India-Nepal Relations

• India and Nepal share a unique relationship of friendship and cooperation characterized by open borders and deep-rooted people-to-people contacts and culture.
• There has been a long tradition of free movement of people across the borders. Nepal has an area of 147,181 sq. km and a population of 29 million. India and Nepal share similar ties in terms of Hinduism and Buddhism with Buddha’s birthplace Lumbini located in present day Nepal.
• The two countries not only share an open border and unhindered movement of people, but they also have close bonds through marriages and familial ties, popularly known as Roti-Beti ka Rishta.
• It shares a border of over 1850 km in the east, south and west with five Indian States – Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand – and in the north with the Tibet Autonomous Region of the People’s Republic of China.
• The India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal. Under the provisions of this treaty, the Nepalese citizens have enjoyed unparalleled advantages in India, availing facilities and opportunities at par with Indian citizens. Nearly 6 million Nepali citizens live and work in India.
• The strategic importance of Nepal is so vital for India that relations with Nepal, as also with Bhutan, constitute a critical variable in India’s defence and security planning in the north eastern part of India.

Historical Background

• The relation between India and Nepal goes back to the times of rule of the Sakya clan and Gautama Buddha. Initially, Nepal was under tribal rule and only with the coming of Licchavi rule in Nepal did its feudal era truly begin.
• From 750 to 1750 AD period saw a shift from Buddhism to Hinduism in Nepal and witnessed widespread cultural diffusion.
• The early 1700s witnessed a change in the Nepalese power structure. The subsequent period witnesses both monarchical and prime ministerial rule. There established a dynastic rule for the Prime Minister, known as the “Rana”.
• The Rana rule took hold and continued in Nepal till 1951.
• In the 1920s, as the Indian freedom struggle progressed, many educated Nepalese people came to India and partook in the struggle. This gave the Nepalese elite an insight into nonviolent struggle.
• The Nepali elite subsequently launched a movement in Nepal and succeeded in ousting the Rana rule.
• The most instrumental role in this movement was played by the Nepali Congress (NC).

Nepalese Struggle with Democracy

• In 1951, after the ousting of the Rana rule, the monarchy continued to dominate Nepalese politics. Nepali Congress party won and the Nepali Congress (NC) struggle to control Nepal.
• In 1959, King declared Nepali Congress (NC) as corrupt, removed it from power and subsequently installed a party-less Panchayat system.
• In 1994, the Unified Marxist Leninist Party (UML) tried to generate an anti-India feeling in Nepal. The UML began to assert that the NC is in reality controlled by Congress party of India. This led to a perception amongst the Nepali people about India’s control and interference over Nepal and its internal affairs through the NC.
• The anti-India plan worked in favour of UML and they succeeded in capturing power for a short period of 9 months in Nepal.
• The UML was removed and the NC assumed power again in 1994. The subsequent period not only saw civil unrest. The civil unrest, over a period of time, evolved into civil uprising and took an ideological turn to Maoism. The Maoist movement in Nepal became fully manifested by 2005.
• An interim constitution was prepared in 2007. Nepal would establish the new constitution by 2010. However, by 2010, the constitution was not ready but delayed.
• After tremendous delays, Nepal finally accepted a constitution in September 2015.

Changed Relations Since 2016

• Nepal is dependent on India for transit to the Seas. It is completely dependent on India for transit rights.
• The misunderstanding created during the constitution framing / Madhesi agitation changed the entire gamut of relations between India and Nepal.
• During his visit to China in 2016, Mr.Oli, the Prime Minister of Nepal managed to push the agenda of trade and transit agreement with China, on the lines of special agreements with India.
• Nepal will be connected with China through a railway network, in addition to roads. Transmission lines will connect the two countries. It provides Nepal a much needed alternative to sell excess power.
• Rail and road networks will also provide Nepal an alternative for petroleum products.

Reason Behind This Ugly Turn in Relationship

• Relationship took a beating in 2015, when India first got blamed for interfering in the Constitution drafting in Nepal.
• India was also blamed for an “unofficial blockade” in the Madhesis issue, this generated widespread resentment against the country.
• The politicians in Nepal exploited Nepali Nationalism and anti-Indianism successfully.
• China seized the opportunity- In the past, China maintained a link with the Palace and its concerns were primarily related to keeping tabs on the Tibetan refugee community.
• Now, that the monarchy is abolished, China has shifted its attention to the political parties, as well as institutions like the Army and Armed Police Force.
• Today, China’s foreign policy is more assertive and China considers Nepal as an important element in its ever expanding footprint.

Geopolitical Diversification & ‘Cartographic War’ (2015–2024)

• The ‘China Card’ Sophistication: Under K.P. Sharma Oli, Nepal signed the Transit and Transportation Agreement with China. This strategic move, finalized in 2018, aimed to diversify trade routes, reduce long-term dependence on India. 
• Territorial & Cartographic Assertion: The 2020 dispute over the Kalapani-Lipulekh region led to Nepal’s “New Map” amendment, signaling that Nepal would no longer accept the “status quo” in border management. 
• From Paternalism to Pragmatism: India pivoted to ‘Quiet Diplomacy,’ focusing on completing “High Impact Community Development Projects” (HICDPs) to regain “hearts and minds” without direct political interference. 
• Connectivity as Diplomacy: The inauguration of South Asia’s first cross-border petroleum pipeline (Motihari-Amlekhgunj) signaled a shift toward “hard-wired” interdependence. 

