New projects and agreements between Nepal and India

Source: The post new projects and agreements between Nepal and India has been created, based on the article “Nepal and India’s special relationship – and how it is getting better” published in “Indian express” on 1st July 2024

UPSC Syllabus Topic: GS Paper2- international relations- India and its neighbourhood- relations.

Context: The article discusses the unique relationship between Nepal and India. It highlights their open border, shared culture, and economic ties. The countries are focusing on reducing trade deficits, enhancing digital financial connectivity, and improving infrastructure to boost trade and people-to-people ties.

For detailed information on India-Nepal Relationship read this article here

What is the nature of the relationship between Nepal and India?

1. Open Borders and Cultural Ties: Nepal and India share an open border and deep-rooted cultural ties, enabling free movement and close people-to-people relationships.
2. Economic Interdependence:

India is Nepal’s largest trading partner and the biggest source of tourists.

It is the sole supplier of petroleum products to Nepal.

India accounts for a significant share of Nepal’s inward remittances and handles the majority of its third-country trade.

During disasters, India is the first responder, providing rescue, relief, and financial packages (e.g., $75 million for earthquake-hit areas).

3. Trade and Deficit Focus:

Nepal’s trade deficit with India stands at nearly 18% of its GDP.

High transaction costs and inadequate infrastructure make Nepal a high-cost economy.

Both countries are focusing on initiatives like cross-border digital financial connectivity and infrastructure improvements to reduce this trade deficit.

What new projects and agreements have been initiated between Nepal and India?

1. Electricity Cooperation:

Exported around 650 MW of electricity to India in 2023, earning over Rs 10 billion.

Signed a long-term agreement to export 10,000 MW of electricity to India over 10 years.

2. Hydroelectricity Projects:

Increased investment in hydroelectricity production and cross-border transmission lines.

Nepal plans to export 40 MW of electricity to Bangladesh in 2025 under a tripartite agreement.

3. Digital Financial Connectivity:

Indians can make mobile payments in Nepal; Nepalis will soon follow.

Simplified process for Nepalis to open bank accounts in India and obtain Aadhaar cards.

4. Petroleum Pipelines:

Constructing new pipelines between Siliguri-Jhapa and Amlekhgunj-Chitwan.

Existing Motihari-Amlekhgunj pipeline saves Nepal Rs 1 billion annually.

5. Transportation Infrastructure:

Building two new integrated check posts (ICPs) in Bhairahaba and Dodhara-Chandani.

Upgrading border roads and operational cross-border freight rail.

Completed feasibility study for the Raxaul-Kathmandu railway; considering Ayodhya-Janakpur rail service.

How will Nepal’s relationship be helpful for India?

Electricity Imports: India will import 10,000 MW of clean energy from Nepal over 10 years, reducing reliance on coal and gas.

Pollution Reduction: Importing clean energy from Nepal will help India reduce pollution.

Economic Boost: Enhanced digital financial connectivity will facilitate hassle-free payments for Indian tourists and traders in Nepal.

Transportation Efficiency:

New petroleum pipelines will streamline fuel supply and reduce transportation costs.

Upgraded border roads and integrated check posts will ease trade and travel between the countries.

Regional Energy Cooperation: Nepal’s participation in regional grids will promote renewable energy development in BIMSTEC and SAARC regions, benefiting India.

Question for practice:

Discuss the various initiatives and agreements that have been undertaken to strengthen the economic and infrastructure cooperation between Nepal and India.