India-Nepal Relations

Recently, K P Sharma Oli took oath as the prime minister of Nepal.

• There is now opportunity to upgrade the relationship to ‘positive’ and ‘stable’ with India.

India-Nepal Relations

India and Nepal share a unique and multifaceted relationship characterized by deep Political, Social, economic, and strategic ties. 

• Political: Both countries share Open Borders under the Treaty of Peace and Friendship. Both countries are also members of  South Asian Association for Regional Cooperation and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.

Treaty of Peace and Friendship  It was officially signed by Chandreshwar Prasad Narain Singh, then Indian ambassador to Nepal representing New Delhi, with Nepal Prime Minister Mohun Shumshere Rana, who had a troubled relationship with the King of Nepal Tribhuvan Bir Bikram Shah. Issue: Treaty was signed on India’s behalf by someone who was in lesser designation compared to the Prime Minister of Nepal was seen by Kathmandu as an insult and disrespect for protocol. Nepal has always had reservations with Articles 2, 6 and 7 of the treaty: Article 2: It states that both governments should “inform each other of any serious friction or misunderstanding with any neighbouring State likely to cause any breach in the friendly relations subsisting between the two Governments’ ‘. Articles 6 and 7: It stipulate India and Nepal will give the same privileges of economic activity, employment, resident and ownership of property to each other’s nationals in their territory.

• Social: The two countries have close bonds through marriages and familial ties, popularly known as Roti Beti ka Rishta.
  • Roti Beti ka Rishta signifies a bond that transcends political and economic dimensions, rooted in shared traditions, values, and human connections.
    • Shared Cultural Heritage:
      • India and Nepal share a rich cultural heritage with common festivals, languages, customs, and traditions.
      • Hinduism and Buddhism form strong cultural and religious links, with sacred sites such as Pashupatinath in Kathmandu and the birthplace of Buddha in Lumbini attracting pilgrims from both countries.
      • India is also supporting 2 heritage projects, namely, Pashupatinath Riverfront Development and Bhandarkhal Garden Restoration in Patan Durbar.
    • Intermarriages:
      • The “Beti” aspect of the relationship refers to intermarriages between Indians and Nepalis, fostering strong familial ties.
      • Marriages between individuals from border regions, such as Uttar Pradesh and Bihar in India and the Terai region in Nepal, are common, further strengthening social bonds.
    • Trade and Livelihoods:
      • The “Roti” aspect symbolizes the economic interdependence, where trade and commerce across the open border facilitate livelihoods.
      • Many Nepalis work in India, contributing to the economies of both nations, while goods and services flow freely, benefiting local businesses and communities.
• Economic:
  • Trade: India remains Nepal’s dominant trade partner, steadily accounting for approximately 60-65% of all trade with Nepal. 
    • India is Nepal’s largest trading partner, the top-source country for tourists, the only supplier of petroleum products and the largest source of total foreign investment. 
    • India also provides transit for almost all of Nepal’s third-country trade and accounts for a significant share of inward remittances from pensioners, professionals and labourers working in India.
  • 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.
• Energy Cooperation: 
  • Electricity: In 2023, another long-term power trade agreement was signed between India and Nepal to export 10,000 megawatts of electricity from Nepal to India in 10 years.
    • Investment in hydroelectricity production and distribution has overall increased. 
    • Tripartite Agreement : They have also helped Nepal initiate the export of hydroelectricity to Bangladesh under a tripartite agreement between Nepal, India, and Bangladesh.
    • This was essential for Nepal to boost investors’ confidence in the hydro sector and ensure returns on their investment.
  • Petroleum: The countries are working on constructing two new petroleum pipelines between Siliguri, India and Jhapa, Nepal and Amlekhgunj and Chitwan.
    • These projects were envisioned after the success of the Motihari-Amlekhgunj petroleum pipeline inaugurated in 2019, the first-ever cross-border pipeline in South Asia. 
    • Saving: It has saved transportation costs for Nepal by a minimum of Rs 1 billion per annum. 
    • In addition, the savings coming from pilferage, leakage, theft, and delays by using pipelines instead of trucks are significant.
• 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.
  • It has also been agreed that two additional integrated check posts (ICPs) in Bhairahaba and Dodhara-Chandani in Nepal, which help facilitate the smooth movement of cargo and passenger vehicles, will be built with the grant assistance of India.
  • Railways:  Cross-border freight rail between India and Nepal has been operational and several other cross-border roads and bridges are being built.
    • Feasibility study of the Raxaul-Kathmandu railway has been completed and a direct rail service from Ayodhya to Janakpur is being considered.
• Digital Connectivity: Nepal and India decided to establish and enhance digital financial connectivity.
  • As a result, Indians travelling to Nepal can make payments through their mobile phones. 
  • This facility will help hassle-free payments to traders, tourists, pilgrims, students, and people who travel to India for medical treatment. 
  • The soon-to-be operationalised mobile transfer mechanism will help workers in Nepal and India transfer earnings through formal channels in their respective home countries.
• Disaster Management: Both countries are working through BIMSTEC for collective disaster response. India’s assistance during 2015 is also well appreciated by Nepal.
  • It has always been the first responder during disasters and emergencies in Nepal. 
  • The country, in addition to the immediate rescue and relief package, provided a financial package of $75 million for the development of the recently earthquake-hit areas of Nepal.