The Pragmatic Turn (2025–Present)

• 2025 Gen Z Uprising: Nepal witnessed a major political upheaval in September 2025, when the government’s ban on key social media platforms triggered widespread youth-led protests, popularly called the “Gen Z movement.”
  • The crackdown on demonstrators forced Prime Minister K.P. Sharma Oli to resign.  
  • The crisis exposed a strategic vacuum for India, which had long relied on elite-level political engagement in Nepal, compelling New Delhi to adopt a cautious “wait-and-watch” approach amid concerns of instability along the open border. 
• Nepal’s Electoral Shift and a New Political Order: The March 2026 elections brought a decisive shift in Nepal’s political landscape, with Nepal’s Rastriya Swatantra Party (RSP) securing a historic mandate and ending the dominance of traditional parties.
  • Currently, India–Nepal relations are moving toward a more pragmatic and institutional framework, centered on economic cooperation in areas such as hydropower exports, digital connectivity, and fintech integration 

Areas of Cooperation

Political

• The formation of the Interim Election Government (IEG) on 14 March 2013 ended the long period of political uncertainty prevailing in Nepal since the dissolution of the Constituent Assembly in May 2012. The IEG in cooperation with the political parties and the Election Commission peacefully conducted the 2nd Constituent Assembly-cum-Parliament Elections in Nepal on 19 November 2013.
• India provided 764 vehicles at a cost of Rs. 56.12 crores to the Election Commission and Police agencies of Nepal for use during the Constituent Assembly-cum-Parliament elections.
• Prime Minister Modi’s two day visit to Nepal, on 3-4 August 2014, marked a new beginning in Indo-Nepal relations. The Prime Minister expressed his commitment to Nepal’s development and promised to take all necessary steps to take the relations to a new height. Moreover, with repeated emphasis on sovereignty and assurance of non-interference in internal affairs of Nepal, he made a successful attempt to win the hearts and minds of the Nepalese people and dispelling India’s image as a hegemonic power to a certain extent.
• However, the bilateral relations deteriorated due to friction over Nepal’s Constitutional promulgation. After 2017 elections in Nepal, Prime Minister of Nepal KP Oli made India his first foreign destination in keeping with the tradition in April 2018, and Prime Minister Modi reciprocated with a quick return visit in May 2018. India and Nepal have several bilateral institutional dialogue mechanisms, including the India-Nepal Joint Commission co-chaired by External Affairs Minister of India and Foreign Minister of Nepal.
• In 2022, the Indian Prime Minister visited Lumbini, Nepal, the birthplace of Buddha, where he laid a foundation stone along with the Nepalese Prime Minister for a Buddhist Vihara, being built with Indian assistance. The PM celebrated the 2566^th Buddha Jayanti celebrations and addressed a gathering of people, including Buddhist scholars and monks, from Nepal and India. The PM praised Nepal for preserving its ancient culture and civilisation. India-Nepal relations are as strong and as ancient as the Himalayas.
• 2025-2026 Political Transition:
  • The 2025 “Gen Z” Movement: In September 2025, widespread youth-led protests against corruption and social media bans led to the resignation of PM K.P. Sharma Oli and the temporary installation of an interim government under former Chief Justice Sushila Karki.
  • March 2026 Elections: The elections marked a historic shift as the Rastriya Swatantra Party (RSP) and younger leaders like Balen Shah gained significant influence, ending the long-standing dominance of traditional parties.
  • New Leadership Engagement: PM Balen Shah has recently accepted an invitation from PM Narendra Modi to visit India, signalling a move toward fresh, forward-looking diplomacy.

Economic

• Nepal and India have a history of age-old relations in trade and commerce. India remains Nepal’s undisputed economic lifeline, providing the vast majority of its foreign direct investment and serving as its primary transit route to global markets.
  • India constitutes 65% of Nepalese international trade, including $8 billion of exports from India to Nepal. Also, India and Nepal signed a pact to enhance rail-based freight movement, boosting trade and connectivity between the two nations.
• India accounts for about 64.1% of Nepal’s total merchandise trade. In the 2024-25 period, Indian exports to Nepal reached $7.33 billion, while Nepal’s exports to India stood at $1.20 billion.
  • India to Nepal: Petroleum products ($1.53B in 2024), iron and steel, machinery, and cereals.
  • Nepal to India: Electricity, soybean oil, spices, and man-made yarn.
• Nepal enjoys duty-free access to the Indian market for most goods, though non-tariff barriers and standard harmonisation remain points of discussion.
• Indian investors in Nepal account for about 40% of the total approved foreign direct investments. There are about 150 Indian ventures operating in Nepal.
• Major initiatives for boosting economic cooperation between India and Nepal are:
  • In 1994, Nepal-lndia Joint Economic Council (JEC) for the promotion of trade and joint ventures where the private sector on both sides can come together with perspectives to resolve mutual issues.
  • Nepal-lndia Chamber of Commerce and Industry (NICCI) was established in 1994 to encourage and assist Nepalese and Indian investors and businessmen find ways to do industry oriented business in Nepal and also find markets in both India and Nepal.

