Such initiatives
India adopted a multi-pronged
approach to assist Nepal. On the one
hand, the Indian government assisted
the Nepalese through the
deployment of the Indian military
forces to provide immediate succour
and relief to the people. On the other
hand, India also attempted to assist
Nepal in its overall post-disaster
reconstruction efforts over the long
term. For instance, in the immediate
aftermath of the earthquake, the
Indian Air Force (IAF) responded to
the earthquakes by deploying its
Medium Lift Helicopters, (MLH) in
severely affected areas with Nepal
like the Nepalese capital Kathmandu,
and other cities and towns like
Aloghat, Chautara, Charikot,
Dhading, Lukla, Trishuli among
fostered goodwill towards India among the
Nepalese people.10
Similarly, India has also led rescue efforts to
evacuate Nepalese nationals from different crisis
ridden and politically volatile regions. Operation
Ajay that was recently launched to facilitate the
return of Indian nationals from Israel amidst the
ongoing Israel-Hamas crisis saw India rescuing
two Nepali nationals as well.9 An operation of
similar magnitude was undertaken by India in the
past as well when Nepalese nationals were
stranded in Yemen. Under the rubric of
Operation Raahat, India had facilitated the
return of fifteen Nepalese nationals from war
torn Yemen in 2015.11
These humanitarian assistance operations have
had an enduring impact on Indian foreign policy
facilitating positive ties between India and
partner countries.
They have enabled India to assist local
populations in foreign States and enhanced
India’s credibility at the international level. These
operations have also enhanced India’s diplomatic
ties with beneficiary countries. In the case of
India’s neighbourhood, the success of HADR
operations has enabled India to project itself as a
responsible power that functions in accordance
with the rules based international order,
providing relief and assistance to its
neighbourhood as and when required.
Such humanitarian assistance operations also
translate into goodwill for the Indian State and its
people as Indian Agencies engage with the local
populations especially in the neighbourhood.
These operations promote Indian values of care
and compassion beyond Indian shores.
Indian success in conducting HADR operations
in Nepal demonstrates the potential for its
emulation in other countries thereby increasing
India’s good neighbourly approach and overall
reliability and trustworthiness within its
immediate neighbourhood and beyond.
Facets of India-Nepal Relations 34
1. Embassy of India in Nepal (2023) Handing over of
2nd consignment of earthquake relief materials to
the Government of Nepal Indian Embassy
Kathmandu 06 November 2023
vember%202023. (Last Accessed: 23 November
2. Hindustan Times (2023) India sends relief materials
for quake victims in Nepal Hindustan Times 05
November 2023 URL:
1699198904850.html (Last Accessed: 23 November
3. Bhaskar, U. C. (2005) Tsunami Reveals Indian
Military’s Humanitarian Response Capability
Manohar Parrikar Institute of Defence Studies and
Analyses (IDSA) 08 January 2005
ability_CUBhaskar_080105 (Last Accessed: 23
November 2023)
4. Sharma, N. (2017) Length of Indo-Nepal border
could change after re-demarcation: Officials
Hindustan Times 12 December 2017 URL:
8H.html (Last Accessed: 23 November 2023)
5. Roche, E. (2020) ‘Nepal Remains a key neighbour
for India’ Mint 27 November 2020 URL:
a-11606468119419.html (Last Accessed: 23
November 2023)
6. Press Information Bureau (2015) Indian Air Force
continues to provide Relief to Stranded Persons of
Earthquake hit Nepal Ministry of Defence 13 May
2015 URL:
121701 (Last Accessed: 23 November 2023)
7. The Economic Times Nepal Earthquake: UN lauds
India’s relief operations in the country The
Economic Times 27 May 2015
9670.cms (Last Accessed 23 November 2023)
8. Press Trust of India India's 'Operation Maitri' in
Earthquake-Hit Nepal Ends NDTV 04 June 2015
-maitri-in-earthquake-hit-nepal-ends-768795 (Last
Accessed: 23 November 2023)
9. The Hindu (2023) 143 people, including two
Nepalese, fly out of Israel under 'Operation Ajay’
The Hindu 22 October 2023 URL:
rticle67449320.ece (Last Accessed: 23 November
10. Sharma, G. (2015) Wary children return to schools
after Nepal earthquake Al Jazeera 31 May 2015
ucation-idUSKBN0OG0GD20150531/ (Last
Accessed: 23 November 2023)
11. India Today India evacuates nationals of 26
countries in Yemen, emerges as hero at global level
India Today 09 April 2015 URL:
7784-2015-04-08 (Last Accessed: 23 November
Anuttama Banerji
Anuttama Banerji is a Research Associate at NatStrat. She is also the current South Asia
Visiting Fellow for the Stimson Center in the United States. Her research areas broadly
include South Asia, Defense and Security with a special focus on the United States
Facets of India-Nepal Relations 35
Recently, I met some very bright young Nepali
youth at a conference organised by the
UNESCAP. They were well educated,
self-driven, intelligent, well-travelled, and with
experience of social work in remote areas of
Nepal. We chatted on myriad subjects: climate
change, urbanisation, management of natural
resources, new start-ups taking advantage of the
digital connect, embracing AI, creating a circular
economy and even family. I live in Shillong,
Meghalaya, and it turns out some of them have
relatives in Shillong and visit them periodically.
They also mentioned relatives in the Gurkha
Regiment. I was impressed by their knowledge of
international organisations, their ability to
connect with people and their network building
skills. Over dinner in a foreign land, we bonded
on our common tastes for food. We were
reminded of our shared links in religion, folklore,
and the deep familial ties on both sides.
Sabyasachi Dutta
However, when the discussion veered towards
recent development cooperation between India
and Nepal, I found our conversation was
stumbling. There was more awareness on
contentious issues than the advances being made
in areas such as connectivity and power. Back
home in Shillong, I reached out to a few friends
in the large Nepali community. Some are in
academia now. Most were clueless on recent
advances made, except for the occasional news
report about issues such as the border dispute
and the blockade. For me it was a striking
example of the changing times, an insight into
the aspirations of the youth and their quest for a
new future. As one from Northeast India, for me
it really was also a telling tale of “so near, yet so
Recent Transformative
Facets of India-Nepal Relations 36
Gelje Sherpa became the youngest member of the 10-man team that summited K2 in the winter for the first time,
on January 16, 2021 | Gelje Sherpa/The Record
At the level of ecology, topographically tied
together in Himalayas and the plains, interlaced
by many shared rivers, India and Nepal share
common ecological issues: these are further
heightened with increasing climate change. With
rising global temperatures, freshwater, flood
management, ground water conservation
between Nepal and India is going to become
crucial for water security, prosperity and the
region. As an extension, management of other
natural resources too will need collaboration.
