Posted on : 18-11-2025

🌑Knowledge Drop – 024

India & Nepal Ink Pact to Boost Trade Ties

Posted on: November 18, 2025
Syllabus: GS2 – International Relations

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Context

India and Nepal have amended the Treaty of Transit to allow rail-based freight movement between Jogbani (India) and Biratnagar (Nepal)—a major step toward strengthening multimodal connectivity and expanding Nepal’s trade with third countries.

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Key Highlights

➤ What Has Changed?

• The amendment enables the movement of rail freight between Jogbani–Biratnagar.
• Liberalisation extends to transit corridors:
  Kolkata–Jogbani, Kolkata–Nautanwa (Sunauli), and Visakhapatnam–Nautanwa (Sunauli).

➤ Why Is This Important?

• Enhances multimodal connectivity—rail + road + sea.
• Strengthens Nepal’s access to global markets.
• Reduces dependence on single-route logistics.
• Reinforces India–Nepal economic partnership.

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India–Nepal Relations: A Quick Overview

Geographical and Strategic Landscape

• Nepal shares borders with Sikkim, West Bengal, Bihar, Uttar Pradesh, Uttarakhand.
• As a land-locked nation, Nepal’s sea access is primarily through India.

Foundation of Ties — The 1950 Treaty of Peace & Friendship

• Forms the legal backbone of bilateral relations.
• Nepalese citizens receive facilities on par with Indian citizens in many sectors.

Defence & Military Cooperation

• Modernisation support to Nepal Army (training + equipment).
• Joint annual military exercise SURYA KIRAN.
• Tradition of appointing each other’s Army Chief as Honorary General.
• Recruitment of Nepali Gorkhas into the Indian Army.

Trade & Economy

• India is Nepal’s largest trading partner.
• Accounts for 64.1% of Nepal’s total trade (FY 2022–23).
• Bilateral trade: $8.8 billion
  • Exports from India: $8.015B
  • Exports from Nepal: $839M
• India contributes 33.5% of Nepal’s FDI.

Connectivity & Development Partnership

Includes major projects:

• East-West Highway
• Cross-border rail links
• Integrated Check Posts
• Tribhuvan Airport (originally Gauchar Airport)
• Multiple grassroots health and education initiatives

Energy Cooperation

• Power Exchange Agreement since 1971.
• Joint Vision Statement (2022) for integrated cross-border transmission and coordinated grid operations.
• India is also a major market for Nepal’s hydropower exports.

Culture

A deep civilizational bond described poetically as the ‘roti-beti’ relationship’.

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Areas of Concern

Peace & Friendship Treaty Concerns

• Sections of Nepal view the treaty as asymmetrical.
• India maintains readiness to review it on a constructive, forward-looking basis.

Territorial Disputes — Kalapani Issue

• The largest land border dispute between the two nations.

Trust Deficit

• Perception in Kathmandu of Indian political influence.
• India’s concerns over China’s rising footprint in Nepal’s
  infrastructure, trade, and politics.

Security Issues

• Cross-border crime
• Illegal migration
• Trafficking
• Terror networks exploiting open borders

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Way Forward

Both countries recognise:

• Their deeply interdependent geography
• Shared cultural roots
• Strategic necessity of cooperation

A rational path includes:

• Transparent dialogue on 1950 Treaty modifications
• Enhanced joint connectivity & energy projects
• Managing China factor with maturity
• Strengthening people-to-people trust

India–Nepal ties have withstood political shifts and will continue to evolve through mutual respect, sovereign equality, and shared prosperity.

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GS Mapping

GS2 – International Relations
Themes: Neighbourhood First, Connectivity Diplomacy, Bilateral Trade, Strategic Balancing

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High Quality Mains Essay For Practice : Essay-1

Word Limit 1000-1200

India–Nepal Trade Ties: Connectivity, Trust, and the Himalayan Diplomacy

Relations between India and Nepal have always been shaped by far more than political agreements or strategic compulsions. They are rooted in a civilisational continuum where geography, culture, and history intersect so deeply that the boundary between the two becomes porous in meaning. The latest amendment to the India–Nepal Treaty of Transit, enabling seamless rail-based freight movement between Jogbani and Biratnagar and opening broader transit corridors via Kolkata, Visakhapatnam, and Sunauli, must be understood within this larger frame. The development is not merely a logistics update; it reflects the evolving rhythm of a relationship in which trade, trust, and strategic balance must coexist with old grievances, new aspirations, and shifting geopolitical winds.

