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Context

The Prime Minister of Nepal made his first bilateral visit abroad to India since taking his oath in July 2021. The visit was a success in terms of launching connectivity projects and signing Memorandums of Understanding (MoUs). Bilateral dialogues, strengthened economic connections and more sensitization towards the people of Nepal is what India needs to pursue to fulfil the objectives of its ‘neighborhood first policy’.

Historical Background

Ancient ties: The relationship between India and Nepal goes back to the times of the 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.
Cultural relations: From 750 to 1750 AD period saw a shift from Buddhism to Hinduism in Nepal and witnessed widespread cultural diffusion.
- India and Nepal share similar ties in terms of Hinduism and Buddhism with Buddha’s birthplace Lumbini located in present-day Nepal.
India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal.
Nepal is an important neighbor of India and occupies a special significance in its foreign policy because of the geographic, historical, cultural and economic linkages/ties that span centuries.
In recent years, India’s relations with Nepal have witnessed some ‘lows’.
- The relationship between the two took a nosedive in 2015, with India first getting blamed for interfering in the Constitution drafting process and then for an “unofficial blockade” that generated widespread resentment against India.

Highlights of the recent visit

Important Projects in discussion:
- The operationalization of the 35 kilometre cross-border rail link from Jayanagar (Bihar) to Kurtha (Nepal) will be further extended to Bijalpura and Bardibas.
- The 90 km long 132 kV double circuit transmission line connecting Tila (Solukhumbu) to Mirchaiya (Siraha) is close to the Indian border.
Agreements signed:
- Agreements providing technical cooperation in the railway sector,
- Nepal’s induction into the International Solar Alliance, becoming the 105th country to become a signatory to the Framework Agreement of the ISA.
- Between Indian Oil Corporation and Nepal Oil Corporation ensuring regular supplies of petroleum products were also signed.
India called for taking full advantage of opportunities in the power sector, including through joint development of power generation projects in Nepal and the development of cross-border transmission infrastructure.
Launch of Indian RuPay card in Nepal: This would open new vistas for cooperation in financial connectivity, and is expected to facilitate bilateral tourist flows as well as further strengthen people-to-people linkages between India and Nepal.

Various facets of India-Nepal ties

1. Cultural ties

While enjoying their own peculiarities, both India and Nepal share a common culture and ways of life.
Religion is perhaps the most important factor and plays a predominant role in shaping the cultural relations between these two countries, marked by a cross country pilgrimage on Char Dham Yatra, Pashupatinath Temple and some Buddhist sites.
A considerable section of Nepalese comprises of Madhesi population which has familial & ethnic ties with states of Bihar, UP.

2. Strategic ties

Nepal is a buffer state between India and China.
Several Nepali Citizens are also deployed in Indian defence forces as well.

3. Political ties

Constitutional turmoil is not new in Nepal. India has played a vital role in the democratic transition in Nepal against the monarch King Gyanendra.
Nepali Congress (NC) is one of the country’s oldest parties which supports relations with India, but the communist parties show a tilt towards China.

4. Economic ties

Nepal is an important export market for India. India is Nepal’s largest trading partner.
Himalayan rivers flowing through Nepal can be used for Hydroelectric power projects which will benefit border states of UP, Bihar and other adjacent areas.
There are three major water deals between Nepal and India, namely the Kosi Agreement, the Gandak Treaty and the Mahakali Treaty. India also exports Power to Nepal.
Also, Nepal is the largest borrower of Indian Currency in South Asia.
Nepal has escalating trade deficit with India. Nepal and India have concluded bilateral Treaty of Transit, Treaty of Trade and the Agreement of Cooperation to Control Unauthorized Trade.

5. Connectivity

The 1950 Treaty of Peace and Friendship was sought by the Nepali authorities in 1949 to provide for an open border and for Nepali nationals to have the right to work in India.
The BBIN Motor Vehicles Agreement (MVA) in which Nepal is a partner will permit the member states to ply their vehicles in each other’s territory for transportation of cargo and passengers.

6. Multilateral and Regional Fora

Both Nepal and India work in tandem in the United Nations, Non-aligned Movement and other international fora on most of the important international issues.
Both the countries have been deeply engaged in the regional and sub-regional frameworks of SAARC, BIMSTEC and BBIN for enhancing cooperation for greater economic integration.

China’s role in Nepal – a matter of concern

Once considered a buffer state between India and China, Nepal is now showing an inclination towards Beijing. China is trying to stimulate and tempt Nepal with multiple aids, economic growth and acquisition.
China is pursuing a more assertive foreign policy and considers Nepal as an important element in its growing South Asian footprint and being a key partner in its Belt and Road Initiative (BRI).
In 2016, Nepal negotiated an Agreement on Transit Transportation with China and in 2017, China provided a military grant of $32 million to Nepal.
In 2019, a Protocol was concluded with China providing access to four seaports and three land ports to Nepal. China is also engaged with airport expansion projects at Pokhara and Lumbini.
China has overtaken India as the largest source of foreign direct investment with the annual development assistance being worth $120 million.
Recently, the ratification of the Pancheshwar Multipurpose project saw street protests and big-time social media campaigns supported by China.

Indo-Nepal Border Disputes

India and Nepal share about an 1800 Km long border. There are 2 major border or territorial disputes:

1) Kalapani

The Kali River in the Kalapani region demarcates the border between India and Nepal.
The Treaty of Sugauli signed by the Kingdom of Nepal and British India (after the Anglo-Nepalese War) in 1816 located the Kali River as Nepal’s western boundary with India.
The discrepancy in locating the source of the Kali River led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims.
However, India has control of Kalapani since the 1962 Indo-Sina War.
- Kalapani is a valley that is administered by India as a part of the Pithoragarh district of Uttarakhand. It is situated on the Kailash Mansarovar route.