In 2014, Prime Minister Narendra Modi launched
the “HIT” formula between India and Nepal:
Highways, I-Ways and Trans-ways. Since then, a
lot has also been achieved. In the last nine years,
Nepal’s first Integrated Check Posts (ICP) was
established in Birganj, the first Cross-Border
petroleum pipeline of the region was built
between India and Nepal, the first broad-gauge
rail line has been established and new
transmission lines have been constructed across
the border. The recent power trade agreement
between the two countries is a game changer.
Through financial connectivity and cross border
digital payments, thousands of students, lakhs of
tourists and pilgrims as well as patients coming to
India for medical treatment will benefit. The
economic connectivity is being strengthened by
the construction of three more ICPs.
In parallel, India’s north-eastern states are also
being connected amongst each other and also
with neighbouring Bangladesh and Bhutan. All
north-eastern states are now connected by air and
rail. The Haldibari rail link is operational between
North Bengal and Bangladesh. Roadways and
several land ports with Bangladesh to the south
are being upgraded. Nepal can take advantage of
The Nepal-India relationship is
much more than “Roti Beti and Rozi
Roti”: It intrinsically is one of shared
aspirations encompassed in the youth
of the country: this fact needs to be
seen against the backdrop of several
factors: ecological, economic,
geopolitical, and socio-political.
The transformative narrative of
Nepal, from a nation “sandwiched”
between two big powers to a nation
which will play an important role in
the maritime geography of the
Indo-Pacific needs further
recognition within the global
strategic community.
this bilateral connectivity with Northeast India
and regional connectivity southwards with
Bangladesh which will further connect to the Bay
of Bengal: a theatre full of promise.
Nepal’s role in the Bay of Bengal and its role in
regional configurations such as BBIN or
BIMSTEC will become more and more critical,
with India’s rapid rise in the Global South.
Nepal’s position as a member of the Global
South and as a Himalayan country in the overall
Indo-Pacific will be a telling testimony of her
recognition and her increasing impact on global
power play in the maritime space with her
assertion as a maritime nation despite being
India and Nepal share the only open border that
exists in South Asia. This is a template for setting
an example of a shared dream of a vibrant South
Asia and Bay of Bengal community. Such an
aspirational narrative needs more resonance in
the study circles of universities and think-tanks in
both countries.
Need to go beyond governments
Yet, beyond the confines of foreign office desks
and the rarefied group of Nepal experts, very
little is discussed on these developments in the
strategic community, universities and media.
They say perceptions are bigger than reality. They
often create reality. Perceptions are often created
by the narratives that occupy the public mind
space. Working towards a constructive future
needs constructive narratives. While
governments do set the tone and can be
matchmakers, nurturing and empowering people
and institutions on the ground is going to be
paramount. This can only be done in a shared
space encompassing votaries of the idea of
Facets of India-Nepal Relations 37
shared prosperity spanning politics,
policymaking, industry, academia, and civil
society: a third space beyond but including the
first two of government and big business. Civil
society, think tanks and academia can play an
important part by highlighting success stories
that come out of the respective governments and
creating narratives that increase the confidence
of businesses to invest in each other. Addressing
the youth throughout this process is particularly
It is time to have dedicated
programmes in universities to
connect the youth on these shared
aspirations: sports and cultural
meets, border festivals, university
exchange programs can be platforms
to build bonds of people and
institutions that create psychological
connectivity transcending “the
politics of day”. As winds of change
swirl around the globe, it is perhaps
time that Nepal and India also decide
to set some new narratives that
recognise this fact.
In any deep relationship such as one like the
Nepal India relationship, there will always be the
burden of misgivings from the past. There will
always be critics of any good idea. Any
relationship needs nurturing, appreciation of
each other’s strengths and the will to overcome
challenges together in the spirit that the value of
the relationship is far greater than the weight of
the challenges. This recognition that the
connection itself is above anything else can
catapult it to the next level which is beyond
regimes and subnational politics. Soon, the
seventh meeting of the joint commission, the
highest-level bilateral mechanism between the
two countries, is being convened to look after
and address the entire gamut of the bilateral
relations and to remove bottlenecks. The
advances being made will need much more
churning in the schools, colleges, and
boardrooms of both countries. Will we be doing
this? Will we be doing enough of this? How can
we do more of this? These questions hold some
genuine answers to further strengthen
India-Nepal ties in changing times.
Sabyasachi Dutta
Sabyasachi Dutta is the Founder-Director of the ‘Asian Confluence’, India East Asia,
Center. Born in Shillong, a social entrepreneur, educationist, artist and a student of Indian
history and international relations, Sabyasachi has had a successful career spanning 12 years
in the Silicon Valley, California USA in cutting edge technology, innovation and
entrepreneurships in large corporations such as SONY Corp. as well as several successful
start-ups, and holding several patents. He left that to start several social innovation projects
in India. He pioneered a unique leadership program for rural youth of India; a unique
model of youth led rural development which was lauded by the World Bank; set up a chain
of eighty primary schools using the model of community participation propelled by youth
leadership and introduced several innovations in education. In his current avatar,
Sabyasachi continues to facilitate cultural programs, exchange programs, talks, discussions
and symposia with scholars and leaders of culture and thought, from India and abroad. He
holds a Masters Degree in Electrical Engineering with a special paper in Media and
Communication from Arizona State University, USA.
