INDIA – NEPAL

INDIA – NEPAL 

Current Relations

1. Economic Relations

• Bilateral Trade: $8.27 billion (2018-19).
• Trade Relations:
  • India is Nepal’s largest trade partner.
  • Bilateral Free Trade Agreement (2009) between India and Nepal.
• FDI: India is the largest source of FDI in Nepal.
• Assistance to Nepal

• Indian Development Assistance: Budgetary aid to Nepal.
• Humanitarian Aid: 2015 Nepal Earthquake.
• 4 Lines of Credit Extended: Over $1 billion dispersed since 2006.
• Vaccine Diplomacy: India has extended vaccines and COVID-related aid to Nepal.

2. Strategic Relations

• Borders 5 Indian States: 22 points of land entry, creating scope for both trade as well as threats from non-state actors, and narco-trafficking in these areas.
• Nepal’s New Map: Claims Indian territory of Lipulekh Pass and Kalapani territory.
• Porous Border: Issues such as drugs, fake currency, and human trafficking.
• Anti-Indian Rhetoric in Nepalese politics.
• Political Instability: Harder for India to forge ties.
• Chinese Angle:
  • China annexed 150 hectares of Nepal.
  • Rising Chinese investments in Nepal.
  • Nepal received over 90% of its total foreign direct investment (FDI) commitment from China.
  • Medium-tech weapon imports from China.
  • Nepal has joined China’s OBOR.

3. Security/Energy & Others

• Power Trade Agreement (PTA): Cross-border electricity connectivity.
• Hydroelectric Project: Nepal became an energy surplus country (during monsoon) in July 2021 and started selling 39 MW of electricity to India via the Indian Energy Exchange.
• Nepal Energy Security: Nepal and India signed a Joint Vision Statement on Power Sector Cooperation, highlighting cross-border transmission infrastructure and bi-directional power trade based on market demand.
• Others: The Raxaul-Amlekhgunj petroleum pipeline to Nepal.
• Military: India and Nepal conduct a joint military exercise, Surya Kiran. Both nations also accord the honorary rank of general to each other’s Army Chief.
• Nepalese in Indian Defense: Recruitment of Gorkha regiments in the Indian Army since Independence.
• Indian Defense Supplies: Supports equipment modernization of the Nepal Army, such as the supply of INSAS rifles.

4. Cultural Relations

• Sister City Agreements: Kathmandu, Varanasi, Ayodhya, Janakpur.
• Diaspora: Nepali diaspora in India and Indian workforce in Nepal.
  • Approximately 600,000 Indians are living/domiciled in Nepal.
• Nepali Students: Nepal’s share of foreign students in India is 26.8%.
• Common Religious Shrines: Nepal, being a Hindu state, and India, with a majority Hindu population, share cultural ties with common shrines like Pashupati, Lumbini, and Bodhgaya.

5. 5. Recent Nepal PM’s Visit

• RuPay Card: India and Nepal launched the RuPay card in Nepal, marking it as the fourth country outside India where RuPay is functional, after Bhutan, Singapore, and the UAE.
  • Data: Roughly 83% of all RuPay cards issued are functional on about 1,400 Point of Sale (POS) machines in Nepal.

• Jaynagar-Kurtha Railways: The inaugurated Jaynagar-Kurtha railway section is part of the Jaynagar-Bijalpura-Bardibas rail link, constructed with grant assistance of INR 548 Crores from the Indian government.
• The Solu Corridor: A 132 kV power transmission line and substation project, one of the major projects in Nepal, undertaken under the Government of India.

6. Recent PM Modi’s Visit to Nepal

• Buddhist Culture and Heritage: The Prime Minister will participate in the foundation ceremony for constructing a center for Buddhist culture and heritage in a plot belonging to the International Buddhist Confederation (IBC), New Delhi, within the Lumbini Monastic Zone.
• Neighbourhood First: Prime Minister Modi’s visit continues the tradition of regular high-level exchanges between India and Nepal in furtherance of the Neighbourhood First policy.
• IIT in Nepal: India has offered to set up a satellite campus of the Indian Institute of Technology (IIT) in Rupandehi.