Mechanisms for Economic Cooperation

Treaty of Trade and Transit 1991

• The bilateral mechanism for trade and transit is provided by the India-Nepal Treaties of Trade, of Transit, and Agreement for Co-operation to Control Unauthorised Trade, 1991. The Trade Treaty valid for seven years was signed on November 27, 2009, and will be automatically renewed for another seven years.
• Under the Treaty of Trade, India provides, on a non-reciprocal basis, duty free access into the Indian market for all Nepalese-manufactured articles barring a short negative list subject to the conditions, since March 2002, that the exports meet the domestic value addition requirement of 30% and change in HS classification at the four-digit level in the course of manufacture or processing in Nepal.
• The India-Nepal Treaty of Transit, renewed every seven years, provides for port facilities to Nepal at Kolkata and specifies 15 transit routes between Kolkata and the India-Nepal border.
• In 2014, the treaty was amended to facilitate the export of goods from a third country through India. Earlier, only goods of Nepalese origin were allowed to be exported through India to third countries. The rail service Agreement between the two governments was concluded in 2004, which governs the carrying of bulk cargo by train from Kolkata to Birgunj, and vice versa.

Treaty of Friendship and Cooperation

• Nepal’s geopolitical constraints have determined a unique relationship with India. The 1950 Treaty of Peace and Friendship determined the mutual security concerns of India and Nepal, mutual relationship on the basis of looking after each other’s interest, and interaction between the people of both countries.
• The treaty recognised the sovereignty, territorial integrity and independence of each other. The security provisions of the treaty obligated the governments of Nepal and India to consult each other in devising effective countermeasures to meet a security threat to either of the two countries emerging out of foreign accession.
• The treaty also stipulates that the two governments must inform each other in any serious friction or misunderstanding with any neighbouring country that may be likely to adversely affect the friendly ties between India and Nepal.
• According to the 1950 Treaty of Peace and Friendship it had been agreed by the two governments that India would be the sole supplier of arms to Nepal, and in case it failed to supply them, then, with the prior approval of India, Nepal would be free to seek assistance from other countries.
• Nepal on its part, quietly withdrew its objections on the 1950 Treaty and the 1965 Agreement. In addition, as a substitute of the Indian technicians and the Military Liaison Group, Nepal agreed to:
  • Exchange military information with India on developments harmful to each other, and permit India to post military personnel at its Embassy in Kathmandu for an agreed period and job.

Infrastructure

• RITES (A Government of India Enterprise for Road and Transport), is playing a significant role in the development of transport infrastructure in Nepal.
• RITES believes in sharing its experience and expertise with the client countries for a meaningful transfer of technology.
• Under the Indo-Nepal cooperation, RITES is committed to contribute its expertise in the transportation technology for the betterment of the people and economy of Nepal.
• Connectivity:
  • Nepal, being a landlocked country, is surrounded by India from three sides, and one side is open towards Tibet, which has very limited vehicular access.
  • India-Nepal has undertaken various connectivity programs to enhance people-to-people linkages and promote economic growth and development.
  • MOUs have been signed between both governments for laying an electric rail track linking Kathmandu with Raxaul in India.
  • India is looking to develop the inland waterways for the movement of cargo, within the framework of trade and transit arrangements, providing additional access to sea for Nepal, calling it the linking of Sagarmatha (Mt. Everest) with Sagar (Indian Ocean).
• A revised Treaty of Transit (2023) provides Nepal access to India’s inland waterways. New agreements in late 2025 expanded rail-based freight connectivity, specifically on the Jogbani-Biratnagar link. The Motihari-Amlekhgunj petroleum pipeline is being extended to Chitwan, with a new pipeline planned from Siliguri to Jhapa.

Hydropower Integration:

• This has emerged as a “transformative pillar”.
  • A Long-Term Power Trade Agreement (2024) targets the export of 10,000 MW of electricity from Nepal to India over the next decade.
  • In 2024-25, Nepal exported electricity worth approximately $130 million to India.
  • Trilateral Trade: India now facilitates the transit of Nepalese power to Bangladesh, with the first transaction inaugurated in November 2024.

Digital Connectivity and Fintech:

• Integration of UPI (India) with FonePay (Nepal) allows seamless cross-border QR payments.
• The RBI’s October 2025 reforms now permit Indian banks to lend in INR to Nepalese entities for legitimate cross-border transactions to ease trade financing.

Defence

• India has played a leading role in helping the Nepalese Army (NA) in its modernisation through the provision of equipment and training. About 250+ training slots are provided every year for the training of NA personnel in various Indian Army Training institutions.
• Joint Military Exercises: India, from 2011, every year undertakes a joint military exercise with Nepal known as Surya Kiran.
  • Focus Areas: Jungle warfare, counter-terrorism in mountainous terrain, and Humanitarian Assistance and Disaster Relief (HADR).
  • Tech Integration: The 2025 edition specifically integrated AI-enabled decision tools, Unmanned Aerial Systems (UAS), and drone-based ISR (Intelligence, Surveillance, and Reconnaissance).
• Both sides discussed jointly assessing the quantum of assistance required by Nepal and to exchange draft SOPs on disaster management cooperation, and agreed to continue further discussion to strengthen bilateral cooperation in the important area of disaster management.
• The Gorkha Regiments of the Indian Army are raised partly by recruitment from hill districts of Nepal. Currently, about 32,000 Gorkha Soldiers from Nepal are serving in the Indian Army. During the year 2016-17, pensions in excess of INRs 2796.5 crores were disbursed by the Indian Army to about 1,25,000 retired Gorkha Soldiers and civilian pensioners, who had served in the Indian Army and other Central & State Services.
• Honorary General Rank: Since 1950, India and Nepal have been awarding Army Chiefs of each other with the honorary rank of General in recognition of the mutual harmonious relationship between the two Armies.

