There are centuries -old relations between India and Nepal which are on the strong foundation of business, culture and mutual cooperation. India is not just a neighbor, but a lifeline for landlocked Nepal. India ensures uninterrupted supply of essential commodities to Nepal through more than 22 trading routes on the border. India is not only Nepal’s largest trading partner, but also the biggest source of foreign investment. Recently, increasing political instability and violence in Nepal has introduced a new challenge for these deep relations and India’s billions of dollars.
Economic partnership: engine of development
About 35% of the total foreign investment received by Nepal comes from India. By July 2023, the figure had reached $ 755.12 million. More than 150 Indian enterprises are functioning in Nepal, including manufacturing, banking, insurance, education, telecom, and energy sectors. These companies have contributed significantly to Nepal’s industrialization, employment generation, government revenue and export income, which has led to the pace to Nepal’s national economy.
Strategic investment in energy sector
Nepal has immense potential for hydroelectric production and India is working on several projects with Nepal to meet its growing energy needs. The biggest example of cooperation between the two countries is the 900 MW Arun-3 Hydropower Project, which is being produced by the Sutlej Hydropower Corporation Limited (SJVN), a government company of India. In addition, India has promised to buy hydroelects from Nepal up to 10,000 MW in the next decade, which is expected to give unprecedented boost to Nepal’s economy.
According to a recent study, if Nepal effectively increases power exports, its GDP can reach Rs 13,100 billion by 2045. This will also increase power trade opportunities between the two countries. India’s major investments include large hydroelectric projects such as Upper Karnali (900 MW) and Lower Arun (669 MW).
Apart from this, India has also invested heavily in cross-border transmission lines. Projects such as Muzaffarpur-Dhalkebar 400 KV Line are strengthening energy exchange between the two countries. For the future, NHPC and IBN have also signed a memorandum for the development of West Seti + SR6 (1200 MW) and Fukot-Karnali (480 MW) hydroelectric projects.
Basic structure and connectivity
Apart from the energy sector, India has also played an important role in the development of infrastructure in Nepal. The Motihari-Akshakhganj oil pipeline is one such important project that is making Nepal’s petroleum supply easier and safe. This pipeline reduces the problems and risks of supply from trucks.
The Government of India has also provided Nepal a $ 1.65 billion “Line of Credit” of US $ 1.65 billion, which are being used for 45 road projects and 6 other projects of hydroelectric and transmission lines. These projects are spread across Nepal, which is promoting the connectivity and economic development of the country.
Rising instability and diplomatic challenge
While there is a strong trade and investment between India and Nepal on the one hand, the recent violent protests in Nepal and political instability have created a new diplomatic challenge for India. There have been reports of Indian citizens getting trapped after arson, looting and Jane-Zi protests at the mayor’s house.
Experts believe that if this situation does not recover, projects worth billions of rupees in India may be in danger. Political instability puts a question mark on the security of investment, which may lead to delays or preventing projects. This will not only affect India’s economic interests, but can also cause tension in the centuries -old relationship between the two countries.
The relationship between India and Nepal is not limited to trade, but it is based on a common history, culture and future aspirations. India has played an important role in the development of Nepal, but Nepal’s internal instability is a major risk to this partnership. It is necessary for India to strengthen its relations with Nepal and play a creative role in bringing political stability, so that the shared development of the two countries can continue uninterruptedly.