A Relationship Framed by Geography and Dependency

Geography has always been Nepal’s geopolitical destiny. As a land-locked Himalayan nation, it relies overwhelmingly on India for access to the sea and the global market. Nearly 64% of Nepal’s total trade is with India, and India accounts for more than 33% of FDI stock in Nepal. The geographic continuity across the open border enables the movement of people, goods, labour, culture, and faith to an extent rare in South Asia. For millions of Nepalis, India is not a foreign land; it is an extension of social and economic reality.

This dependency, however, is accompanied by an expectation of sensitivity. While development cooperation and trade support Nepal’s economy, political narratives in Kathmandu occasionally portray India as overbearing. Similarly, in Indian strategic circles, concerns often emerge regarding Nepal’s increasing engagement with China in infrastructure, telecommunications, energy, and connectivity. Thus, the relationship oscillates between deep cultural intimacy and strategic caution.

The Treaty of Transit Amendment: A Practical Step with Strategic Undertones

The specific revision to the Treaty of Transit marks a significant enhancement in multimodal connectivity, especially in the context of Nepal’s ambition to emerge as a more effective bridge between South and East Asia. It enables:

• Rail-based freight movement from Jogbani to Biratnagar
• Access to multiple Indian ports including Kolkata and Visakhapatnam
• Enhancement of Nepal’s traffic with third countries, improving its trade resilience
• Strengthening of cross-border supply chains and lowering of transportation costs

The liberalisation is part of a broader pattern: India expanding regional connectivity through transparent, rules-based frameworks, in contrast to opaque, debt-heavy models often associated with China’s Belt and Road Initiative (BRI). India’s approach is incremental but relationship-driven — enhancing Nepal’s development capacity without strategic coercion.

The Historical Bedrock: The 1950 Treaty and Beyond

The 1950 India–Nepal Treaty of Peace and Friendship remains the mental anchor of the bilateral relationship. It grants Nepalese citizens rights in India comparable to Indians, and vice-versa. But over time, especially in Nepal’s political discourse, it has been portrayed as unequal. India has formally expressed readiness to revise the treaty “in a constructive manner,” but mutual trust is essential for meaningful renegotiation.

This asymmetry in perception has three roots:

1. Nepal’s desire for greater strategic autonomy
2. India’s security sensitivities arising from the open border
3. The political use of anti-India sentiment in Nepalese domestic politics

Despite these frictions, the two countries have preserved an unusually fluid cross-border human and economic relationship.

Defence and Security Cooperation: Quiet but Persistent

India remains central to Nepal’s defence structure:

• The Gorkha regiments of the Indian Army are raised partly from Nepal
• India and Nepal conduct the annual SURYA KIRAN joint military exercise
• India assists Nepal Army with modernisation and training
• Nepal’s Army Chief and India’s Army Chief traditionally receive honorary ranks in each other’s forces
• Border security coordination remains vital to controlling trafficking, terrorism, and illegal movement

Despite political ups and downs, defence ties have remained steady — indicating a deeper institutional trust.

Connectivity: The Heart of the Developmental Partnership

India is Nepal’s largest development partner in sectors like health, energy, road networks, railways, and border infrastructure.

Key highlights include:

• Gauchar Airport (now Tribhuvan Airport) built with Indian assistance
• The East-West Highway, a lifeline for Nepal
• Multiple cross-border transmission lines enabling electricity trade
• Integrated Check Posts (ICPs) at Biratnagar, Jogbani, Raxaul, Birgunj
• India’s assistance during the devastating 2015 earthquake through Operation Maitri, the largest ever foreign relief operation by India

The new Transit Treaty upgrade is thus a continuation of a long developmental arc — not an isolated event.

Energy Cooperation: The New Pillar of Interdependence

The Joint Vision Statement on Power Sector Cooperation (2022) created a new chapter in bilateral relations. It committed India and Nepal to:

• Joint development of hydropower projects
• Construction of cross-border transmission infrastructure
• Coordinated grid operations
• Export of Nepal’s hydropower to India and Bangladesh through Indian territory

For Nepal, this is critical. With an estimated 40 GW of commercially viable hydropower potential, energy diplomacy may become its economic backbone. India’s role as the primary buyer, investor, and transit provider is indispensable.

Challenges: Old Faultlines Beneath New Highways

Despite strong fundamentals, several concerns persist:

1. Perceptions of unequal treaties

Nepal’s domestic politics often uses the 1950 treaty as a symbol of sovereignty imbalance, despite the practical benefits it brings. India’s willingness to review the treaty has not yet been reciprocated with a unified position from Nepal.

2. The Kalapani dispute

Kalapani remains the most visible territorial dispute, complicated by colonial maps and the shifting course of the Kali River. No progress is possible without political will on both sides.