Multilateral Partnership

• Neighbourhood First Policy: India prioritises Nepal as a key partner for regional stability and connectivity.
• India and Nepal share multiple multilateral forums such as BBIN (Bangladesh, Bhutan, India, and Nepal), BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation), Non Aligned Movement, and SAARC (South Asian Association for Regional Cooperation) etc.

Diaspora and Culture

• Around 6,00,000 Indians are living/domiciled in Nepal. These include businessmen and traders who have been living in Nepal for a long time, professionals (doctors, engineers, IT personnel) and labourers (including seasonal/migratory in the construction sector). An Indian Citizens’ Association (ICA) of Nepal was formed on 14 September 1990.
• The Pashupatinath temple with four priests from South India shines out as the most precious cultural link between the two. The king of Nepal enjoys exceptional privileges in the Puri and Rameshwaram temples in India.

Cultural

• “Roti-Beti ka Rishta”: This term describes the deep-rooted kinship and familial ties formed through cross-border marriages and a shared socio-cultural heritage.
• There have been initiatives to promote people-to-people contacts in the area of art & culture, academics and media with different local bodies of Nepal.
• India has signed three sister-city agreements for the twinning of Kathmandu-Varanasi, Lumbini-Bodhgaya and Janakpur-Ayodhya.
  • The development of the Ramayana Circuit (Ayodhya-Janakpur) and Buddhist Circuit (Lumbini-Sarnath-Bodh Gaya) further cements these people-to-people links.

India’s Development Assistance to Nepal

• The Government of India provides substantial financial and technical development assistance to Nepal, which is a broad-based programme focusing on the creation of infrastructure at the grass-root level, under which various projects have been implemented in the areas of infrastructure, health, water resources, education and rural and community development.
• The Government of India has extended four distinct Lines of Credit (LOC) to the Government of Nepal totalling USD 1.65 billion, making it one of India’s largest development assistance portfolios. 
  • These LOCs are designed for infrastructural development—particularly in road networks and power transmission—and to support post-earthquake reconstruction projects as prioritised by Nepal.
  • USD 100 Million: Primarily focused on road and power infrastructure, and urban infrastructure projects.
  • USD 250 Million: Directed towards post-earthquake reconstruction, including housing, education, and health infrastructure.
  • USD 550 Million: Dedicated significantly to road development and irrigation projects.
  • USD 750 Million: Specifically allocated for large-scale post-earthquake reconstruction and infrastructure.
• India also provided assistance to Nepal when it was hit by an earthquake on 25 April 2015. The total relief assistance to Nepal amounted to approximately $67 million, and a post-earthquake reconstruction package of US $ 1 billion was announced.
• Key Sectors and Projects Funded:
  • Power Transmission: Major projects include the Koshi Corridor (220 kV), Modi Lekhnath (132 kV), Solu Corridor (132 kV), and the Dhalkebar-Bhittamod (400 kV) transmission lines.
  • Road Connectivity: These LOCs have financed over 40 road projects, with over 1,100 km completed.
  • Reconstruction: Post-2015 earthquake reconstruction, including housing and public infrastructure.

Recent Developments

• Arun-3 Hydro Electric Project:
  • In 2019, the cabinet also approved ₹1236 crore investments for the Arun-3 hydro project.
    • The Arun-3 Hydro Electric project (900 MW) is a run-of-river located on Arun River in Eastern Nepal.
• Build Own Operate and Transfer (BOOT):
  • A Memorandum of Understanding (MoU) was signed between the Government of Nepal and Sutlej Jal Vikas Nigam (SJVN) Limited for the project in 2008 for execution on a Build Own Operate and Transfer (BOOT) basis for a period of 30 years including five years of the construction period.
• International Centre for Buddhist Culture and Heritage:
  • During the visit of the Prime Minister of India, he performed the ‘shilanyas’ ceremony to launch the construction of the India International Centre for Buddhist Culture and Heritage in the Lumbini Monastic Zone.
  • The centre will be a world-class facility welcoming pilgrims and tourists from all over the world to enjoy the essence of spiritual aspects of Buddhism.
  • The facility is aimed at catering to scholars and Buddhist pilgrims from all over the world who visit Lumbini.
• Hydropower Projects:
  • The two leaders signed five agreements, including one between the Satluj Jal Vidyut Nigam (SJVN) Ltd and the Nepal Electricity Authority (NEA) for the development and implementation of the 490.2 megawatt Arun-4 hydropower project.
  • Nepal also invited Indian companies to invest in the West Seti hydropower project in Nepal.
• Setting up a Satellite Campus:
  • India has offered to set up a satellite campus of the Indian Institute of Technology (IIT) in Rupandehi and has sent some draft memoranda of understanding for signing between Indian and Nepali universities.
• Pancheshwar Multipurpose Project:
  • Nepal discussed some pending projects like the Pancheshwar Multipurpose Project, an important arm of the Mahakali Treaty signed between Nepal and India in 1996, and the West Seti Hydropower Project, a reservoir-type project with a projected capacity of 1,200 megawatts.
• Cross-border Rail Link:
  • The operationalisation of the 35-kilometre cross-border rail link from Jayanagar (Bihar) to Kurtha (Nepal) will be further extended to Bijalpura and Bardibas.
• Double Circuit Transmission Line:
  • Another project includes a 90 km long 132 kV double circuit transmission line connecting Tila (Solukhumbu) to Mirchaiya (Siraha) close to the Indian border.
• Integrated Check Posts (ICPs):
  • New facilities at Nepalgunj (operational 2024) and Bhairahawa (under construction) aim to streamline cross-border trade.
• Multilateral Projects:
  • Additionally, agreements providing technical cooperation in the railway sector, Nepal’s induction into the International Solar Alliance, and between Indian Oil Corporation and Nepal Oil Corporation on ensuring regular supplies of petroleum products were also signed.

