India-Nepal Ties

Context:  Recently, the Nepal Prime Minister Pushpa Kamal Dahal visited India. Key Takeaways from the Visit:
  • India would take forward the 2022 India­-Nepal vision document for cooperation in the power sector that sets an ambitious goal in India ­Nepal power trade and transmission.
  • A long­ term Power Trade Agreement has been signed between India and Nepal.
  • India has set a target of importing 10,000 MW of electricity from Nepal.
  • Plans were unveiled to extend Motihari-Amlekhgunj– South Asia’s first cross-border petroleum pipeline and to build a second such pipeline.
  • An MoU for the construction of a petroleum supply pipeline between Siliguri and Jhapa, besides extensions to existing pipelines and construction of new terminals were positive.
  • Agreements signed:
    • MoU between NHPC and VUCL (Vidyut Utpadan Company Ltd.) of Nepal, for the development of Phukot Karnali Hydroelectric Project
    • Project Development Agreement for Lower Arun Hydroelectric Project between SJVN (India) and Investment Board of Nepal.
    • The revised Treaty of Transit under which Nepal will get access to India’s inland waterways.
Historical Ties:
  • Nepal is an important neighbor of India and occupies special significance in its foreign policy because of the geographic, historical, cultural and economic linkages/ties that span centuries.
  • Nepal shares an open border of 1,868 km with five Indian states (Uttarakhand, Uttar Pradesh, Bihar, West Bengal and Sikkim) and 1,415 km with Tibet.
  • India and Nepal share similar ties in terms of Hinduism and Buddhism with Buddha’s birthplace Lumbini located in present day Nepal.
India Nepal Ties:
  • Economic:
    • Trade: India remains Nepal’s dominant trade partner, steadily accounting for approximately 60-65% of all trade with Nepal.
    • Investment: Indian firms are the biggest investors in Nepal, accounting for about 40% of total approved foreign direct investments. There are about 150 operating Indian ventures in Nepal. They are engaged in manufacturing, services (banking, insurance, dry port, education and telecom), power sector and tourism industries.
  • Political: Both countries share Open Borders under Treaty of Peace and Friendship. Both countries are also members of SAARC and BIMSTEC. Both
  • Social: The two countries have close bonds through marriages and familial ties, popularly known as Roti Beti ka Rishta.
  • Cultural:
    • India and Nepal share rich Hinduism and Buddhist cultural heritage.  To continue this, both governments have also tried to build on this shared cultural heritage. India and Nepal have also signed sister-city agreements for twinning of Janakpur-Ajodhya, Kathmandu-Varanasi, Lumbini-Bodhgaya.
    • India is also supporting 2 heritage projects, namely, Pashupatinath Riverfront Development and Bhandarkhal Garden Restoration in Patan Durbar.
  • Water Resources: There are about 250 small and large rivers flowing from Nepal to India and constitute an important part of the Ganges river basin.
    • A three-tier bilateral mechanism was established in 2008 to discuss all issues relating to cooperation in water resources and hydropower.
  • Defence Cooperation: Indian and Nepalese military undertake annual joint military exercise ‘Surya Kiran’. India also provides equipment and training to the Nepalese army to assist in its modernisation.
  • Connectivity:
    • As Nepal is a landlocked country, it is dependent on India for access to sea. Both countries have signed MoU to provide rail connectivity and are also working to develop inland waterways in Nepal to connect Nepal with the Indian ocean.
    • Establishment of Integrated Check Ports along the borders, recent ones being Birgunj and Biratnagr, have also eased trade and transit.
  • Disaster Management: Both countries are working through BIMSTEC for collective disaster response. India’s assistance during 2015 is also well appreciated by Nepal.
  • Regional Integration: Both countries are working to BBIN, BIMSTEC, SAARC to improve regional connectivity and regional integration.
Unique Relationship: India-Nepal
  • Few countries have more intimate relations than Nepal with India as they share an open border that allows their nationals to move freely.