Why is Lipulekh important for India?

For India, the Lipulekh pass has security implications.
After its disastrous 1962 border war with China, it was concerned about a possible Chinese intrusion through the pass and has been keen to hold on to the strategic Himalayan route to guard against any future incursions.
The link road via Lipulekh Himalayan Pass is also considered one of the shortest and most feasible trade routes between India and China.

2) Susta Region

It is about 140 sq. km of land in Uttar Pradesh at the Nepal border in the Terai area. India has control of the territory. Nepal claims this territory.
The change of course by the Gandak river is the main reason for disputes in the Susta area.
Susta is located on the bank of the Gandak river.

It is called the Narayani river in Nepal.
It joins Ganga near Patna, Bihar.

Issue of Simultaneous floods in Bihar and Nepal

Some of Nepal’s biggest river systems originate in the Himalayan glaciers which then flow into India through Bihar.
During the monsoons, these river systems flood causing many problems for Bihar.
It is a necessity that there is process-driven coordination between the Centre and the Government of Bihar to handle the flooding in Nepal’s Terai and North Bihar (largely the Mithilanchal region).

Which are those flooding rivers?

Nepal’s three biggest river systems—Kosi, Gandaki and Karnali—originate in the high mountain glaciers, flow through the country and then enter India through the state of Bihar.
During the monsoon season, these river systems often get flooded due to heavy rains/landslides in Nepal which create floods in India’s most flood-prone state—Bihar.

Why Nepal is Important to India?

It acts as a strategic buffer against the aggression of China.
The Pakistan factor: peddling of FICN, drugs and terrorism through the Indo-Nepal border. It makes the cooperation of Nepal important.
India and Nepal share common culture: There are huge Nepali communities in Darjeeling and Sikkim. Many marital relations across the border exist.
National Security: There is a lot of interdependence. Gurkha Regiment in Indian Army is known for its valiance.
- Nepal could play in the hands of China which could be detrimental to Indian interests. Hence they need to be kept as close as possible.
Ministry of External Affairs term India-Nepal Relation as “Roti-Beti ka Rishta” (Relation of food and marriage)
Energy Security: Nepal has the potential of 80 GW of hydroelectricity. But only 600 MW potential is realized so far.
- Nepal’s lack of cooperation in this regard has hindered development. The surplus could be used for Indian border states.

Major Irritants in bilateral ties

1) Nepali nationalism and Anti-India sentiments

Anti-India Sentiment in Nepal is largely politically motivated as it is wrongly perceived as India’s backing to Monarchy.
The widening gap in understanding each other’s concerns has helped feed Nepali nationalism and create a dense cloud of distrust and suspicion between the two countries.
The gap widened after India chose to impose an economic blockade in response to Nepal’s sovereign decision to promulgate a democratic constitution.

2) China factor

Increasing Chinese presence in Nepal is one of the major concerns for India. China’s move to extend the rail link to its border with Nepal can reduce its dependence on India.
Fundamentally these Chinese agencies are building up anti-India sentiments in Nepal.
Nepal’s assent for the ‘One Belt One Region’ (OBOR) initiative of China is viewed by India with suspicion.
Nepal has been slowly fallen prey to China’s inroad debt trap policy.

3) India has ignored the changing political narrative for long

The reality is that India has ignored the changing political narrative in Nepal for far too long.
For too long India has invoked a “special relationship”, based on shared culture, language and religion, to anchor its ties with Nepal.
The 1950 Treaty of Peace and Friendship which was sought by the Nepali authorities in 1949 is viewed as a sign of an unequal relationship, and an Indian imposition.

4) Open borders

The issue of open borders has also been a point of debate in Nepal in recent years- Nepalese people argue that India is benefiting more from it than Nepal.
It has an open border with India which leads to problems such as illegal migrants, counterfeit currency entry, drug and human trafficking.

5) Madhesis Issue

Madhesis share extensive cross-border ethnic and linguistic links with India. India’s involvement in Nepali politics and the upsurge in Madhesi have deep roots in history and unless resolved.
Madhesis protest and India’s blockade soured the relations for the worst.

Way Forward

1) Dialogues for Territorial Disputes

In the best spirit of friendship, Nepal and India should restart the water dialogue and come up with policies to safeguard the interests of all those who have been affected on both sides of the border.
India needs to be a sensitive and generous partner for the neighbourhood first policy to take root.
The dispute shall be negotiated diplomatically under the aegis of International law on Trans-boundary Water Disputes.

2) Sensitising Towards Nepal

The onus is on India to rethink on a long-term basis how to recalibrate its relationship with Nepal provided Nepal should not ignore its relations with India.
It should maintain the policy of keeping away from the internal affairs of Nepal, meanwhile, in the spirit of friendship, India should guide the nation towards more inclusive rhetoric.

3) Strengthening Economic Ties

The power trade agreement needs to be such that India can build trust in Nepal. Despite more renewable energy projects (solar) coming up in India, hydropower is the only source that can manage peak demand in India.
For India, buying power from Nepal would mean managing peak demand and also saving the billions of dollars of investments that would have to be invested in building new power plants, many of which would cause pollution.

4) Investments from India

The Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between India and Nepal needs more attention from Nepal’s side.
The private sector in Nepal, especially the cartels in the garb of trade associations, are fighting tooth and nail against foreign investments.
It is important that Nepal conveys this message that it welcomes Indian investments.