Significance of Nepal to India

• Strategic: Nepal’s strategic location between India and China, the potential of Nepal being a transit economy, and the abundance of natural resources, especially hydropower, make Nepal strategically important to India.
• Himalayan Buffer State: Nepal acts as a crucial geographical buffer between India and China. Its political stability is essential to prevent external military or political encroachment towards India’s northern borders.
• Economic: Nepal is a market for Indian investors and exports. The hydroelectric potential makes Nepal economically vital for India; India is also pushing for the conclusion of the long-pending Free Trade Agreement (FTA) under the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), in which Nepal’s cooperation is crucial.
• Security: Cooperation of Nepal is crucial to control the flow of illicit arms, narcotics and counterfeit currency to India. India needs Nepal as a dependable neighbour for its defence and security in the Himalayan region.
• Connectivity: India is pitching for economic integration of the South Asian region by strengthening the connectivity between the nations. The BBIN Motor Vehicle Agreement, ratified by India, Nepal and Bangladesh, is intended to realise the untapped trade potential between South Asian nations.
  • An agreement to study the feasibility of a rail line linking the Indian border town of Raxaul in eastern Bihar state to the Nepalese capital Kathmandu was signed in 2018.
• Water Resource Management: Major rivers like the Kosi and Gandak originate in Nepal. Cooperation is critical for flood control and irrigation in the high-population states of Uttar Pradesh and Bihar.

Significance of India to Nepal

• Apart from India’s development assistance to Nepal, the strategic importances of India to Nepal are:
  • Over 66% of Nepal’s trade is with India, which is its largest trading partner. India also accounts for nearly 40 per cent of total FDI flow to the neighbouring country. India is a major supplier and transit route for energy resources to Nepal.
  • Nepal has several important sectors that can attract Indian investments such as hydropower, transmission lines, road and rail networks, health, education, tourism and irrigation.
• Remittances & Employment: Approximately 6 million to 8 million Nepali citizens live and work in India, contributing significantly to Nepal’s economy through remittances.

Challenges in Relations

Water:

• Water issues between India and Nepal have been affected to a major extent by a lack of appreciation of the other side’s perspective. Kosi Agreement has not gone off very smoothly between the two countries. India and Nepal signed the Kosi agreement in 1954 to regulate the flow of the river and ensure flood management.
• India and Nepal have traditionally disagreed over the interpretation of the Sugauli Treaty signed in 1816 between the British East India Company and Nepal, which delimited the boundary along the Maha Kali River in Nepal.
  • The Treaty of Sugauli concluded between British India and the Kingdom of Nepal in the year 1816, maps the Makhali river as the western boundary with India but different British maps showed the source of the tributary at different places which was mainly due to underdeveloped and less-defined surveying techniques used at that time.
  • The discrepancy in locating the source of the river led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims.

India-Nepal Border dispute:

• While 98% of the India-Nepal boundary was demarcated, there are border disputes pending between the two countries – at Susta (West Champaran district, Bihar), Kalapani and the ‘tri-junction’ of Lipulekh.

Kalapani and the maps

• India inherited the boundary with Nepal, established between Nepal and the East India Company in the Treaty of Sugauli in 1816. 
• Kali river constituted the boundary, and the territory to its east was Nepal. The dispute relates to the origin of Kali. 
• Near Garbyang village in Dharchula Tehsil of the Pithoragarh district of Uttarakhand, there is a confluence of different streams coming from north-east from Kalapani and north-west from Limpiyadhura. 
• The early British survey maps identified the north-west stream, Kuti Yangti, from Limpiyadhura as the origin, but after 1857 changed the alignment to Lipu Gad, and in 1879 to Pankha Gad, the north-east streams, thus defining the origin as just below Kalapani. 
  • Nepal accepted the change and India inherited this boundary in 1947.
• The Maoist revolution in China in 1949, followed by the takeover of Tibet, created deep misgivings in Nepal, and India was ‘invited’ to set up 18 border posts along the Nepal-Tibet border. 
• By 1969, India had withdrawn its border posts from Nepali territory. The base camp for Lipulekh remained at Kalapani, less than 10 km west of Lipulekh. 
• In their respective maps, both India and Nepal showed Kalapani as the origin of Kali river and as part of their territory. 
• After 1979, the Indo-Tibetan Border Police has manned the Lipulekh Pass. In actual practice, life for the locals (Byansis) remained unchanged given the open border and free movement of people and goods.
• After the 1996 Treaty of Mahakali (Kali river is also called Mahakali/Sarada further downstream) that envisaged the Pancheshwar multipurpose hydel project, the issue of the origin of Kali river was first raised in 1997. 
• The matter was referred to the Joint Technical Level Boundary Committee that had been set up in 1981 to re-identify and replace the old and damaged boundary pillars along the India-Nepal border. 
• The Committee clarified 98% of the boundary, leaving behind the unresolved issues of Kalapani and Susta (in the Terai) when it was dissolved in 2008. 
• It was subsequently agreed that the matter would be discussed at the Foreign Secretary level. 
• The Survey of India issued a new political map (eighth edition) on November 2, 2019, to reflect the change in the status of Jammu and Kashmir as two Union Territories. Nepal registered a protest though the map in no way had changed the boundary between India and Nepal. 
• However, on November 8, the ninth edition was issued. The delineation remained identical but the name Kali river had been deleted. Predictably, this led to stronger protests, with Nepal invoking Foreign Secretary-level talks to resolve issues. 

