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India-Nepal Relations

Context: Nepalese Prime Minister Pushpa Kamal Dahal is on an official visit to India, seeking to enhance cooperation in power, transport and tourism.

More on the news: Key highlights of visit

  • Export of hydropower: India-Nepal have signed a series of agreements, including export of Nepal’s hydropower to Bangladesh through Indian Territory.
    • A long-term Power Trade Agreement has been signed, aiming to set a target of importing 10,000 MW of electricity from Nepal in the coming years.
  • Infrastructure assistance: NHPC and VUCL (Vidyut Utpadan Company Ltd.) of Nepal have signed agreement for the development of Phukot Karnali Hydroelectric Project and Lower Arun Hydroelectric Project.
  • Access to inland waterways: Both the sides have signed the revised Treaty of Transit under which Nepal will get access to India’s inland waterways.
  • Railway connectivity: Both sides jointly inaugurated a cargo train from Bathnaha in India to Nepal Customs Yard. The rail link was built with an Indian grant.
  • Upgradation of petroleum pipeline: Foundation was laid for development of Phase-II facilities as part of the Motihari-Amlekhgunj Petroleum Pipeline.
  • Religious tourism: The projects related to the Ramayana Circuit will be expedited.

India-Nepal ties: Significance

  • Economic significance:
    • Trade: Nepal shares border with 5 Indian states. Hence an important point of trade and economic exchange.
    • Energy security: India and Nepal share many trans-boundary Himalayan rivers with huge hydropower potential.
    • Foreign exchange: Remittances sent from India is one of the major sources of foreign exchange.
  • Strategic significance:
    • Buffer state: Nepal acts as buffer state between India and China. It prevents any future chances of aggression.
    • Internal security: Cooperation of Nepal is necessary for curbing cross-border smuggling of weapons, fake currency and narcotics.
  • Cultural significance:
    • Pilgrimage sites: Many Hindu and Buddhist religious sites are in Nepal making it an important pilgrimage site for Indian citizens.
    • Common religion: Majority of citizens in India and Nepal are Hindus, forming a major civilisational link between the two nations.
  • Diaspora: Nepali diaspora in India and Indian workforce in Nepal act as people-to-people link.

Areas of Cooperation between India and Nepal

Trade and Economy
  • Bilateral trade: India is the largest trading partner of Nepal.
    • In FY 2021-22, Nepal constituted 2.34% of India’s exports. And exports from India constitute almost 22% of Nepal’s GDP.
  • FDI: India is the largest source of FDI in Nepal.
  • Indian firms engaged in manufacturing, services (banking, insurance, dry port), power sector and tourism industries etc.
  • Transit: Nepal being a land-locked country, needs freedom of transit. India provides transit for almost the entire third country trade of Nepal.
  • Recent developments:
    • A 35-km cross-border railway line linking Jaynagar in Bihar to Kurtha in Nepal flagged off.
    • India has also handed over the Solu Corridor, a 90-km, 132 kV power transmission line which will help bring electricity to several remote districts in northeastern Nepal.
    • Nepal has signed a MoU with India for Kathmandu-Raxaul railway link.
  • Sagarmatha to Sagar: India is looking to develop the inland waterways to Nepal and provide sea access for Nepal.
Defence cooperation
  • Defence modernization: India provides assistance to the Nepalese Army in its modernization through the provision of equipment and training.
    • The Gorkha Regiments of the Indian Army are raised partly by recruiting from hill districts of Nepal.
  • Joint military exercise: Surya Kiran
Cultural cooperation
  • There have been initiatives to promote people-to-people contacts in the areas of art & culture, academics and media with different local bodies of Nepal.
  • Recent developments:
  • Sister cities: India has signed three sister-city agreements for Kathmandu-Varanasi, Lumbini-Bodhgaya, and Janakpur-Ayodhya.
  • Recently PM Modi laid the foundation for construction of the India International Centre for Buddhist Culture and Heritage in the Lumbini Monastic Zone, Lumbini, Nepal.
  • The Ramayana Circuit train: It includes major pilgrimage sites from India and Nepal that are related to the Ramayana.
Energy cooperation
  • Hydroelectric projects: Arun 3 Project, Pancheshwar Multipurpose Project, Pokhara (1 MW), Trisuli (21 MW), Western Gandak (15 MW), and Devighat (14.1 MW).
  • Motihari-Amlekhgunj Pipeline: Pipeline carries petroleum products from Motihari in India to Amlekhgunj in Nepal.
  • India and Nepal have a Power Exchange Agreement since 1971 for meeting the power requirements in the border areas.
  • Nepal also invited Indian companies to invest in the West Seti hydropower project in Nepal.
  • Developmental assistance: The Government of India provides developmental assistance to Nepal in the areas of infrastructure, health, water resources, and education and rural & community development.
  • Humanitarian assistance: Nepal remains the biggest recipient of India’s humanitarian assistance due to its ecological fragility.
  • Vaccine diplomacy: India has extended vaccines and COVID related aid to Nepal.
Multilateral Partnership
  • India and Nepal share multiple multilateral forums such as BBIN, BIMSTEC, Non-Aligned Movement, and SAARC etc.

Major challenges in India Nepal Relations

Major challenges in India Nepal Relations
Major challenges in India Nepal Relations

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