Significance of India-Nepal Relation

• Buffer State: Nepal acts as a buffer state against any possible aggression from China. Thus, India needs an amicable relation with Nepal to check the expansionist tendencies of its neighbour.
• Economic and Strategic Considerations: Nepal plays a significant role in India’s regional security and economic stability, including as a major source of remittances.
  • It is the seventh largest remittance–sending country to India, helping provide for livelihoods in its poorest parts, from Uttar Pradesh and Bihar, all the way to Odisha. 
• India’s internal security:  India and Nepal share an open border that boosts economic relations between the two countries. There has been a long tradition of free movement of people across the border.
  • Open borders are also exploited for illegal activities such as circulation of counterfeit Indian currency, human trafficking, NARCO trafficking, infiltration of terrorists backed by ISI, Pakistan etc. 
• Regional Dynamics: There is a strategic importance of stable Nepal-India relations for broader South Asian stability and development.

Issues and Recent Deterioration of India-Nepal Relations

• Constitution & Madhesi Issue: In 2015, Nepal promulgated a new constitution that granted significant political privileges to the ruling hill tribes while imposing discrimination against plains-dwelling communities such as the Madhesis. 

Madhesis People Madhesis are people living in South of Nepal in the region of Terai.  They are people living close to the border of India. Historical Aspect and Ties with India: Madhes has historically been part of the larger Mithila region. Most of the affluent of the Terai are educated in India, and the democracy on the other side of the border has kept levels of political awareness high.  Most of the 11 Indian ambassadors to Nepal since 1990 have been from Bihar — and about half of them belong to a sizeable caste in Nepal’s Terai.  Suspicion: Their interest, and visible concern, in the region’s politics has attracted suspicion in Kathmandu.

• • The constitution also introduced stringent requirements for Madhesis to obtain citizenship. 
  • This became a contentious issue between India and Nepal, leading to economic sanctions including blockades on gas and fuel supplies by India.
  • India has been criticised in Kathmandu for having sided with the “discredited” Madhesi leaders, and shutting its eyes to the blockade that hurt the aam Nepali. 
  • Political Change: Over a quarter century ago, a 15-month blockade by India led to a political change in Nepal and, subsequently, the advent of democracy.
• Escalation of Territorial Dispute:
  • New Map: Previously, tensions between New Delhi and Kathmandu escalated after Nepal unveiled a political map in mid-May 2020, integrating regions such as Lipulekh, Kalapani, and Limpiyadhura, which were previously delineated in India’s November 2019 map.
  • The Prachanda cabinet’s decision to put a map showing areas in India as part of its territory on a new currency note has drawn a strong reaction from New Delhi, and is seen as provocative by many in Nepal
  • Officials have criticized Nepal’s actions, labeling them as breaches of bilateral agreements and potentially worsening the relationship between the two nations.
• 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.
• Big Brotherattitude: There is a widespread perception in Nepal that India does not respect the country’s sovereignty and that it often intervenes in Nepal’s domestic affairs.India has been perceived to be playing a role of big brother in the region.

Way Forward

• Change to Hands-off Policy:  India’s relentless engagement with Nepal’s politics and governance goes against the principle of non-interference that is part of the Panchsheel doctrine.
  • New Delhi should also understand that a hands-off policy will lead to a politically stable and economically energised Nepal, which will in turn benefit India’s own national security and the economy of its Hindi heartland.
• Bilateral Dialogue: Both countries should prioritize dialogue and resolution of pending bilateral issues, including territorial disputes and economic cooperation.
• Respect for Sovereignty: Upholding principles of non-interference and respecting sovereignty of each other nations are essential for rebuilding trust and fostering a cooperative relationship.
• India-Nepal Eminent Persons’ Group: Mr. Modi and Mr. Oli who together nominated the eight-member India-Nepal Eminent Persons’ Group back in 2017.
  • The team finalised its consensus report the following year, whose implementation is expected to lift bilateral relations towards a transparent, confident and equal partnership.
  • The EPG report, which was finalised in 2018, had prominently recommended revision of this treaty. But the report has not yet been officially adopted.
• 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.
• People-to-People Links: India needs to appreciate that the people-to-people links between our two countries have an unmatched density and no other country, including China, enjoys this asset. India needs to leverage this precious asset to ensure a stable and mutually-productive state-to-state relationship.

Conclusion

• The relationship between India and Nepal is unique, steeped in historical, cultural, economic, and strategic significance. 
• Despite facing challenges, such as border disputes, political differences, and external influences, the bonds of “Roti-Beti ka Rishta” underscore the deep-rooted ties that transcend temporary setbacks. 
• Moving forward, both nations must prioritize mutual respect, dialogue, and cooperation, recognizing their interdependence and the benefits of a stable and prosperous partnership.