Susta Dispute

• Susta is an area under territorial dispute currently in Tribenisusta, Lumbini Zone, Nepal and near Nichlaul, Uttar Pradesh, India. The area under dispute totals over 14,000 hectares (140 km²) and is being controlled by India.
• The Susta territorial dispute has arisen as a result of the shifting of the course of the Gandak river.
  • The Treaty of Sagauli defined Gandak as the international boundary between India and Nepal.
  • When the treaty was signed, Susta was on the right bank of the river Gandak which falls in Nepal territorial control. But, in due course of time, the river has changed its course and Susta now falls on the left bank of the Gandak, which is controlled by India.
• India has justified its control of Susta on the basis of international law.

Legal Dimension of Issue

According to International Laws, the principles of avulsion and accretion are applicable in determining the borders when a boundary river changes course.

• Avulsion: It is the pushing back of the shoreline by sudden, violent action of the elements, perceptible while in progress. Also it can be defined as the sudden and perceptible change in the land brought about by water, which may result in the addition or removal of land from a bank or shoreline.
• Accretion: It is the process of growth or enlargement by a gradual buildup. It is the natural, slow and gradual deposit of soil by the water.

If the change of the river course is rapid – by avulsion – the boundary does not change. But if the river changes course gradually – that is, by accretion – the boundary changes accordingly.

Since, the Gandak change of course has been gradual, India claimed Susta as part of their territory as per international laws.

• On several occasions, India has tried to resolve the issue through friendly and peaceful negotiations, but the Nepali leadership has always shown hesitation in resolving the issue.
• In Nepal, the issue has become a tool for arousing strong public sentiment against India. Therefore, resolving the issue may not be in the best interest of Nepal’s domestic politics.

Security Issue:

• Terrorist outfits like LeT, Indian Mujahideen and some insurgent groups from North Eastern part of India have been using the open border to provide logistical support to their clandestine operations in India. There are also reports of misuse of open border by local criminal gangs, smuggling of subsidised consumer goods, influx of illegal migrants, counterfeit currency entry, drug and human trafficking and allegations of encroachment of territory.

Issues with Peace and Friendship Treaty

• The 1950 Treaty of Peace and Friendship was sought by the Nepali authorities in 1949 to continue the special links they had with British India and to provide them an open border and the right to work in India.
  • But today, it is viewed as a sign of an unequal relationship, and an Indian imposition.
  • The idea of revising and updating it has found mention in Joint Statements since the mid-1990s but in a sporadic and desultory manner.

China’s Intervention:

• China has been stepping up its presence in Nepal. China has signed an Agreement on Transit Trade which is now being developed along with an examination of a possible rail link. For the first time, joint military exercises were held in early 2017, and China promised a military grant of $32 million. China is also working to restore and upgrade the Rasuwagadi-Syabrubesi road link with Tibet. Nepal has also signed on to the Belt and Road Initiative and a special economic zone has been promised.
• A 1,200 MW hydel project on the Budhi Gandaki River was awarded on EPCF (Engineering, Procurement, Construction, and Finance) basis to the Gezhouba group. Growing Chinese presence in Nepal is a cause of concern to India’s interest.
• The rights of migrant Indian labour in Nepal and Nepali labour in India have also been a concern in bilateral relations.

Madhesi Issue:

• Nepal Constitutional process had begun in 2008 as a result of unseating of the monarchy which finally culminated in the promulgation of the constitution in 2015. The promulgation established Nepal as a federal, secular and democratic republic. However, the Constitution making process could not be concluded on the basis of a consensus.

Crisis

• The Constitution, aimed at establishing lasting peace, had instead triggered fresh conflicts as it was being shunned by the marginalised and disenchanted communities such as Madhesi, Tharus, Janajatis (i.e., the people living in the Terai region), Dalits and women. There were also other concerns related to citizenship norms and electoral constituencies.
• This resulted in a blockade at the India-Nepal border, which had resulted into an economic and humanitarian crisis. It had disrupted Nepal’s earthquake ravaged economy. In the midst of these agitations, India was accused of fomenting the crisis.

