India Nepal Relations, History, Indo-Nepal Treaty 1950, Challenges

India Nepal Relations represent one of South Asia’s closest and most distinctive bilateral partnerships. The two countries share an open border, deep civilisational links rooted in Hinduism and Buddhism and extensive social and economic interdependence. It was formalised through the Treaty of Peace and Friendship 1950. The treaty enables free movement, trade and employment across borders. India remains Nepal’s largest trade partner, investor and development partner with cooperation in connectivity, hydropower, security and disaster management.

India Nepal Relations Historical Background

The historical foundation of India Nepal Relations has evolved from the ancient time. Major events in the history of India Nepal Cooperation are:

• Ancient Civilisational Links: India and Nepal share Hindu and Buddhist traditions, with sites like Pashupatinath, Janakpur, Bodhgaya and Lumbini fostering uninterrupted cultural, religious and pilgrimage exchanges since ancient times.
• Treaty of Sugauli 1816: The treaty between Nepal and British India defined Nepal’s boundaries along the Kali River, laying the groundwork for later territorial interpretations and disputes like Kalapani and Susta.
• Post Independence Reset 1950: The 1950 Treaty of Peace and Friendship formalised open borders, reciprocal rights and security cooperation, establishing a special relationship after India’s independence and Nepal’s political transition.
• Cold War Balancing: Nepal gradually diversified foreign relations, engaging China to balance India’s influence, especially after the 1962 Sino-Indian War reshaped Himalayan strategic equations.
• Economic Blockade 1989-90: Expiry of trade and transit treaties led to severe shortages in Nepal, GDP growth falling from 9.7% in 1988 to 1.5% in 1989, deeply straining bilateral trust.
• Democratic Transition 1990: Restoration of democracy in Nepal normalised relations, leading to new trade, transit and economic agreements restoring connectivity and cooperation.
• Maoist Phase and China Factor: Post-2006 politics saw Nepal diversify partnerships, with increased Chinese investments altering traditional India-centric engagement patterns.
• Post 2014 Engagement: High-level visits since 2014 revitalised ties through credit lines, hydropower cooperation, disaster assistance and cultural diplomacy.
• Earthquake Diplomacy 2015: India’s Operation Maitri delivered immediate relief after the earthquake, reinforcing humanitarian cooperation despite later political frictions.

Read About: India China Relations

Indo-Nepal Treaty of Peace and Friendship 1950

The Indo-Nepal Treaty of Peace and Friendship 1950 provides the legal and strategic foundation of bilateral relations, governing mobility, trade, security cooperation and economic privileges. The major features of this treaty are:

• The treaty grants citizens of both countries rights to reside, work, own property and conduct business in each other’s territory without visas or passports.
• A 1770 km open border enables free movement of people, supporting livelihoods, remittances and cultural exchanges but also creating security management challenges.
• The treaty obligates both nations to inform each other of external threats, reinforcing mutual security coordination in the sensitive Himalayan region.
• Indian and Nepali businesses receive national treatment, ensuring imported goods are treated on par with domestic products after entry.

However, Nepal increasingly views the treaty as unequal, prompting the Eminent Persons Group to recommend revisions, though implementation remains pending.

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India Nepal Relations Area of Cooperation

India and Nepal partners in trade, connectivity, energy, defence, culture, development assistance, humanitarian support and multilateral engagement. The major areas of cooperation within India Nepal Relations are:

1. Trade and Economy

Economic ties form the backbone of bilateral relations, with India acting as Nepal’s primary trade partner, transit provider and major investment source.

• Trade Volume: Bilateral trade reached INR 57,858 crore in 2018-19, with India exporting INR 54,300 crore and Nepal exporting INR 3,558 crore, reflecting asymmetrical dependence.
• Transit Dependency: India provides transit for nearly all of Nepal’s third-country trade, making Indian ports vital for Nepal’s economic stability.
• Investment Presence: Indian firms operate in banking, insurance, power, manufacturing, tourism and dry ports, contributing significantly to Nepal’s GDP and employment.
• Energy Trade: Nepal exported electricity worth Rs 10.38 billion to India by mid-2022, marking hydropower as a growing export sector.

