India-Nepal: Embracing Shared Prosperity

20 Jun 2023

The relationship between India and Nepal has long been characterized by a deep-rooted cultural affinity and an intimate friendship. Over the years, both nations have made significant efforts to enhance bilateral cooperation and foster a favourable environment for economic growth. The recent CII India-Nepal Business Summit marked an important milestone in the further expanding this relationship. With the developments made and agreements signed during the India visit of Nepal’s Prime Minister in June 2023, the future prospect of the India-Nepal relationship appears promising and poised for further advancement.

During the visit, Prime Minister of Nepal Pushpa Kamal Dahal highlighted the vast array of business opportunities available in Nepal and extended an invitation for Indian investors to explore sectors like mining, manufacturing, agriculture, energy, tourism, infrastructure, information technology, and hospitality. Nepal’s abundance of natural resources, coupled with a large pool of human capital and a promising market, makes it an attractive destination for investment. The Indian Government has expressed its support for this vision.

Mutual Growth

India remains Nepal’s largest trade partner and the largest source of foreign investments, besides providing transit for almost entire third country trade of Nepal. Over the past decade, India’s exports to Nepal have witnessed remarkable growth, increasing more than eightfold, while Nepal’s exports to India have nearly doubled as well. India accounts for about two-third of Nepal’s merchandise trade, about one-third of trade in services, one-third of foreign direct investments, and almost 100 per cent of petroleum supplies, underscoring the interdependent nature of the two nations’ economies.

Connecting People, Strengthening Ties

Connectivity has been a key focus area in the India-Nepal relationship. Prime Minister Narendra Modi’s ‘HIT formula’ — Highways, I-ways, and Trans-ways— will serve as a guiding principle to ensure that borders do not become barriers between the two friendly nations. Nearly 8 million Nepalese citizens live and work in India. Strengthening connectivity through infrastructure development is destined to contribute to the prosperity of both nations.

The two friendly nations have also embarked on several firsts in the past few years, showcasing the strengthening bilateral ties. These milestones include the construction of first Integrated Check Post (ICP) in Birganj, the establishment of the first cross-border petroleum pipeline in the region connecting India and Nepal, and the development of the first broad-gauge railway line between the two nations, providing a new dimension to cross-border connectivity. 

Powering Nations

India and Nepal have also taken substantial steps to strengthen cooperation in the power sector. Last year, the two nations adopted a landmark vision document to foster collaboration in this area, which has solidified into new transmission lines constructed across the border for the import of over 450 MW of power from Nepal and the signing of an agreement for the ambitious target of importing 10,000 MW of electricity from Nepal over the next ten years. These achievements and ambitions exemplify the commitment and progress in enhancing connectivity and cooperation between India and Nepal. To further enhance their power sector cooperation, both countries have also reached agreements on key hydro-electric projects, namely the Phukot-Karnali and Lower Arun Hydro-Electric projects. These projects hold great potential for harnessing Nepal’s abundant hydroelectric resources and furthering their economic and energy partnership. Additionally, the trilateral arrangement allowing Nepal to sell power to Bangladesh using the Indian transmission network signifies a significant step towards greater regional cooperation.

Recognizing the positive impact of the Motihari-Amlekhganj petroleum pipeline, a decision has been made to extend the pipeline’s reach to Chitwan. Not to mention, an additional pipeline will be constructed from Siliguri to Jhapa in eastern Nepal, facilitating efficient petroleum transportation and contributing to the region’s energy security. To support these endeavours, new storage terminals will be established at strategic locations in Chitwan and Jhapa, ensuring efficient handling and distribution of petroleum products. These developments exemplify the growing partnership between India and Nepal in the power and energy sectors.

Cultural Connect

According to Piyush Goyal, Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution, and Textiles, Government of India, the two nations share a relationship that is not confined to political, geopolitical, or economic issues, but defined by a shared history, a deep cultural affinity, and a strong friendship. The Government of India and the Government of Nepal have continually reaffirmed their commitment to nurturing this affinity and have made bold decisions to transform the development landscape. It is imperative that these efforts are echoed and supported by the private sector, which serves as a powerful engine of growth.

Looking ahead, this relationship holds immense potential for further collaboration. By leveraging each other’s strengths and working together to address these challenges, India and Nepal can foster a mutually beneficial economic partnership that promotes growth and prosperity for both nations.

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