Causes of Crisis

• The present constitution divides Nepal into seven new states, with some borders slicing through the Madhesi ancestral homeland in the southern plains. Only eight districts in the Terai region are going to be given the status of an State while the remaining fourteen are to be joined with the hill districts. The Madhesi and Tharu agitators, consisting of several disadvantaged and subaltern social groups, have protested against this decision.
• These groups believe the promise of a democratic restructuring of the State stands subverted, with the given plan. Other complaints relate to citizenship norms that disallow children of Nepali mothers married to foreigners from inheriting Nepali citizenship.

India’s Role

• India’s official statements issued on the subject, the promulgation of the new Constitution has just been ‘noted’ , not welcomed.
• The primary concern for India had been the lack of its inclusive character. India had repeatedly asked the Nepalese political class to be ‘flexible ‘ and ‘broad-based’ in its approach. India also feels let down that many of the commitments given by Nepal during the framing of the 2007 interim Constitution have been forgotten.

Amendments to the Constitution

• In 2016, Nepal parliament passed two crucial amendments to their Constitution that address key Madhesi demands of proportional representation and inclusion in state bodies.

Gurkha issues

• The introduction of India’s Agnipath scheme in 2022 has inadvertently paralyzed a century-old military tradition, creating a significant “social security” vacuum in Nepal’s hills.  
  • Kathmandu argues that the four-year “Agniveer” contract violates the 1947 Tripartite Agreement, which guaranteed permanent service and pensions, leading to a suspension of recruitment rallies from 2022. 
  • A little over 32,000 Gurkhas are currently serving in the Indian Army. And with the gradual retirements of soldiers and no new intakes, estimates are that in about seven years, the strength of Gurkha battalions will be half of what it is today. 

Current Issues

• Reiterating that Kalapani, Lipulekh and Limpiyadhura are Nepali territories: Nepal urged India to immediately withdraw its troops stationed in the Kalapani region and amicably resolve the border row through high-level dialogue based on historical facts and evidence.
• Construction of roads: The Nepal Government unwaveringly believes that construction of roads and other structures should be stopped.
  • It violates the clause mentioned in Nepal-India Joint Commission which mentions that any dispute between the two countries should be resolved through diplomatic mechanism.
• New map: Nepal first protested the inauguration of the road claiming that it passed through its territory, and days later, it came out with a new map showing Lipulekh, Kalapani and Limpiyadhura as its territories.
  • India reacted sharply to the move.
  • Nepal’s Parliament approved the new political map of the country featuring areas which India maintains belong to it.
• Anti-India Sentiments: Anti-India demonstrations were seen on the streets of Nepal over the release of a new political map of India, made after the bifurcation of the state of Jammu and Kashmir (J&K) into the Union Territories of J&K and Ladakh.
• The China Factor: Nepal’s participation in China’s Belt and Road Initiative (BRI) remains a sensitive political topic, with India offering grant-based alternatives to counter Chinese loan-based infrastructure.
  • Following the 2025 political turmoil in Nepal, China provided a $4 million grant specifically to support the 2026 general elections.
    • This move, along with broader “technical assistance,” has been viewed by analysts and Indian officials as a sign of deepening Chinese leverage over Nepal’s democratic processes. 
  • Further, China and Nepal have formalized the Trans-Himalayan Multi-dimensional Connectivity Network under the Belt and Road Initiative (BRI), a development that has generated strategic concerns in India regarding the evolving geopolitical dynamics in the Himalayan region. 
• Debate over the 1950 India–Nepal Treaty: The 1950 Treaty is increasingly viewed by Nepal’s younger, nationalist political class as an “unequal colonial relic” that compromises their sovereign autonomy.
  • While the Eminent Persons Group (EPG) finalized a report with recommendations for a revision years ago, the refusal of the Indian leadership to formally receive the document has fueled perceptions of New Delhi’s “Big Brother” recalcitrance. 
  • Nepal seeks to amend key provisions of the treaty, including Article 5 (arms imports), to assert greater autonomy.
• Trade Deficit and Economic Asymmetry: Nepal’s massive trade imbalance with India is frequently weaponized by local politicians as evidence of “economic hegemony” and exploitation.
  • The concentration of Nepal’s exports in a few volatile commodities like soybean oil makes its economy highly vulnerable to changes in Indian tariff structures, leading to persistent demands for non-reciprocal trade concessions. 
  • In the first five months of FY 2025/26, Nepal’s trade deficit with India reached Rs 339 billion, leading to a ballooning current account crisis in Kathmandu. 