Facets of India-Nepal Relations 38
Avadhesh Mathur
Historical and Cultural
India and Nepal share very close historical and
cultural relations, which has been the bedrock of
their ties. As mentioned in the ancient Indian
epic, Ramayana, Lord Rama of Ayodhya was
married to Goddess Sita of Janakpur. Kirats were
an important part of the Pandav Army in the
battle of Kurukshetra in Mahabharata. During
6th Century BC, Magadh, Shakya and Brijis
Republics occupied territories on both sides of
the current Indo-Nepal border. Prince
Siddhartha was born in 566 BC in Lumbini near
Kapilvastu, the capital of Shakya rulers which is
now in Nepal. He attained Nirvana in Sarnath
near Varanasi, a city whose connection with
Nepal is as old as history. Some of the rarest texts
of Skandpurana are preserved in Nepal, palm
leaf manuscripts dated AD 810 that are available
in Kathmandu. Kashi has been the centre for
Nepali pilgrims, priests and at one time, even the
exiles. When King Rajendra was asked to choose
the destination for his exile, he chose Varanasi in
K.P. Bhattarai was born in Varanasi. He joined
the Indian independence movement against the
British Raj in India and the Rana rule in Nepal.
Banaras was also one of the main venues where
the anti-Rana movement started. The Colony
Dugdh Vinayak continues to be known as Nepali
Colony and the language spoken in this Colony is
Banaras Hindu University (BHU) was the main
centre for Nepali students and intellectuals.
Krishna Prasad Koirala with more than 40
members of his family lived in Banaras in 1917.
They launched publications “Gorkhali” and
“Janmbhoomi” which highlighted atrocities and
injustices of the Rana regime. The Koiralas also
joined the Non-Cooperation Movement and had
Facets of India-Nepal Relations 39
Pashupatinath Temple, Kathmandu
Indian leadership. Some of the major projects
implemented have been :
• The first highway linking the Kathmandu
valley with the plains (1953);
• Nepal’s first six airports at Gauchar (1951),
Simra (1964), Janakpur (1964), Bhairahawa
(1964) Pokhara (1964) and Biratnagar (1968);
• Koshi Barrage (1963), Devighat Hydropower
and Irrigation Project (1983);
• Bir Hospital in Kathmandu (1984), Institute
of Forestry (1950), the railways at Janakpur
• Most parts of the East-West Highway (1966)
and key sections of the Tribhuvan University,
one of the first centres for higher education
in the country (1960);
• B.P.Koirala Institute of Earth Science,
Optical Fibre Cable Project, Lumbini
Museum 2004, Kathmandu airport, Bagmati
bridge in Mathmandu, Janakpur, Birganj and
Raxaul railway.
• There are a number of other initiatives
underway to further strengthen the
relationship. However, there is scope for
further cooperation in various fields.
Way Ahead and
The following recommendations would help to
further cement India-Nepal ties, especially
cultural, connectivity and people to people
1. There should be tie ups between Indian
Agricultural Research Institute (IARI) and
similar institutions in Nepal. India could
also establish an Agriculture University in
Nepal with the help of Indian universities,
for example Pant Nagar Agriculture
India and Nepal have a special
relationship by way of Treaty of
Peace and Friendship (1950) which
laid down the foundation for Nepalis
to enjoy national rights in India
making them eligible to serve in
Indian Government and security
forces. The two Armies also have a
tradition of awarding the honorary
rank of General to each other’s Army
New Delhi and Kathmandu could
establish a joint high-level
Commission on Common Himalayan
Environment and Bio-diversity,
keeping in mind the common
challenges posed by climate change.
a formal membership of the Indian National
Congress. In 1947, the Nepal National Congress
decided to establish its head office in Banaras
while K.P. Bhattarai was heading the office. On
the other hand, the Communist Party of Nepal
was founded in Calcutta by Pushp Lal Shreshtha
in 1950. All India Gorkha League was formed in
1921 in Dehradun.
Since 1815, after the Treaty of Sugauli, Nepalis
have been recruited in the British Indian / Indian
Army. The pension ($615 million) to ex-Gurkha
regiment personnel is more than the annual
budget of Nepal ($450 million). Even in present
times, Prachanda lived in India during most part
of his Maoist Movement.
Socially, culturally and by way of religion, there
are many commonalities between India and
Nepal. There is also close cooperation between
India and Nepal in other fields including defence,
police, intellectual development, security issues,
water sharing, academic exchanges, student
admissions etc. Because of the open border
between India and Nepal, the people-to-people
relations among the citizens of the countries
have remained unparalleled.
Developmental Assistance
Despite its own pressing requirements, India has
assisted Nepal since the time it became
independent in 1947. This has been in sync with
India’s desire to support its neighbours and the
South-South cooperation philosophy followed by
Facets of India-Nepal Relations 40
University. India’s Dairy Development
Board may facilitate transfer of milk
technology to Nepal on the pattern of
2. India can look at the possibility of extending
IT services/optical fibre and establishing IT
back offices in Nepal.
3. There is ample scope to hold trade fairs in
Nepal/India that would increase awareness
about mutual business opportunities among
small and medium traders.
4. India can also assist Nepal in improving its
cricket infrastructure, coaching and training
5. Nearly six million Nepalis live and work in
India, some of whom have done extremely
well. They need to be brought on common
India-Nepal friendship platforms to further
strengthen people to people contacts.
6. A platform for promoting religious links
between Hindus and Buddhists of the two
countries needs to be established. Religious
leaders like Sri Sri Ravishankar, Baba
Ramdev, Brahma Kumaris are active in this
7. Centres may also be established in
Indian/Nepali universities/ colleges/
schools for research/study of common
languages including Hindi, Maithili,
Bhojpuri/Nepali etc.
8. Number of Nepali students studying in
India can remain in touch with their alma
mater through their alumni associations. Tie
ups could be established between the
Banaras Hindu University, University of
Allahabad, University of Patna, University
of Lucknow, University of Calcutta, JNU
(traditionally Nepalis come to these places)
etc. and universities in Nepal to enhance
cooperation between higher educational and
professional institutions. A quota may also
be fixed for Nepali students in these
Universities. There is no authentic study of
common history, culture between the two
countries. These tie-ups can further
encourage research in common religious
traditions and ethnology.
9. India has extended support to Nepal during
natural calamities and disasters. India’s
expertise in Disaster Management can be
used to train Nepali staff and for creating
institutions like National Disaster
Management Authority (NDMA).