3. China’s expanding shadow

Chinese investment in Nepalese infrastructure—roads, hydropower, telecom—creates strategic anxieties for India. Nepal’s balancing act sometimes tilts uncomfortably close to strategic drift.

4. Trust deficit in political perception

Governments change rapidly in Nepal; policy continuity often breaks. This creates unpredictable phases in the relationship.

The Way Ahead: A Relationship that Must Evolve with Dignity

India and Nepal cannot be “managed” through transactional thinking. They require a partnership anchored in mutual dignity, non-interference, and shared prosperity.

The way forward includes:

• Clear communication on treaty revisions
• Transparent handling of boundary disputes
• Expanded power trade agreements
• Strengthened rail-road-port connectivity architecture
• Faster implementation of joint development projects
• People-centric initiatives to reaffirm cultural bonds

The amended Treaty of Transit is a promising step — a reminder that the relationship is capable of renewal even after periods of irritability.

Conclusion: The Himalayas Stand as Witness

India–Nepal relations cannot be reduced to spreadsheets of trade or maps of transit routes. They are a living continuum where the Himalayas stand as silent witnesses. Every new rail link, every new transmission line, and every new policy bridge does more than move goods — it moves trust.

As India and Nepal modernise their connectivity frameworks, they are re-establishing the oldest truth of their geography:

The Himalayas divide nations,
but they unite civilizations.

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High Quality Mains Essay For Practice : Essay-2

Word Limit 1000-1200

Literary Essay — “Where the Himalayas Breathe Between Two Nations”

There are relationships on earth that do not begin with signatures or treaties.
They begin with mountain winds, with a river crossing borders without knowing it crossed one,
with footsteps echoing across valleys long before names like nation or state were invented.
India and Nepal belong to that rare class of relationships —
woven not in the rooms of diplomats,
but in the rhythms of civilisation itself.

For centuries, the Himalayas have towered above these two lands,
not as a wall but as a perpetual witness.
From the pilgrim walking to Pashupatinath,
to the Gorkha soldier taking oath under the Indian tricolour,
to the Nepali trader crossing the plains of Bihar with salt, copper or faith —
the movement was always natural, intuitive, unquestioned.

And yet, modern statehood imposes paperwork on timeless intimacy.
Treaties are signed, borders marked, and negotiations held —
but beneath all of it flows something deeper:
an emotional geography that cannot be drawn on a map.

When India and Nepal amended their Treaty of Transit,
they weren’t merely adjusting logistics or unlocking new rail corridors.
They were acknowledging the truth that connectivity is not a privilege between them;
it is the lifeblood of a relationship older than their flags.

Every train that crosses Jogbani–Biratnagar
is not just carrying freight —
it carries centuries of trust,
the aroma of shared kitchens,
the echo of cultural memory,
and the unspoken gratitude of two nations repeatedly rescuing each other
in earthquakes, floods, political instability, and moments of silence.

But no relationship, no matter how ancient, escapes friction.
The shadows of Kalapani,
the debates around the 1950 Treaty,
the whispers of Chinese influence,
the anxieties of strategic encirclement —
these are the small storms that rattle even the strongest mountains.

And yet, the Himalayas remain unmoved.
They remind both sides that disagreement is not betrayal,
that criticism is not severance,
and that neighbours tied by breath, migration, faith, and history
cannot afford mistrust to become permanent.

For Nepal, India is the river to the sea.
For India, Nepal is the gateway to the sky.
Trade makes the first line true;
geopolitics makes the second essential.

Every new pact — like the one signed now —
is not merely a diplomatic achievement.
It is a renewal of vows.

A reminder that even as global powers hover in the region,
even as roads, railways, ports and treaties are modernised,
the real bond lies elsewhere:

In the mountain mother who says,
“My daughter married across the border; that is also my home.”

In the Nepali student who comes to Delhi with a dream
that is not labelled foreign.

In the Indian pilgrim who climbs Muktinath
and returns with tears rather than souvenirs.

These are the soft bridges.
These are the invisible highways.
These are the truths that cannot be cancelled by a map.

India and Nepal do not merely share a border.
They share breath.

The new trade pact is only a chapter —
the story is far older,
far deeper,
and far more unbreakable.

And as the trains begin to move between Jogbani and Biratnagar, Kolkata and Nautanwa,
and as goods travel further into the world through new Indian ports,
one can imagine the Himalayas smiling —
for once again, the mountains see movement,
and movement is life.

Not for nations alone.
But for civilizations intertwined
in ways that cartographers will never fully understand.

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