2. Connectivity

Connectivity initiatives strengthen economic integration and people-to-people ties between the two countries.

• Rail Links: The Jayanagar-Kurtha rail line is operational and being extended to Bardibas, enhancing passenger and freight movement.
• Electric Rail Corridor: India and Nepal signed MoUs for an electric rail link between Kathmandu and Raxaul, improving cross-border mobility.
• Petroleum Pipeline: The Motihari-Amlekhgunj pipeline, South Asia’s first cross-border pipeline, ensures secure and affordable fuel supply to Nepal.
• Inland Waterways: India’s Sagarmatha-to-Sagar initiative links Nepal to Indian waterways, expanding access to the Indian Ocean.

3. Energy and Hydropower

Hydropower cooperation is a strategic pillar benefiting both countries’ energy security and climate goals.

• Arun-3 Project: The 900 MW Arun-3 hydropower project, implemented by SJVN under BOOT mode, involves ₹1,236 crore Indian investment.
• Arun-4 Agreement: India and Nepal signed an agreement for the 490.2 MW Arun-4 project, strengthening long-term power cooperation.
• Pancheshwar Project: The Mahakali Treaty’s Pancheshwar Multipurpose Project aims to generate 1,200 MW while supporting irrigation and flood control.
• Export Commitment: India agreed to import 10,000 MW of electricity from Nepal over a decade, boosting Nepal’s revenue base.

4. Defence Cooperation

Defence ties reinforce mutual trust and regional security.

• Gorkha Regiments: Around 32,000 Nepali citizens serve in Indian Army Gorkha regiments, symbolising historic military integration.
• Surya Kiran Exercise: Annual joint military exercise Surya Kiran enhances interoperability, disaster response and counterterrorism coordination.
• Honorary Ranks: Army chiefs of both nations confer honorary General ranks, reflecting deep institutional respect.

5. Cultural Ties

Cultural diplomacy strengthens grassroots relations beyond formal politics.

• Sister Cities: India signed Sister-City Agreements linking Kathmandu-Varanasi, Lumbini-Bodhgaya and Janakpur-Ayodhya.
• Educational Exchanges: India provides over 1,500 scholarships annually to Nepali students across technical and academic disciplines.
• Religious Tourism: Shared pilgrimage circuits boost tourism and cultural understanding.

6. Humanitarian and Development Assistance

India is Nepal’s largest development and disaster-response partner.

• Development Aid: India has provided over USD 1.5 billion since 2008 for health, education, infrastructure and rural development.
• Disaster Relief: Operation Maitri after the 2015 earthquake delivered rapid relief and reconstruction support.
• Operation Vaccine Maitri: India supplied nearly 9.5 million COVID-19 vaccine doses to Nepal under this operation.
• Operation Ajay: India helped various Nepalese citizens to evacuate from Israel during Israel-Hamas conflict along with the Indian Citizens.
• Operation Ganga: During Russia-Ukraine War, India helped Nepal through evacuating citizens from Ukraine and neighbouring nations.

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India Nepal Relations Challenges

Despite strong ties, bilateral relations face strategic, political, economic and security challenges requiring sustained dialogue and cooperation.

• Territorial Disputes: Kalapani and Susta disputes intensified after Nepal’s 2019 map claim, complicating diplomatic trust and border management.
• Treaty Perception Issues: The 1950 treaty is criticised in Nepal as outdated and unequal, affecting public sentiment and political narratives.
• Trade Imbalance: Nepal imports over 64% from India but exports less than 10%, creating persistent economic asymmetry.
• China’s Influence: China’s Belt and Road investments in Nepal challenge India’s traditional influence and buffer-state dynamics.
• Border Security: The open border is exploited for smuggling, fake currency circulation, human trafficking and insurgent movement.
• Trust Deficit: Delays in project execution and perceptions of political interference fuel anti-India sentiment among sections of Nepali society.

Recent Currency Map Issue: Nepal circulated NPR 100 notes with disputed Kalapani, Lipulekh and Limpiyadhura, symbolically asserting claims, intensifying diplomatic tensions and complicating bilateral trust.