10. India’s considerable expertise in cyber
security can be shared with Nepal to make
sure they are not subject to cyber
threat/banking frauds as in the recent past.
11. Both India and Nepal have a wealth of
herbs grown in Himalayan region. Further
research could be undertaken for medicinal
properties of these herbs.
12. While tremendous progress has been made
in establishing hydroelectricity power plants
in Nepal in collaboration with India,
research on transborder environmental
issues like flood, glacial melt, earthquake,
landslides etc for preventing damage to soil
and ecosystem can be jointly undertaken by
both countries. Existing flood forecasting
and disaster early warning systems need to
be established for effective public
13. In April 2018, an understanding between
Indian and Nepal’s Prime Ministers was
reached for river navigation. This needs to
be followed up.
14. Early completion of all pending projects like
Pancheshwar Project, Koshi, Sharda
Barrage, Gandhak Barrage Arun-III and
Upper Karnali Project etc. has been already
undertaken by both governments.
15. India can launch a Satellite for Nepal’s
exclusive use like weather/education.
16. Both Varanasi and Kathmandu have already
been declared sister cities as also
Sarnath/Lumbini. Joint cultural programs,
business projects, preference in educational
institutions and scholarships to students
belonging to sister cities may be considered.
17. An air service between
Ayodhya-Janakpur-Kathmandu will also
further promote tourism. Nepal has a
number of tourist spots; however, more
information needs to be disseminated to
Indian tourists about those places. Tourist
information and promotion centres in
various parts of Nepal and India need to be
18. Development of special corridors like
Lumbini-Bodhgaya, Sarnath-Kushinagar,
Pashupatinath-Kashivishwanath, Ramayana
circuit (Janakpur- Ayodhya), Runtek
Facets of India-Nepal Relations 41
Avadhesh Mathur
Served in the Ministry of Home Affairs and Cabinet Secretariat for approximately 37 years
and retired as Secretary in the Prime Minister’s Office in 2012. He also served in the United
Nations as Head of the UN Mission in North Kosovo (2012-2014). He is currently a
Member of the National Security Advisory Board.
During the span of almost 48 years, Shri Mathur has been closely involved in national
security issues both at operational and policy level. He has been involved in political
analysis and negotiation, conflict resolution, security sector development and strategic
communication in bilateral and multilateral settings. Shri Mathur has served in Indian
Embassies in Belgium and Pakistan. During his assignments as Secretary to the
Government of India, his special area of interest had been study of issues affecting
national security in India’s neighbourhood
His other area of interest has been Northeast India where he was successful in bringing
peace in some regions through political reconciliation and integration of
militants/insurgents into the national mainstream.
Shri Mathur has been awarded medals by the President and the Prime Minister of India
besides various other awards and commendations.
Shri Mathur belongs to the Indian Police Service (1975 batch).
-Thangboche, Muktinath-Tirupathi etc. are
under consideration and need to be
The geographical contiguity,
historical cultural links and
socioeconomic opportunities that
connect India and Nepal have
created a natural partnership that
should be nurtured with mutual
understanding, trust and sensitivity,
for furthering prosperity and security
for both countries. There are ample
opportunities for both sides to further
deepen their ties and the future holds
an optimistic outlook.
Facets of India-Nepal Relations 42
Despite the longstanding and fruitful
geo-historical, cultural, economic, security,
diplomatic, and people-to-people ties between
India and Nepal, which have been
institutionalised since 1950, the relationship is
not without its challenges. Over the years,
differing perspectives on critical issues have
emerged, casting a shadow on the otherwise
robust connection. The hydro-energy sector, in
particular, stands out as a significant point of
contention, with its roots traced back to the
signing of the 1950 Treaty of Peace and
Friendship and the Koshi agreement in 1954,
contributing to persistent strains in bilateral
Early Hiccups
Nihar R. Nayak
The perception among the Nepalese often
characterises agreements and cooperation as a
unilateral effort by India to exploit their natural
resources, with the assumption that India stands
to gain more from these projects. However, a
closer examination reveals a different narrative.
India's inability to execute large-scale
hydro-projects in the 73 years of cooperation has
fuelled interpretations by civil society,
overlooking the original intent of the Koshi and
Gandak barrage, primarily designed for flood
control and irrigation. It's essential to note that
India faced technological and financial
constraints in the 1960s and 1970s, hindering the
pursuit of mega projects in the Himalayas.
Nevertheless, this situation has been
misconstrued by some Nepalese, leading to the
perception that India's interests lie solely in
developing dams along the border and exploiting
Nepali water resources for its advantage.
Facets of India-Nepal Relations 43
Source: / The Kathmandu Post
These initial challenges significantly impacted the
trajectory of hydro-energy partnership in the
subsequent years.
Nepalese authorities exhibited non-cooperation
with India until 1992, a turning point marked by
Nepal's decision to permit private sector
involvement in the hydro-energy sector through
the Electricity Act.
However, India faced another setback with the
onset of the Maoist insurgency in 1996, resulting
in further delays for many planned Indian
New Momentum
In response to the ongoing load shedding, the
democratically elected government took decisive
action by declaring the National Energy Crisis
Reduction and Development Decade
(2016-2026) in 2016.
This strategic initiative aimed to boost power
generation capacity through the active
However, the collaboration gained
momentum in the aftermath of the
Maoist conflict. A significant turning
point occurred with the signing of
the Agreement on Electric Power
Trade, Cross-Border Transmission
Interconnections, and Grid
Connectivity in October 2014. This
agreement, formulated under Prime
Minister Modi's HIT (Highways,
I-ways, and Trans ways) initiative,
marked a pivotal moment during his
inaugural foreign visit to Nepal after
assuming office in New Delhi. This
period also coincided with Nepal
enduring more than 18 hours of daily
load shedding, despite possessing the
potential to generate 42,000 MW of
hydroelectricity, showcasing the
pressing need for enhanced energy
involvement of private developers, enhance
domestic transmission lines, establish power
purchase agreements with independent power
producers, construct additional cross-border
power lines, and explore market expansion
opportunities in the Bangladesh, Bhutan, India,
and Nepal (BBIN) sub-region.