  • Their relationship is characterized by close economic, security and cultural ties.
  • India remains a major trade and transit partner, where a number of Nepalis continue to earn a living or pursue higher education.
Recent State of Relation:
  • Yet, their political relationship, in the near past, has gone through more ebbs than flows, largely due to a border dispute over the Kalapani area.
  • A change of government in Nepal with the fall of the hawkish regime led by Khadga Prasad Sharma Oli and the restoration of the pre-2022 election Nepali Congress and Maoist alliance to power raised expectations of a thaw in this matter.
Recent Thaw in Relationship: 
  • Alignment with Western and Indian interests: 
    • Dahal accepted the $500 million US grant under the Millennium Challenge Corporation Nepal Compact, abandoning his party’s view that it was part of the Indo-Pacific security plan that would undermine Nepal’s diplomatic non-alignment.
  • Preference to India: 
    • Nepal wants to be seen as a friend to India as he broke the tradition of top Nepali leaders by choosing India for his first visit abroad instead of heading to Beijing.
    • There has been progress on resolving the points of friction around hydropower projects that India is executing in Nepal.
    • He has gone slow on projects under China’s Belt and Road Initiative (BRI) that Nepal agreed to six years ago.
Issues in Bilateral Relations:
  • Territorial Dispute:
    • In 2020 India’s defence minister virtually inaugurated a new 80 km-long road in the Himalayas, connecting to the border with China, at the Lipulekh pass.
    • The Nepal government protested this and introduced a constitutional amendment which made changes to the Nepali map to include that Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as part of its sovereign territory
  • A growing trust deficit especially since the 2015 unofficial Indian blockade that crippled Nepal’s economy and rise of territorial nationalism in both countries.
  • Delay in Project Completion: The trust deficit between Nepal and India largely affected the implementation of various Indian-aided projects in Nepal. At times, some of the Indian investment projects had been attacked.
  • Domestic Politics: Indian media’s sensationalized reporting about Nepal recently, irresponsible statements by Nepali politicians like KP Oli, and Nepal border police fatally shooting an Indian man have added to tensions and created a hostile environment for meaningful engagement.
  • Rising Chinese Footprint:
    • Investment: In 2019 China accounted for approximately 40% of new FDIs and 90% of total FDI against India’s 30%.
    • Elevated Partnership: During the visit of Xi Xinping, Nepal and China elevated their ties from Comprehensive Partnership of Cooperation to Strategic Partnership of Cooperation.
    • Connectivity:
      • In 2017, Nepal formally joined the Belt and Road Initiative (BRI) of China.
      • China is also developing a US$ 2.5 billion trans-Himalayan railway connecting Tibet to Nepal’s capital city Kathmandu.
      • China and Nepal have also signed an agreement for construction of an all-weather road connecting Tibet and Kathmandu under The Trans Himalayan Multidimensional connectivity network.
  • Good ties with Nepal help India address security and geopolitical issues in its neighborhood more smoothly.
Way Forward:
  • Interdependence between Nepal and India is the secret to reset the relations between the neighbors. Towards this end, the two countries could also build an international corridor along the border region to enhance the trade between the two countries.
  • Institutional Mechanism: Both countries can also create institutional mechanisms to play an active role in several important multilateral forums such as BBIN, BIMSTEC, NAM, and SAARC to serve their common interests.
  • Full-fledged Engagement: India should remain fully engaged with Nepal at all levels and across the political spectrum. The safeguarding of India’s vital interests demands such sustained engagement.
Additional Information: About Treaty of Peace and Friendship:
  • The India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal.
  • It talks about reciprocal treatment of Indian and Nepali citizens in the two countries, in residence, property, business and movement.
  •  It also establishes national treatment for both Indian and Nepalese businesses (i.e. once imported, foreign goods would be treated no differently than domestic goods).
 Source: The Hindu

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