India – Nepal Discussed Ties 

Syllabus: GS2/IR

Context

• The Finance Minister of Nepal visited India and had a meeting with the Indian Finance Minister and External Affairs Minister.

About

• The Inter-Governmental Sub-Committee (IGSC) on Trade, Transit and Cooperation to Control Unauthorised Trade was concluded.
  • It was related to market access, Customs and trade facilitation, standards, food safety, border infrastructure, rail and road connectivity and other trade-related matters.
• Nepal’s reconstruction plans post-floods and the “reset” of India-Nepal ties with the newly elected government were at the top of the agenda as External Affairs Minister.

Overview of India – Nepal Relations

• Shared Border: The country shares a border with five Indian states – Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand.
  • Land-locked Nepal relies heavily on India for the transportation of goods and services and access to the sea is through India.
• The India-Nepal Treaty of Peace and Friendship: Signed in 1950, it forms the bedrock of the special relations that exist between India and Nepal. 
  • Nepalese citizens avail facilities and opportunities on par with Indian citizens in accordance with the provisions of the Treaty.  
• Defence Cooperation: India has been assisting the Nepal Army (NA) in its modernisation by supplying equipment and providing training. 
  • Both countries conduct Joint Military Exercise SURYA KIRAN alternately in India and in Nepal.  
  • Since 1950, India and Nepal have been awarding each other’s Army Chief with the honorary rank of General.
  • The Gorkha regiments of the Indian Army are raised partly by recruitment from hill districts of Nepal. 
• Trade and Economic: The India-Nepal goods trade was worth about US$ 9.38 billion in Financial Year 2025-26. This represents more than 60% of Nepal’s total external goods trade. 
  • India is also Nepal’s biggest export destination and received more than 80% of Nepal’s goods exports in FY 2025-26. 
  • India is also the largest source of foreign investment in Nepal accounting for almost 1/3rd of the total FDI received by the country. 
• Connectivity and Development Partnership: India is the largest developmental donor of Nepal in the field of priority sectors such as health, education and connectivity.
  • Some of the major projects include Gauchar Airport (presently Tribhuvan Airport), East West Highway, development of cross-border rail links and establishment of Integrated Check Posts. 
  • Since 2006, India has provided Lines of Credit worth US$ 750 million to Nepal. 
• Energy Cooperation: India and Nepal have had a Power Exchange Agreement since 1971 for meeting the power requirements in the border.
  • Joint Vision Statement on Power Sector Cooperation 2022: It includes joint development of power generation projects in Nepal, development of cross-border transmission infrastructure, and coordinated operation of the national grids. 
• Humanitarian Assistance and Disaster Relief (HADR): In the wake of the 2015 earthquake in Nepal, India was the first responder and carried out its largest disaster relief operation abroad (Operation Maitri). 
  • India launched a Humanitarian Assistance and Disaster Relief (HADR) response after devastating flash floods hit Nepal in August 2026.
  • It also demonstrates India’s role as a first responder in the neighbourhood, while strengthening humanitarian and people-to-people ties with Nepal.
• Cultural Ties: The leaders of the two countries have often noted the age-old ‘roti beti’ relationship, which refers to cross-border marriages between people of the two countries.

Areas of Concerns between India & Nepal

• Treaty of Peace and Friendship of 1950: It was an effort to strengthen and develop ties and to perpetuate peace between the two countries.
  • Over the time, Nepal believed the treaty was asymmetrical and incompatible with the national interest of Nepal.
  • India has consistently stated it is open to reviewing the treaty “in a constructive and forward-looking manner”.
• Kalapani dispute: The area is in India’s control but Nepal claims the region because of historical reasons. The area is the largest territorial dispute between Nepal and India.
• Trust Deficit between the Two Countries: Perception in Kathmandu that India interferes in Nepal’s internal political processes.
  • India’s concerns about growing Chinese influence in Nepal’s infrastructure, trade, and political decisions.
  • Occasional political narratives in Nepal portraying India as hegemonic.
• Security Concerns: Both India and Nepal have shared security concerns, including issues related to cross-border terrorism, trafficking, and border security. 
• Perception of Unequal Relationship: Some segments of Nepalese society have expressed concerns about what they perceive as an unequal relationship with India, with concerns of economic dependence and a lack of reciprocity in the bilateral relationship.

Way ahead

• Despite these challenges and disputes, India and Nepal have historically maintained close ties and continue to engage in dialogue and diplomatic efforts to address bilateral issues. 
• Both countries recognize the importance of their relationship and are committed to finding mutually acceptable solutions to their differences while promoting cooperation and friendship for the mutual benefit of their peoples.

Source: AIR