India’s Neighbourhood First
Policy and Energy
The neighbourhood occupies a central position
in India's foreign policy. India holds the
conviction that political stability, economic
prosperity, and strategic security in neighbouring
countries are crucial. The belief is rooted in the
understanding that the influence of
extra-regional powers in South Asia, if
unchecked, could pose challenges to India's
geo-cultural advantages in the region. Former
Prime Minister of India, Dr. Manmohan Singh,
succinctly stated, “The real test of foreign policy
is in the handling of neighbours.”1
In the post-independence era, India actively
advocated for multiparty democracy and
provided extensive economic and technical
support to neighbouring nations for
infrastructure development and economic
growth. Since the 1990s, India's overarching
objective has been to foster partnerships and
extend the benefits of its economic prosperity to
its immediate neighbours.
Emphasising the significance of fostering
partnerships with neighbouring nations, External
Affairs Minister S. Jaishankar reaffirmed on July
16, 2021, that "Economic growth is universally
driven by 3Cs: Connectivity, Commerce, and
Contacts. All three need to come together to
ensure regional cooperation and prosperity.”2 In
addition to addressing economic and security
concerns, a notable development was the
inaugural convening of the Inter-Ministerial
Coordination Group (IMCG) on Neighbouring
Countries at the Secretary level on April 12,
where cross-border connectivity took centre
Facets of India-Nepal Relations 44
Subsequently, Modi's foreign visits to the two
Himalayan countries not only underscored the
precedence given to neighbouring nations but
also signalled a departure from the previous
foreign policy focus on Pakistan. The renewed
focus on neighbouring countries can be
attributed to India's pursuit of development and
energy requirements. Presently, India views its
smaller neighbours as strategic partners in
achieving its economic growth and
developmental objectives. Another factor
influencing this shift is the shared sphere of
influence, driven by the increasing presence of
external forces, notably China, in the region.
China has made significant diplomatic strides in
India's neighbourhood through substantial
investments in infrastructure, bilateral trade
enhancements, strengthened defence and cultural
cooperation, and the revitalisation of maritime
and land silk routes.
Furthermore, beyond establishing a prominent
presence in international forums and cultivating
relations with major powers, India recognises the
potential to leverage platforms like SAARC and
other sub-regional mechanisms to fulfil its more
immediate national interests. Similarly, India is
actively pursuing green energy solutions to
decrease its reliance on fossil fuels. While Nepal
currently relies on India for its energy needs, the
long-term perspective shifts toward mutual
cooperation. India seeks Nepal's collaboration to
fulfil its commitments made in Paris and
Glasgow regarding climate change, as well as to
realise Prime Minister Modi's vision of “One
Sun, One World, One Grid.”
Reflecting this commitment, two out of the four
For the Modi government, the
initiation of India's foreign policy
journey begins with the
neighbourhood. The invitation
extended to all SAARC leaders to
attend Modi's oath-taking ceremony
in May 2014 distinctly conveyed the
message that neighbours hold a
paramount position.
agreements signed during Prime Minister
Deuba's visit to India in March 2022 were related
to the energy sector. This included Nepal joining
the India-led International Solar Alliance,
aligning with the shared goal of sustainable
energy solutions. Another significant agreement
involved the exchange of terms for the supply of
petroleum products between the Indian Oil
Corporation (IOC) and the Nepal Oil
Corporation (NOC).
The New Phase of
In 1971, India and Nepal engaged in a Power
Exchange Argument to address the power needs
in the border region shared by both countries.
Over twenty transmission interconnections, each
with varying capacities, were established.
Furthermore, a comprehensive agreement
covering 'Electricity Power Trade, Cross Border
Transmission Interconnections, and Grid
Connectivity' was formalised on October 21,
2014, deepening the collaboration between the
two nations.
A significant development occurred in
November 2021 when India granted permission
to Nepal to sell its surplus energy. This aligns
with the Cross Border Trade of Electricity
(CBTE) guidelines issued in February 2021,
marking a step forward in fostering energy
cooperation between the two countries. In
November 2021, India endorsed Nepal's
proposition to export 39 MW of electricity to the
Indian market. The electricity would be
transmitted through the 400
KV-Muzafarpur-Dhalkebar cross-border
transmission line. Additionally, India has made
commitments to develop substantial hydro
projects, including Arun–III, Lower Arun, Upper
Karnali, and Pancheswar, all designed to be
storage-based. This strategic approach aims to
assist Nepal in generating electricity during
non-peak periods and exporting surplus energy
to India and other nations. Honouring this
commitment, the Indian Central Electricity
Authority approved the Nepal Electricity
Authority's proposal to sell an additional 325
MW of electricity to India in April 2022.
Facets of India-Nepal Relations 45
flexibility to cross-border entities, allowing them
to optimally utilise their resources by procuring
power on a closer-to-real-time basis.4 On
September 6, 2023, the Indian Cabinet granted
approval for the purchase of 10,000 MW of
electricity from Nepal over the span of ten years,
marking a significant step towards a long-term
inter-government power trade agreement. The
formalisation of this agreement is anticipated to
take place either in 2023 or early 2024. This
agreement is poised to stimulate additional
investments in Nepal's power sector and facilitate
the export of power to the Indian market.
Major Negotiating Issues
Despite the significant strides made and financial
gains for Nepal in cross-border energy trade,
Nepalese stakeholders have raised concerns
about the prolonged approval process for selling
hydroelectricity from specific private developers.
These delays are attributed to issues related to
third-country investments. The apprehension
stems from the procedure implemented by the
Central Electricity Authority of India in February
2021, which prohibits the import of power from
projects directly or indirectly involving countries
with whom India lacks bilateral hydro-energy
Despite these allocations, Nepali authorities
express disappointment, as India has only
permitted the sale of 110 MW of electricity
under a longer-term arrangement. The Nepali
authorities are seeking a guaranteed, long-term
commitment from India for the purchase of
electricity at fixed prices exceeding INRs 4.00 per
unit. Notably, Nepali developers are advocating
for guaranteed fixed-price electricity sales to
India, favouring this approach over engaging in
Advantage Nepal
The earnings from electricity exports to India
have shown a consistent upward trend, totalling
nearly NPRs 11.8 billion until mid-October 2023.