Measures Needed to Strengthen India-Nepal Relations

• Modernizing Foundational Diplomatic Frameworks: To eliminate psychological friction, India must formally acknowledge and initiate phased deliberations on the Eminent Persons Group (Epg) report.
  • Transitioning to constructive engagement regarding the 1950 Treaty Of Peace And Friendship will signal profound respect for Nepal’s Sovereign Equality.
    • Modernizing this foundational framework into a reciprocal partnership model neutralizes domestic Ultra-Nationalist Rhetoric in Kathmandu.  
  • This proactive diplomatic recalibration replaces legacy paternalism with a forward-looking, equitable Security Architecture. 
• Designing a Strategic ‘Gorkha Retention Protocol’: New Delhi must urgently design a Gorkha Retention Protocol as a strategic carve-out within the Agnipath Scheme to salvage the century-old military symbiosis.
  • Offering guaranteed post-retirement absorption for Nepali Agniveers within Indian Central Armed Police Forces is functionally imperative.
    • This bespoke Military Diplomacy prevents a catastrophic socioeconomic vacuum and thwarts the redirection of martial talent to Adversarial Nations.  
  • Re-establishing this vital employment channel transcends defense cooperation, acting as a foundational pillar of Bilateral Social Security. 
• Expanding Trans-Himalayan Digital Interoperability: India should aggressively expand its Digital Public Infrastructure (DPI) diplomacy by fostering deep interoperability between Indian and Nepali e-governance registries.
  • Establishing a seamless digital corridor drastically reduces bureaucratic friction for migrant workers and cross-border businesses. Co-developing localized tech stacks ensures data security while binding the two economies through invisible, highly efficient digital tethers.  
  • This technocratic integration neutralizes geopolitical competition by creating an indispensable, user-centric ecosystem that daily benefits ordinary citizens. 
• Depoliticizing Territorial Boundary Management: Territorial friction must be systematically decoupled from electoral politics by instituting an insulated, permanentjoint technocratic boundary commission.
  • Empowering this body with advanced geospatial mapping and binding arbitration protocols transforms emotional cartographic disputes into clinical exercises.  
  • Transferring discourse from political podiums to closed-door expert negotiations prevents the weaponization of geography for vote-bank consolidation. This institutionalized conflict-resolution mechanism acts as a vital geopolitical shock absorber, ensuring isolated disputes do not paralyze the economic agenda. 
• Advancing Green Energy Co-ownership: The energy paradigm must evolve from a simplistic transactional model into a comprehensive green energy co-ownership framework.
  • India should incentivize its corporate giants to form equitable joint ventures with Nepali entities, offering them equity stakes and technology transfers.  
  • Developing a deeply integrated sub-regional energy grid permanently aligns Kathmandu’s economic interests with New Delhi’s energy security.  
  • This transformation creates an unbreakable economic interdependence that naturally repels extra-regional strategic encroachment. 
• Institutionalizing Sub-National Paradiplomacy: New Delhi must decentralize its neighborhood engagement by empowering bordering states to engage in formalizedparadiplomacy with adjacent Nepali provinces.
  • Establishing statutory cross-border provincial councils decentralizes the resolution of localized friction points like inundation management and micro-trade blockages.  
  • This localized diplomatic architecture bypasses bureaucratic bottlenecks, delivering rapid, culturally nuanced borderland governance.
    • Facilitating direct dialogues fosters organic, bottom-up economic corridors that reflect the true socio-cultural realities of the Terai region. 
• Building Climate-Resilient Ecological Corridors: Future bilateral infrastructure investments must be strictly re-engineered as climate-resilient economic corridors, acknowledging the vulnerabilities of the Himalayan ecosystem. Shifting focus to sustainable, disaster-proof inland waterways and ropeways ensures long-term infrastructure viability.
  • India and Nepal must co-establish a himalayan climate mitigation fund dedicated to joint monitoring of glacial lake outburst floods (glof). Embedding environmental sustainability as a core mandate neutralizes domestic ecological backlash and fosters shared stewardship of the himalayan commons.

Way Forward

• Hydropower, connectivity and infrastructure are three areas that constitute the building blocks of India-Nepal relations. Some of the big ideas for future cooperation that could have a transformative impact include the following:
  • Along the lines of Gujral Doctrine, the initiative to reduce suspicion and generate political comfort in Nepal’s political class must come from India. Standing up against India has unfortunately become an important part of Nepal’s definition of sovereignty. India must understand the sources of this negative tradition and address the problem.
  • India should maintain a policy of keeping away from the internal affairs of Nepal, while at the same time, in the spirit of friendship, India should guide the nation towards a more inclusive democracy. Since the free movement of people is permitted across the border, Nepal enjoys immense strategic relevance from India’s national security point of view, as terrorists often use Nepal to enter India. Therefore, stable and friendly relations with Nepal is one of pre-requisites which India can’t afford to overlook.
  • Indian partnership in cooperative watershed and environment management for the protection of the Himalayan ecosystem, including soil conservation, reforestation, and more rational land use for horticulture and bio-agriculture.
• On connectivity and infrastructure, India could speed up construction of a road bridge over the Mahakali, linking western Nepal more closely with north India; provide viability gap funding for the Kathmandu-Terai Fast Track Road that could reduce travel time from north Bihar to Kathmandu to under two hours; and establish a new international airport at Nijgadh and further cross-border power grids.
  • India and Nepal could jointly build an East-West railway along the present alignment of the highway built by India. It could become economically viable the moment it is connected to Kathgodam in the west and Siliguri in the east, significantly shortening the route from north to Northeast India.

Conclusion

• A climate of confidence and trust in the long-term between India and Nepal can greatly help Nepal meet its ambitious target and provide an opportunity for Indian investors to invest in Nepal.
• There is a trust deficit in Nepal because of the Indian reputation for delaying implementation of various projects. This has sent a wrong message in Nepal that the delays are deliberate. Similarly, Nepal should have no problem recognising the unique nature of Nepal’s relationship with India marked by the national treatment given to Nepali citizens, an open border, and easiest access to the sea.
• This could help India smoothen its recently strained relations with Nepal as well as strengthen historically friendly ties. Moreover, India needs to ensure speedy delivery of generous pledges of over a billion dollars committed to make good on ‘neighbourhood first’ policy.