India–Nepal relations, rooted in deep historical, cultural, and strategic ties, face a critical juncture following the violent Gen Z-led protests in Nepal. These protests toppled the elected government, dissolved Parliament, and installed former Chief Justice Sushila Karki as interim Prime Minister until the March 2026 elections. While India supported the constitutional order, the unrest raises concerns over stability in the shared border region.
What is the Background of the Nepal Crisis and Its Implications for India?
1. Trigger of Protests: In early September 2025, widespread Gen Z-led protests erupted in Nepal. The protests were against poor governance, entrenched corruption, and authoritarian measures by the CPN-UML-led government. One such measure was the banning of 23 social media websites, which was seen as an intolerance toward dissent.
2. Escalation and Violence: The protests turned violent. Seventy-four people were killed, and key institutions, including Parliament and the Supreme Court, were attacked. Buildings were burned, and vital documents destroyed, causing severe economic losses estimated at over NPR 10 billion.
3. Government Collapse: The crisis forced Prime Minister KP Sharma Oli to resign. This led to the unconstitutional dissolution of Parliament, violating Article 76 of Nepal’s 2015 Constitution. Sushila Karki, a respected former Chief Justice, was appointed interim Prime Minister on September 12, 2025, with the backing of protest leaders.
4. Interim Setup: Karki became Nepal’s first female Prime Minister. She pledged to address corruption and hold elections by March 5, 2026. The negotiations involved President Ram Chandra Paudel and Army Chief Ashok Raj Sigdel. Karki also appointed anti-corruption ministers, including Rameshwar Prasad Khanal (Finance) and Kulman Ghising (Energy).
5. Implications for India: As a key stakeholder, India monitored the unrest closely. Ambassador Naveen Srivastava attended Karki’s swearing-in ceremony. The crisis carries risks of spillover effects, such as refugee influxes across the open border, and potential exploitation by anti-India elements, echoing the 2006 Madhesi movement.
What is the Importance of India–Nepal Relations?
1. Historical and Cultural Ties: India and Nepal share a deep-rooted civilisational bond through Hinduism and Buddhism, reflected in sacred sites like Pashupatinath Temple and Lumbini. The 1950 Treaty of Peace and Friendship institutionalised these ties. Over 8 million Nepalis live in India, and the presence of Gurkha regiments in the Indian Army reinforces enduring people-to-people and military links.
2. Strategic Significance: Sharing an open 1,770 km border, Nepal plays a critical role in India’s Himalayan security architecture. As a buffer state between India and China, its geopolitical orientation directly affects India’s regional stability. India’s support during Nepal’s 2006 transition to democracy further highlights its strategic involvement.
3. Economic Interdependence: India is Nepal’s largest trading partner, accounting for over 60–65% of Nepal’s trade (USD 8.5 billion in 2024). India provides petroleum, electricity, and essential commodities, while Nepal’s vast hydropower potential offers clean energy opportunities for India. Remittances from 600,000 Nepali workers in India sustain Nepal’s economy.
4. Developmental Partnership: India has provided more than USD 1.5 billion in aid since 2008, including post-2015 earthquake reconstruction, road and railway projects, and education and health infrastructure. These initiatives enhance mutual resilience and highlight India as Nepal’s primary development partner.
5. Political and Governance Cooperation: Nepal’s political stability is crucial for India’s Neighborhood First Policy. Since the adoption of federalism in 2015, India’s assistance in capacity building, governance reforms, and democratic consolidation has been vital for ensuring internal stability and inclusive development in Nepal.
6. Geopolitical Relevance: With China’s growing influence through BRI projects like Pokhara Airport, India–Nepal relations serve as a counterbalance to external pressures in South Asia. Strengthening bilateral ties enables India to secure its northern frontier while ensuring Nepal’s balanced and sovereign foreign policy choices.
What Are Key Areas of Cooperation in India–Nepal Relations?
1. Trade and Investment: Bilateral trade reached USD 8.5 billion in 2024, with India as Nepal’s largest partner and top FDI source. Integrated Check Posts (Birgunj, Bhairahawa) and the Motihari–Amlekhgunj petroleum pipeline enhance efficiency, while machinery, petroleum, and hydropower dominate exchange.
2. Energy and Hydropower: India and Nepal aim to develop 10,000 MW of hydropower projects by 2030–35, including the 456 MW Arun-3 project (2024). The 400 kV Dhalkebar–Muzaffarpur line enables surplus electricity exports, positioning Nepal as a renewable energy hub for South Asia.
3. Connectivity and Infrastructure: India’s USD 1.5 billion Line of Credit supports cross-border railways (Jayanagar–Kurtha, Jogbani–Biratnagar), highways (East–West Highway upgrades), and post-earthquake road reconstructions. Upcoming digital and air connectivity projects aim to further integrate the two economies and boost tourism.