This surge in export revenue has played a crucial
role in reducing the trade deficit with India,
concurrently bolstering Nepal's foreign exchange
In the fiscal year 2022-23, electricity export
earnings secured the third position in overall
export revenues, following palm oil (NPRs 20
billion) and yarn (NPRs 20 billion). This
underscores the growing significance of Nepal's
electricity trade in contributing to its economic
gains and trade balance.3
In response to Nepal's request, India made a
significant commitment in June 2023, pledging to
purchase up to 10,000 MW over the next decade.
India, in support of Nepal's power export
initiatives, established multiple channels,
demonstrating a willingness to facilitate energy
trade, albeit with a preference for controlled
quantities in a single transaction. Addressing this,
the Central Electricity Authority (CEA) took a
noteworthy step by amending India's Cross
Border Electricity Trade (CBET) rules in August
2023. This amendment specifically catered to
neighbouring countries like Bhutan, Nepal,
Myanmar, and Bangladesh, allowing them to
engage in buying or selling electricity through
India's real-time market (RTM), a departure from
the previous restriction to the day-ahead market
(DAM) in power exchanges.
This progressive move by the Indian government
is poised to empower these nations, enabling
them to import and export electricity more
closely aligned with India's real-time market.
Engaging in real-time trading offers greater
Nepal stands poised to emerge as a
net beneficiary in the energy trade,
not only with India but also with
other countries such as Bangladesh,
Sri Lanka, and Myanmar.
As of October 2023, India has
granted approval for Nepal to sell 450
MW of electricity in its market.
Furthermore, 520 MW has received
clearance for sale in India's exchange
market, encompassing both
day-ahead and real-time markets.
Facets of India-Nepal Relations 46
transactions through the day-ahead market
(DAM) and real-time market (RTM). Nepal has
also articulated a demand for India to permit a
higher volume of hydroelectricity exports to
Bangladesh through Indian transmission lines,
surpassing the current limit of 40 MW.
Green energy has witnessed surging demand,
particularly in the post-Paris agreement era. The
disruptions in the global energy supply chain,
compounded by the effects of COVID-19 and
the escalation of global oil prices due to the
Ukraine crisis, have intensified the call for green
energy solutions. Consequently, this sector is in a
state of evolution, with considerable progress yet
to be made. Nepali developers are encouraged to
maintain confidence in India and persist in
negotiating for optimal solutions and benefits.
Given the shared imperative of hydro energy, this
collaboration has the potential to serve as a role
model in fostering partnerships at both bilateral
and regional levels. The cooperation could prove
forward-looking and mutually rewarding if both
countries are willing to address their sensitivities
independent of regional issues and third-party
influences in bilateral matters.
1. Amb (Retd) V.P. Haran, “Challenges in India's
Neighbourhood Policy”, a lecture given at Central
University of Tamil Nadu on 14 July 2017,
htm?674 (accessed on 18 November 2023).
2. “India's connectivity drive in neighbourhood
benefits Nepal, Bangladesh”, The Sentinel, 17 April
h-587850 (accessed on 20 April 2022).
3. Prithvi Man Shrestha, “Power export earns Nepal
Rs12 billion this wet season” The Kathmandu Post,
19 October 2023,
(accessed on 18 November 2023).
4. Sweta Goswami, “Neighbouring Countries can now
trade electricity in India’s real time market” Moneycontrol,
02 August 2023, https://www.moneycontrol.
rket-11081571.html (accessed on 18 November
Nihar R. Nayak
Dr. Nihar R. Nayak is Research Fellow with IDSA, New Delhi. His area of expertise is
Domestic Politics in Nepal and Bhutan, Climate Change impacts in the Himalayas, Energy,
and Political violence (Maoist Conflict) in South Asia. Dr. Nayak has completed PhD in
International Politics from JNU. Dr. Nayak has national and international publications
including the book “Strategic Himalayas: Republican Nepal and External Powers”. He
recently published a monograph on “Political Changes in Nepal and Bhutan: Emerging
Trends in Foreign Policy in the post-2008 period” published by MP-IDSA in September
Facets of India-Nepal Relations 47
Nepal is increasingly buffeted by geopolitical
cross currents. With an economy only recovering
slowly from the COVID 19 pandemic, Nepal was
hit by the soaring oil, fertilizer and food prices
following the Russia-Ukraine conflict. Thereafter
the possibility of the Israel-Palestine conflict
expanding to the wider region has also led to
fears of a spurt in oil prices.
Nepal-China-US Interplay
The public US-China spat in Nepal before the
Ranjit Rae
adoption by Nepalese Parliament of the USD
500 million Millennium Challenge Corporation
(MCC) grant for road maintenance and
construction of transmission lines is only a
precursor of things to come. The Nepalese
political class is deeply polarised. The
Communists, egged on by China, felt that the
MCC was part of the Indo-Pacific Strategy that
was aimed against China. The Nepali Congress
and other parties supported the grant on the
grounds that it contributed to Nepal’s economic
development. A compromise was finally worked
out with a declaratory statement in Parliament
that enabled adoption of the MCC. However,
another proposal of the US, the State Partnership
Project (SPP) that involved cooperation between
the Nepalese Army and the Utah National
Guards primarily for humanitarian assistance and
disaster management was rejected on the
grounds that Nepal cannot join any military pact
despite the US stating categorically that the SPP
did not imply any military alliance.
However, it is the ongoing US-China
contestation for global influence and
the India-China tensions that pose
the biggest challenge for Nepal.
Facets of India-Nepal Relations 48
Indian PM Modi and Nepalese PM Prachanda hold bilateral talks in New Delhi in June 2023 | Twitter/MEA
Following the adoption of the MCC compact,
the US has stepped up its activities in Nepal. A
series of high-level visits from the US have taken
place in recent months. These visits include the
Deputy Secretary of State Victoria Nuland, the
USAID Administrator Samantha Power, the
Under Secretary for Human Rights and Tibetan
Affairs and several other officials, also from the
military. The CIA Director too had wished to pay
a visit but this was politely declined by the
Nepalese. The Nepalese Foreign Minister has
paid an official visit to Washington. Though
Nepal has endorsed the MCC pact, it remains
opposed to the Indo-Pacific Strategy.