Importance/Benefits

1. Economic Benefits
   • Energy Security: The International Energy Association expects India’s energy demand to increase by 35% by 2030. In this context, the additional supply from Nepal could help India bridge the gap.
   • Open Border: An open border promotes hassle-free trade between both nations, benefiting the border states of India and Nepal.
   • Growing Economy: Nepal’s growing economy and landlocked position make it dependent on Indian primary goods and investments.
   • Demand for Nepali Exports: India has a strong demand for Nepali exports, such as Pashmina and textiles.
2. Strategic Benefits
   • Buffer State: Nepal acts as a buffer between India and China, helping to avoid border conflicts.
   • Defence Market: Potential market for Indian arms and munitions.
   • Cross-Border Collaboration: Cooperation in curbing cross-border infiltrations and drug trade.
   • Sagarmatha to Sagar: Connecting inland waterways to Nepal, boosting connectivity and trade potential.

1. Cultural/Historical Benefits
   • Demonstration of India’s Soft Power: Shared cultural connections and history, such as the birthplace of Gautam Buddha in Nepal.
   • Pilgrimage Sites: Revered pilgrimage sites in both nations, especially those related to Buddhism and Hinduism.
   • Common Religion: Both countries have around 80% Hindu population, integrating people.
   • Friendship Treaty: The India-Nepal Treaty of Peace and Friendship (1950) forms the foundation of special relations.
     • Fact: Under this treaty, Nepali citizens enjoy unparalleled advantages in India, with facilities and opportunities similar to Indian citizens.
   • Nepal-India Open Border Dialogue: Formed by people in Nepal’s Terai region and the Indian state of Bihar, initially focused on understanding flood issues, later advocating for an open border and organizing several seminars.

Concerns/Issues

1. Economic Concerns
   • Project Delays: Delay in implementation of projects.
     • Example: Mahakali Treaty
   • Economic Blockade (2015): Soured relations with India, allegedly showing a “Big Brother” attitude.
   • Chinese FDI: Pushing India out and narrowing the market for Indian investments.
   • Mahakali Treaty: Delay in implementation has created a deadlock in Nepal-India water cooperation.
2. Strategic Concerns
   • Demands for Change in 1950 Treaty: In January 2021, Nepal’s Foreign Minister Pradeep Kumar Gyawali stated that Nepal wants India to review and revise the 1950 Indo-Nepal Treaty to reflect changes and new realities.
   • Nepal’s New Map: Claims Indian territory of Lipulekh Pass and Kalapani.
   • Porous Border: Issues include drugs, fake currency, and human trafficking.
   • Anti-Indian Rhetoric: Often used in Nepali politics to win voters but also causes disaffection towards the Indian diaspora in Nepal.
   • Political Instability: Harder for India to forge ties without a stable government, as Nepal has seen multiple PMs in recent years.
   • Chinese Influence: China has increased its footprint in Nepal through developmental work.

India-Nepal Border Issues

1. Causes
   • Lipulekh Pass:
     • Situated at an altitude of 5,000 meters. Nepal claims that the Indian army has encroached 372 km² towards Limpiyadhura from Kalapani since the 1962 Indo-China war. Nepal, as a friendly neighbor, granted permission to the Indian army to set up a camp in the region at that time.
     • Due to asymmetric power, Nepal has not been able to force India to withdraw troops from the area.
   • Kalapani Issue:
     • Indian officials insist on using a map drawn up by the British colonial government in 1875.
     • The 1875 map shows the origin of the Mahakali River to the east of Kalapani. Unlike the maps from 1850 and 1856, the 1875 map lacks Nepal’s certification.
2. Current Scenario
   • In May 2015, Nepal signed an agreement with China to use the Lipulekh Pass for trade; Kathmandu immediately protested to both New Delhi and Beijing.
   • In 2020, Nepal’s Cabinet endorsed a new political map showing Lipulekh, Kalapani, and Limpiyadhura under its territory, sparking a border dispute with India.
   • Nepal’s ruling Nepal Communist Party lawmakers tabled a resolution in Parliament demanding the return of Nepal’s territory in Kalapani, Limpiyadhura, and Lipulekh.

Quotes

• “The open border is a ‘safety valve’ for Nepal. Without compromising India’s security, the challenge is to turn it into a bridge, not a barrier.” — Amb. Jayant Prasad
• “The reset process will sustain and gather momentum only if India makes a strategic shift in the way it handles Nepal.” — SD Muni

• Scholarships: India has been providing scholarships to Afghan students for higher studies to enhance their human capital.