4. Defence and Security: Under the 1950 Treaty of Peace and Friendship, over 30,000 Gurkhas serve in the Indian Army. Annual joint exercise ‘Surya Kiran’ and USD 50 million military aid strengthen border security, counter-insurgency operations, and intelligence-sharing against cross-border threats.
5. Development and Capacity Building: India supports more than 200 small development projects (USD 100 million) in health, education, and water. Over 1,500 scholarships are awarded annually, COVID-19 vaccine supplies (10 million doses), and projects like the Bir Hospital upgrade highlight India’s role in human capital and healthcare.
6. Cultural and People-to-People Ties: An open border and rupee trade facility facilitate visa-free movement and economic exchanges. Cultural initiatives—Ramayana and Buddhist Circuits, yoga exchanges, and the India–Nepal Joint Commission—deepen civilisational bonds and strengthen trust.
What Are the Challenges in India–Nepal Relations?
1. Political Instability and Governance Deficits: Frequent government changes, including the 2025 crisis and Parliament dissolution, undermine policy continuity. Weak institutions, corruption, and democratic backsliding create uncertainty, slowing long-term bilateral projects and inviting external interference.
2. Rise of Nationalism and Anti-India Sentiments: Episodes like the 2020 map row over Kalapani–Lipulekh–Limpiyadhura and perceptions of the 2015 blockade fuel distrust. Gen Z protests and monarchist echoes amplify anti-India rhetoric, often mobilised by political elites and social media.
3. Expanding Chinese Footprint: Nepal’s growing engagement with China’s Belt and Road Initiative (BRI), including USD 3 billion in loans and projects like the Trans-Himalayan Railway, increases Beijing’s influence. This challenges India’s traditional primacy and heightens strategic competition in the Himalayas.
4. Economic Asymmetry and Trade Imbalances: India remains Nepal’s largest trade partner, but the USD 6 billion trade deficit creates perceptions of exploitation. Delays in hydropower imports, tariff barriers, and over-reliance on remittances from India expose Nepal’s economic vulnerabilities.
5. Water Resource and Environmental Disputes: River-sharing disagreements, like delays in the Mahakali Treaty, hinder irrigation and hydropower cooperation. Climate-driven floods in shared river basins threaten 15 million people, making water management a persistent friction point in bilateral ties.
6. Border Management and Security Concerns: The 1,770 km open border facilitates movement but also enables USD 1 billion worth of smuggling annually, human trafficking, and illegal migration. Unresolved disputes, such as Lipulekh–Kalapani, further strain border cooperation and mutual trust.
What Can Be the Way Forward?
1. Strengthening Democratic Institutions: India should support Nepal’s constitutional order and federal experiment by providing technical assistance through the Election Commission of India. Promoting free and fair 2026 elections while engaging Gen Z leaders through youth exchanges will build resilience against instability.
2. Deepening Economic Engagement: Expanding investments in hydropower, agriculture, tourism, and IT can generate jobs and reduce migration pressures. A Bilateral Economic Partnership Agreement (BEPA) covering services, e-commerce, and trade diversification will address the USD 6 billion trade deficit sustainably.
3. Enhancing Connectivity and Infrastructure: Accelerating BBIN projects, cross-border railways (Jayanagar–Kurtha), and highways (Hulaki Highway extension) will boost regional integration. Linking Nepal to Act East supply chains ensures it benefits from India’s growing connectivity with Southeast Asia.
4. Security and Border Management: Strengthening joint patrolling along the 1,770 km open border with drone surveillance, biometric tracking, and e-border posts can curb smuggling and trafficking. Expanding Gurkha recruitment, joint training, and intelligence-sharing will enhance defence cooperation.
5. Managing the China Factor: India should offer transparent grants-based financing for sustainable infrastructure as alternatives to BRI loans. Promoting India–Nepal–China trilateral dialogues and strengthening BIMSTEC connectivity platforms will prevent zero-sum rivalries and enhance regional balance.
6. Cultural and People-Centric Diplomacy: Expanding 2,000 annual scholarships, pilgrim circuits (Ramayana and Buddhist), and cultural festivals will strengthen soft power. Setting up skill-development centres in Nepal can address migration challenges while reinforcing India–Nepal civilisational bonds.
Conclusion
Nepal’s 2025 political turmoil challenges India–Nepal ties rooted in shared history and geography. Despite instability and external pressures, mutual dependence offers opportunities for renewal. By bolstering democracy, deepening trade, and fostering dialogue, India can help steer Nepal toward stability. Their intertwined futures demand cooperation over interference, shaping “Naya Nepal” and a resilient partnership.
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