Meanwhile, Nepal, which under Oli was an
enthusiastic supporter of the Chinese Belt and
Road Initiative, (BRI) has seen little forward
movement in terms of project implementation.
None of the nine flagship connectivity projects,
including the Trans Himalayan railway have seen
significant progress.
A controversy has also arisen within Nepal on
whether or not the Pokhara International Airport
that was commissioned recently is within the
ambit of the BRI; the Chinese insist that it is and
Nepal disagrees. This is not a simple matter since
the airport was built on the basis of a financial
package comprising concessional and
commercial Chinese loans that could become a
precedent for future BRI projects. As of now, the
airport appears to be a white elephant with few, if
any, international flights. Nepal’s efforts to
persuade the Chinese to convert loans for the
project into a grant also do not appear to have
borne any fruit.
No framework plan for BRI was
finalised during PM Prachanda’s
recent visit to China, 23-30 September
2023. Similarly, no consensus has
emerged on modalities for financing
these big-ticket projects with Nepal
insisting of grants or concessional
loans (a salutary lesson learnt from
the Sri Lanka economic and debt
crisis) which the Chinese are
reluctant to agree to.
Of the many Chinese initiatives, Nepal has
signed on to the BRI and the Global
Development Initiative, though it has so far not
endorsed the Chinese sponsored Global Security
Initiative and Global Civilizational Initiative, even
though the then President of Nepal Bidya Devi
Bhandari did participate in a GSI event organised
by China in September 2022. The Nepalese and
Chinese Communist parties, particularly under
PM Oli had significantly stepped-up engagement
with an MOU signed between them prior to
President Xi Jinping’s visit to Nepal in October
2019. However, efforts by China for a united
communist front in Nepal have not been durable
though some, albeit temporary success was
achieved with the formation of the Nepalese
Communist Party (NCP) following a merger of
the Communist Party of Nepal (Unified
Marxist–Leninist) and Maoist Centre in 2018.
This was short-lived; the merger collapsed after
three years due to internal contradictions and the
poor interpersonal relationship between the top
leaders. China, however, is a long-term player and
their strategic goal for a united Communist front
in Nepal will remain, particularly in light of
growing US involvement.
One less commented development during
Prachanda’s recent visit to Nepal relates to
Taiwan. For the first time the Nepalese
Government has explicitly expanded its
commitment to the ‘One China’ policy to include
Taiwan. The Joint Statement issued at the end of
the visit stated that “Recognizing that the
Government of the People’s Republic of China
is the sole legal Government representing the
whole of China, and Taiwan is an inalienable part
of China’s territory, the Nepali side is against
“Taiwan independence.”
India-Nepal Relations
The poor state of the India-China relationship
has also impacted Nepal. India’s refusal to buy
power from Nepalese projects that have a
Chinese footprint has led to some resentment
within Nepal. Several articles have appeared
suggesting that India wants to corner the entire
hydro-generation capacity of Nepal. During
Prachanda’s recent visit to China, the two
Facets of India-Nepal Relations 49
Hydropower Cooperation
Perhaps the most far-reaching developments
relate to cooperation in the field of hydro-power.
The vision statement adopted in April 2022 was
further fleshed out with major initiatives during
PM Prachanda’s recent India visit.
India agreed to purchase 10000 MW of power
from Nepal over a ten-year period. Already, India
is purchasing almost 650 MW of power of which
over 500 MW is sold in the energy market and the
rest through a longer-term power purchase
agreement (PPA).
Nepal is not only permitted to sell power in the
day ahead market but on the spot/real time
market as well, thereby reaping higher peaking
power prices. Several Indian promoted
hydro-power projects are moving ahead. The 900
MW Arun III project together with two other
projects on the Arun River, the 669 MW Lower
Arun and 490 MW Arun IV are being developed
by Indian PSU Satluj Jal Vikas Nigam. India’s
NHPC will also develop the West Seti (750 MW)
and Seti River-6 (450 MW) and Phukot Karnali
480 MW projects, the last in cooperation with
Nepal’s Vidyut Utpadan Company Ltd (VUCL).
Unfortunately, the 900 MW Upper Karnali
Project promoted by GMR appears to be in a
limbo with efforts by the private sector company
to secure a strategic investor not successful thus
Nevertheless, India should try and
resolve this issue in a practical
manner since it will strengthen the
Buddhist Circuit and encourage
tourism in both countries, failing
which this airport would become
another white elephant that Nepal
can ill afford.
Last year alone Nepal sold USD 800
million worth of power during the
wet monsoon season. This figure will
only increase with time.
countries have agreed to establish a
Trans-Himalayan transmission line, a means for
Nepal to diversify its power exports to countries
other than India.
On balance however, bilateral India-Nepal
relations appear to be progressing well. Contrary
to the usual practice of raising all bilateral issues,
during his official India visit from 31 May to 3
June 2023, Prime Minister Pushpa Kamal Dahal
‘Prachanda’, chose a novel, more productive
approach. Instead of focussing on a long litany
of complaints and irritants in the relationship
such as the 1950 Treaty of Peace and Friendship,
the non-acceptance of the Eminent Person’s
Report, the boundary dispute, and the question
of Gurkha recruitment under the Agniveer
Scheme, Prachanda decided to concentrate on
the substantive, economic dimension of bilateral
ties. This gelled with India’s own priorities under
the Neighbourhood First policy of connectivity
and development.
Connectivity Projects
Significant progress was made towards
developing the region as an open,
interconnected, interdependent and mutually
beneficial economic space where each country
could exploit its own comparative advantage to
the fullest potential, thereby benefitting itself and
indeed, the wider region. Projects including
trans-border railway lines, the
Raxaul-Kathmandu railway, Integrated
Check-Posts for enhanced logistical connectivity,
transmission lines, oil and gas pipelines, and
digital connectivity with the extension of India’s
digital financial sub-stack including the Universal
Payments Interface (UPI) to the sub-region made
steady progress. Problems remain about flight
clearances for the new ADB financed, Chinese
constructed Lumbini Airport at Bhairawaha that
receives few if any international flights. It would
have been more prudent for Nepal to have
sought India’s concurrence in advance of the
construction since it is close to the Indian border
and most flights landing or taking off
immediately exit/enter Indian airspace.
