AREAS OF COOPERATION
Trade
About 64.1% of Nepal's entire trade, or $8.53 billion USD, is with India (Indian FY 24-25). This comprises $1.20 million USD in exports from Nepal to India and $7.33 billion USD in exports from India to Nepal.
With 35% of Nepal's total FDI stock, valued at around USD 777 million, Indian companies are among the country's biggest investors. Nepal rose from 28th place in 2014 to 14th place as India's top export destination in 2024–2025. Nearly 16% of Nepal's GDP comes from exports from India
India and Nepal have also signed the Double Taxation Avoidance Agreement (DTAA) in November 2011. The bilateral remittance flow is estimated at approximately US$ 3 billion (Nepal to India) and US$ 1 billion (India to Nepal)
Apart from that, India provides transit from almost entire third-country trade of Nepal via Kolkata port. A revised Treaty of Transit signed in 2023, will enable Nepal to use Indian ports such as Haldia, Kolkata, Paradip and Visakhapatnam for its third-country trade. It will reduce transportation costs and time for Nepalese exporters and importers.
The ‘New Partnership in Agriculture’: It was announced in April 2018, which focuses on collaborative projects in Agriculture, Education and R&D.
Connectivity and Development Partnership
India provides financial and technical aid to Nepal’s developmental activities.
India has been assisting Nepal in the development of border infrastructure through the upgradation of 10 roads in the Terai area; development of cross-border rail links at Jogbani-Biratnagar, Jaynagar-Bardibas; and the establishment of Integrated Check Posts at Birgunj, Biratnagar, Bhairahawa, and Nepalgunj.
The total economic assistance earmarked under the ‘Aid to Nepal’ budget in FY 2019-20 was INR 1200 crore.
Besides, a plan to extend South Asia’s first cross-border petroleum pipeline from Motihari (Bihar) in India to Amlekhgunj in Nepal, by another 69 km up to Chitwan in Nepal has been proposed.
Also, a second cross-border petroleum pipeline from Siliguri in India to Jhapa in eastern Nepal will be constructed.
India is also linking Sagarmatha-Sagar, a waterway that will provide Nepal access to sea, through Kosi route.
India-Nepal Rail Services Agreement (RSA): India and
Nepal signed a Letter of Exchange (LoE) to the IndiaNepal Rail Services Agreement (RSA), which enabled all authorised cargo train operators including private container train operators to carry Nepal’s container and other freight.
Mahakali River bridge: Recently, a MoU was signed between India and Nepal for the construction of a motorable bridge across the Mahakali River connecting Dharchula (India) with Darchula (Nepal), under Indian grant assistance.
Various projects have been implemented in the areas of infrastructure, health, water resources, education and rural & community development.
India has built several hydroelectric projects in Nepal like Pokhra (1 MW), Trisuli (21 MW), Western Gandak (15 MW), Devighat (14.1 MW) etc.
Nepal has also extended an invitation to Indian businesses to invest in the West Seti Hydropower Project.
Cultural, Educational and People to People Ties
The most striking feature of India-Nepal relations is the deep cultural link and people to people contact. Nearly eight million Nepalese citizens live and work in India and around 6,00,000 Indians reside in Nepal.
Both the neighbours have signed three sister city agreements for the twinning of Kathmandu-Varanasi, Lumbini-Bodhgaya and Janakpur-Ayodhya.
Besides, The Swami Vivekananda Centre for Indian Culture was set up in Kathmandu in August 2007 to showcase the best of Indian culture.
Also in 2022, PM Modi inaugurated the construction of India International Centre for Buddhist Culture and Heritage in the Lumbini Monastic Zone, Lumbini, Nepal.
GoI provides around 3000 scholarships/seats annually to Nepalese nationals for various courses.
The B.P. Koirala India-Nepal Foundation was set up in 1991 to foster educational, cultural, scientific and technical cooperation and to promote mutual understanding and cooperation through sharing of knowledge and professional talents in academic pursuits and technical specialization.
The Nepal-Bharat Library was founded in 1951 in Kathmandu. It is regarded as the first foreign library in Nepal.
An Indian Citizens’ Association (ICA) of Nepal was formed on 14 September 1990.
ICA is the only association of resident Indian citizens in Nepal and provides a platform for discussion on matters pertaining to the legitimate interest of resident Indians in Nepal and works for the protection of such interests.
Humanitarian Aid
In 2015, India has provided 1.54 billion Nepalese Rupees (INR nearly 96 crore) to Nepal as part of its commitment towards assistance and rehabilitation after the 2015 earthquake.
As part of COVID-19 assistance, India had supplied more than 23 tonnes of medicines and medical equipment to Nepal on Grant basis and total COVID-19 assistance provided to Nepal is more than US$ 7 million.
In Nov 2023, another earthquake of 6.4 magnitude hit Nepal. India was again quick to respond with 9 tonnes of relief material, and much more over period of time.
Energy Cooperation
India and Nepal have had a Power Exchange Agreement in place since 1971, aimed at meeting the power needs of border regions in both countries by leveraging each other's transmission infrastructure.
There are over twenty transmission interconnections (132 kV, 33 kV, and 11 kV lines) that facilitate both power exchange and trade between the two nations along their border areas.
To further enhance electricity transmission, the first highcapacity 400 kV cross-border transmission line from Muzaffarpur (India) to Dhalkebar (Nepal), funded by the Government of India (GoI) with a loan of US$ 13.2 million for the Nepal section, was completed in 2016. Additionally, two more 132 kV cross-border transmission lines between Kataiya (India) and Kusaha (Nepal), as well as Raxaul (India) and Parwanipur (Nepal), were completed in 2017 with GoI grant assistance.
India currently supplies about 600 MW of electricity to Nepal.
On October 21, 2014, an Agreement on ‘Electric Power Trade, Cross-border Transmission Interconnection, and Grid Connectivity’ was signed between the two countries to strengthen cross-border electricity transmission, grid connectivity, and power trade. This agreement lays the foundation for power trade, with Nepal importing power from India until it becomes power surplus, and future potential for India to import power from Nepal under mutually agreed terms.
The agreement also established two key mechanisms: the Joint Working Group (JWG) and the Joint Steering Committee (JSC). Furthermore, a Joint Technical Team (JTT) was formed to develop a long-term integrated transmission plan, which includes projects extending to 2035.
In addition, South Asia’s first cross-border petroleum products pipeline, built and funded by Indian Oil Corporation Ltd., connects Motihari (India) to Amlekhgunj (Nepal) and was remotely inaugurated by the two Prime Ministers on September 10, 2019.
an MoU was signed in 2024, between Nepal Electricity Authority and PowerGrid Corporation to jointly develop two new 400 kV cross border transmission lines viz., the Dododhara-Bareilly and Inaruwa-Purnea lines
Defence Cooperation
Bilateral defense cooperation between India and Nepal includes supporting the modernization of the Nepalese Army through the provision of equipment and training.
The Gorkha Regiments of the Indian Army are partially staffed by recruits from the hill districts of Nepal.
Since 2011, India has conducted an annual joint military exercise with Nepal, called Surya Kiran. This exercise features an aerobatic demonstration by the Indian Air Force (IAF).
Multilateral Partnership
India and Nepal are active participants in several multilateral forums, including BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation),
NAM (Non-Aligned Movement), and SAARC (South Asian Association for Regional Cooperation), among others.