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India-Nepal Relations (Part-1)

Prime Minsters of both the nations

India and Nepal share a unique relationship having a common cultural and religious background along with historical ties dating back to at least the Ramayan era. The friendship between the two nations is characterized by open borders and deep-rooted people-to-people contacts with free movement of people across the border. Nepal shares a border of ~1850 km with five Indian states – Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand. It is a landlocked country, surrounded by India from three sides and one side is open towards Tibet which has very limited vehicular access.


In modern history, The India-Nepal Treaty of Peace and Friendship of 1950, forms the basis of the special relations that exist between India and Nepal. As per provisions of the treaty, Nepalese citizens avail facilities and opportunities on par with Indian citizens in India and vice-versa. The treaty permits the free movement of people and goods between the two nations along with a close relationship and collaboration on matters of defense and foreign affairs. As per government estimates, nearly 8 million Nepalese citizens live and work in India and ~6 lakh Indians are living/domiciled in Nepal. Further, the two nations not only share an open border and unhindered movement of people, but they also have close bonds through marriages and familial ties, popularly known as Roti-Beti ka Rishta, especially in border areas of both nations. Many Nepalese work in the Indian Armed Forces. No wonder, both nations are natural partners.

India has its Embassy in Kathmandu and a Consulate General in Birgunj (south-central part of Nepal) while Nepal has its Embassy in New Delhi and a Consulate General in Kolkata. Both countries share multiple multilateral forums such as BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), Non-Aligned Movement, and SAARC (South Asian Association for Regional Cooperation), etc.

In consonance with the ‘Neighbourhood First’ policy, Prime Minister Shri Narendra Modi has visited Nepal five times since 2014 and similarly, Nepalese Prime Ministers have also made regular visits to India.


Nepal’s democratic journey

  • In modern history, Nepal was practically ruled by Prime Ministers called Ranas till 1951 who was ousted by King Tribhuvan with the support of the Nepali Congress Party (NCP). Then the cabinet system was introduced and political parties were brought into government.

  • The nation witnessed a period of struggle from 1951 to 1959. Then, in 1960 King Mahendra suspended the constitution and introduced the panchayat system of Villages, Districts, and National Councils.

  • In 1990 pro-democracy agitation grew stronger and Kind Birendra agreed to the new constitution. The first democratic elections were held in 1991 which were won by NCP.

  • 1995 saw the emergence of civil unrest in Nepal and anti-India sentiments mainly fuelled by the Unified Marxist Leninist Party. The unrest turned to Maoist violence and dragged on for more than a decade.

  • In 2001, the Royal family including King Birendra, Queen Aishwarya, and several other royal members were killed. King’s brother Gyanendra was crowned as the new King.

  • In 2006, a Comprehensive Peace Agreement was reached with Maoists leading to the end of decade decade-long insurgency.

  • In 2007 monarchy was abolished, the Interim constitution was adopted and Nepal finally became a republic in 2008.

  • After tremendous delays, Nepal accepted a constitution in September 2015 which it holds to date.



India-Nepal Relations


Trade Relations

India is Nepal’s

  • Largest trade partner,

  • the highest source of foreign direct investment (FDI),

  • transit for almost all of the third-country trade of Nepal (as Nepal is landlocked),

  • a major supplier of petroleum, and,

  • one of the top sources of inward remittances.


In 2021-22, the annual trade between Nepal and India stood at ~11 billion USD. The data for bilateral trade (in USD million) is as below:

Title/Year

2017-2018

2018-2019

2019-2020

2020-2021

2021-2022

India's Export to Nepal

6,612.96

7,766.20

7,160.35

6,765.93

9,634.06

%Growth

21.26

17.44

-7.80

-5.51

40.88

Nepal's Export to India

438.38

508.14

711.61

670.33

1,371.04

%Growth

-1.52

15.91

40.04

-5.80

103.67

Total Trade

7,051.34

8,274.34

7,871.95

7,436.26

11,005.10

%Growth

19.54

17.34

-4.86

-5.53

46.51


The bilateral framework for trade is currently anchored on the India-Nepal Treaty of Trade and Agreement of Co-operation to Control Unauthorized Trade – 2009 giving Nepal unilateral duty-free access to the Indian market. Also, India is the largest source of investment in Nepal. As per Nepal Rashtra Bank (NRB) data it accounts for more than 32% of the total FDI stock of Nepal, which is nearly 520 million USD till mid-2020. There are ~150 Indian companies operating in Nepal including ITC, Dabur, Hindustan Unilever, VSNL, TCIL, MTNL, State Bank of India, Punjab National Bank, Life Insurance Corporation of India etc.


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