Facets of India-Nepal Relations 50
Political Issues
Though political issues did not form a salient
part of Prime Minister Prachanda’s visit to India,
there are several issues that on balance would be
preferable to resolve, sooner rather than allow
them to fester.
The question of Gurkha recruitment to the
Indian Army is a sensitive issue with strategic
implications. India has over 30,000 Nepalese
servicemen in her Army. Pension payments are
made to some 1,25,000 Gurkha retirees in Nepal
adding up to 2% of Nepal’s GDP. With the new
Agniveer Scheme, all Gurkha recruitment into
the Indian Army has ended. The Nepalese
Government is fearful of re-introducing
individuals well-trained in weaponry back into
society after their four-year tenure of an
Agniveer ends, given the historical backdrop of
the violent Maoist insurgency. A consequence of
this impasse is disturbing reports of several
Nepalese joining Russian mercenary forces as
well as the Ukrainian Army and potentially facing
each other in the Russia-Ukraine conflict. There
are also reports that China is interested in
recruiting Nepalese Gurkhas for providing
security to their projects in Nepal as well as
Pakistan. India should engage in urgent
discussions with the Nepalese authorities to find
a mutually satisfactory resolution of the issue of
Gurkha recruitment.
It is unlikely that the Agniveer
scheme will be amended solely for
the Nepalese, but at the very least,
facilities offered to Indian Agniveers
post-retirement in terms of
alternative avenues of employment,
should be extended to the Nepalese
as well.
Finally, India’s willingness to enable
export of Nepalese power to
Bangladesh through India’s
transmission grid opens up
significant new prospects for the
development of a sub-regional
electricity grid that will benefit all
countries. Already, an agreement of
sale of 40 MW of Nepalese power to
Bangladesh has been finalised,
though the implementation
framework needs to be fleshed out.
While cooperation in hydropower
remains a primary goal of both
countries, it is critical to factor in
environmental and climate change
considerations in the Himalayan
region, particularly in light of the
far. Fortunately, some of the problems relating to
the sale of GMR power through India to
Bangladesh have been resolved; this would imply
some progress towards the finalization of a PPA,
essential for raising debt to finance the project.
Though agreed at the level of the Prime
Ministers, the adoption of the detailed project
report (DPR) for the massive 6000 MW +
Pancheshwar Multipurpose Project has not been
completed within the three-month deadline.
With political will and a policy of give and take,
the remaining differences over water sharing and
cost/benefits of the project should be
satisfactorily resolved. The project should be
viewed strategically; it will bring about a
fundamental transformation in the economies of
the less developed far western region of Nepal
and Uttarakhand’s Kumaon region.
The long pending Sapt Koshi High Dam project,
essential to tame the ‘River of Sorrow’ is seeing a
new lease of life with the agreement between the
two countries to expedite studies that would
enable the completion of the DPR. However, a
lot of ground work would be required,
particularly to persuade the local inhabitants of
the area of the benefits that would potentially
flow from the project.
recent Glacial lake outburst flood
(GLOF) outburst in Sikkim that led
to the destruction of the dam of the
Teesta III project and adversely
affected several downstream projects.
Facets of India-Nepal Relations 51
Despite some political differences,
overall, India-Nepal relations,
focussed on economic development
and mutual prosperity are strong and
expanding. Nepal’s multiparty
democracy and democratic
institutions such as the media and
judiciary are robust, though there is
some disenchantment with domestic
political processes and widespread
corruption and the inability of the
ruling class to fulfil the aspirations,
especially of the young Nepalese.
New political forces such as the
Rashtriya Swatantra Party,
comprising young, educated and
The Boundary question has become extremely
complicated due to parliamentary endorsement
by a two-thirds majority of Nepal’s unilateral
expanded claims in the sensitive areas near the
India-Tibet border in Uttarakhand. It is
impossible for India to accept this claim that has
been raised some 205 years after the Treaty of
Sugauli was signed between Nepal and the British
East India Company. The only dispute that India
has accepted in this sector relates to the limited
territory of Kalapani. Nevertheless, eventually,
some bilateral talks would need to be held; to
begin with, perhaps, talks about laying the
ground rules for discussions, could be the way
The Eminent Persons Group (EPG) report for
all practical purposes is moribund but
discussions on the key issue in the Report,
namely the 1950 Treaty of Peace and Friendship
between the two countries should resume
expeditiously. India is publicly committed to
considering Nepalese proposals on the matter;
we have successfully renegotiated the 1949 Treaty
with Bhutan and there is no reason why the 1950
Treaty cannot be successfully updated for mutual
benefit. The Foreign Secretary-level mechanism
should be convened to begin the dialogue.
charismatic leaders, are emerging.
Similarly, those forces, such as the
royalists that felt left out following the
adoption of the new Constitution in
2015 are reasserting themselves.
A worrying development relates to several
instances of tension between diverse religious
and ethnic communities. This is something new.
Incidents of Hindu-Muslim tensions, especially
in the Terai, as well as between Hindus and some
Janjatis in Dharan, can potentially destroy social
harmony. Fortunately, all political parties have
condemned such incidents and the authorities
have clamped down hard and are taking steps to
prevent their recurrence.
It is in India’s interest for peace and stability to
prevail in Nepal. Conflict and disharmony can
make Nepal vulnerable to external forces that
may be inimical to both Nepal and India, as we
have experienced in the past. The new
Constitution of Nepal was adopted after long,
violent struggles. Reopening core elements that
have been agreed upon could potentially,
destabilize Nepal. In any event, these are issues
for the Nepalese to decide amongst themselves.
India should adopt a very cautious approach and
not get pulled into these highly charged and
sensitive matters.
Facets of India-Nepal Relations 52
Ranjit Rae
Ranjit Rae retired as Ambassador of India to Nepal in 2017 after an extensive career in the
Indian Foreign Service spanning over three decades. He has recently published a book
titled Kathmandu Dilemma: Resetting India-Nepal Ties (Penguin 2021) and has written
several articles on Nepal in national dailies.

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