India - Nepal Relations and China Factor UPSC IAS Target

India - Nepal Relations and China Factor UPSC

24 Apr 2019

Category : International Relations

Topic: India - Nepal Relations and China Factor UPSC

India and Nepal started their relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying secret letters that defined security relations b/w the two countries and an agreement governing both trades transiting Indian Territory and bilateral trade. Both countries committed in a letter, "neither government shall tolerate any threat to the security of the other by a foreign aggressor" and bounded both sides "to inform each other of any serious friction or misunderstanding with any neighboring state likely to cause any breach in the friendly relations subsisting between the two governments."

  • Nepal has an area of 147,181 sq. km. and a population of 29million
  • Nepal shares a border of over 1850 km in the east, west, and south with five Indian States –Bihar, Sikkim, West Bengal, Uttar Pradesh, and Uttarakhand – and in the north with the Tibet Autonomous Region of the People's Republic of China
  • The two countries not only share an open border movement of people, but also share close bonds through family ties, and marriages are popularly known as “Roti-Beti ka Rishta”

India-Nepal historical relationship

Skanda Purana has a separate volume known as ‘Nepal Mahatmya’, which explains in more detail the beauty and power of Nepal. Nepal is also mentioned in Hindu scriptures such as the Narayana Puja and the Atharva Siras (800-600 BC). Around 1000 BC, small kingdoms and confederations of clans arose in the region. From one of these, the Shakya confederation arose a prince named Siddharta Gautama (563–483 BC), who later relinquished his royalty to lead an ascetic life and came to be known as the Buddha. The 7th Kirata king, Jitedasti, was on the throne in the Nepal valley at the time.

  • By 250 BC, the region went under the influence of the Maurya Empire of northern India, and later became a vassal state under the Gupta Dynasty in the 4th century AD. In the 15 century, rulers called the Licchavis governed the majority of its region.
  • Increased trade activities were seen b/w northern Nepal and India during the golden age of Guptas (starting in 320 A.D.)
  • There is a good and quite detailed description of the kingdom of Nepal in the account of the famous Chinese Buddhist pilgrim monk Xuanzang, dating from 645 AD.
  • During the Nepal-Tibet war of 1791, the East India Company proposed a 7-clause accord under which exports and imports of goods b/w India and British India would be subject to 2.25 percent customs duty.
  • Nepal’s trade with India continued till 1923 without having a trade accord with British India. Before the signing of this trade concord, the British East India Company was interested to have trade ties with Nepal, for the expansion of its exports.
  • The opening of direct India -Tibet route through Gyants routes further promoted Nepal to develop trade with India. Furthermore, the development of a good transportation system and the creation of many trade hubs in northern India helped to enhance the trade turnover b/w India and Nepal.
  • A peace accord of Sugauli in 1816 enabled the British to enter the Nepalese markets. In the early days, the foreign trade of Nepal was limited with Tibet and India.

Earthquake in 2015

When a destructive 7.8 magnitude earthquake struck Nepal on 25 April 2015, the GoI quickly dispatched National Disaster Response Force (NDRF) teams and special aircraft with relief and rescue materials to Nepal. India’s support, which reached Nepal within 6 hours of the earthquake, included 16 NDRF teams, 39 IAF aircraft sorties with 571 tons of relief material, and other life-supporting systems. GoI had declared a post-earthquake reconstruction package of US$ 1 bn during the International Conference on Nepal’s Reconstruction held in Kathmandu on 25 June 2015.

Economic cooperation between Nepal and India

  • Since 1996, Nepal’s bilateral trade more than seven times and exports to India have grown more than eleven times
  • Exports from Nepal to India went up from IRs. 230 crores in 1995-96 to IRs.2468.3 crores in 2015-16.
  • India’s exports to Nepal went up from IRs. 1,525 crores in 1995-96 to IRs.29825.7.6crores in 2015-16.
  • Nepal’s imports from India are:
    • Petroleum products (13.7%)
    • Agricultural and other commodities
    • Motor vehicles and spare parts (13.1%)
Bilateral trade Year
1755 crores 1995-96
32294 crores 2015-16

Indian companies and Investment

Indian companies are the biggest investors in Nepal, accounting for about 40% of the total approved foreign direct investments. About 150 Indian ventures are operating in Nepal. They are engaged in the manufacturing, services, tourism industries, and power sector.

Arun-3 Hydro Electric Project

  • The project is positioned on Arun River in Sankhuwasabha District of Eastern Nepal
  • The power from the hydro electric project shall be exported from Dhalkebar in Nepal to Muzaffarpur in India
  • Cabinet Committee on Economic Affairs has approved Investment for generation component of Arun-3 HEP (900 MW) for an expected cost of Rs. 5723.72 crore.

Big Brotherly attitude not liked by Nepal and violation on its sovereignty :

  • India has been supposed to be playing the role of big brother in the region.
  • There is a general view in Nepal that India doesn’t respect the country’s sovereignty and that it often interferes in Nepal’s domestic affairs.
  • Nepal blamed India for imposing an economic barrier including the barrier of gas supply, fuel, etc on them to put pressure to make certain amendments in their constitution.
  • There was much outrage in Nepal of the way Indian media covered the 2015 Nepal Earthquake relief and rescue operations. Moreover, many Nepali trended hashtags like #gobackIndia on social media to express their outrage.

Nepal’s new constitution and its consequences

A new constitution was announced in Nepal in 2015. It gave extensive political rights to the ruling hill tribes and discriminated against the people living in plains including Madhesi. The constitution gave representation to Madhesi which wasn’t in proportion to their population. It also made acquiring citizenship by Madhesi very difficult and discriminating. After seeing this, India also objected to these discriminatory provisions and requested Nepal to rectify them.

Nepal & 2015 Madhesi tragedy

Nepal declared its new Constitution in 2015 but the Madheshi, the Tharu, and the Janajati, who is considered as the marginalized groups felt they were being left out in the new constitution. These groups, Madheshi in particular, then barricaded the border points. The Nepalese govt blamed India for deliberately worsening the embargo by not permitting vehicles to pass from check-points where no protests were held. Indian government however denied all accusations of any involvement in the barricade.


Demonetization has severely affected Nepali nationals because those notes were legal tender in Nepal too. Nepal has time and again appealed that the Indian government makes arrangements for the exchange of those notes held by Nepali nationals and its central bank.

Nepal’s focus on china

  • China plans to extend the Tibet railway to Kathmandu across the border in the upcoming years.
  • Nepal signed the Belt and Road Initiative (BRI) Framework accord with China last year.
  • China is striving to challenge Indian interests by cultivating local interest groups that could advance China's interests in Nepal.
  • Chinese are constructing a number of highways from the Tibetan side into Nepal, all the way down to the East-West highway that crosses Nepal.

Challenges and Concerns between Nepal and India

  • OBOR has a blueprint for linking Nepal with the Eurasian transport corridor.
  • The establishment of diplomatic ties b/w China and Nepal and its growing influence in Nepal has resulted in slumping traditional leverage of India in Nepal.
  • Overtime faith deficit has widened b/w India-Nepal because of the Indian reputation for delaying implementation of various projects.
  • Internal Security is a major apprehension for India. The indo-Nepal border is virtually open, which is utilized by insurgent groups and terrorist outfits from the North-Eastern part of India eg., a supply of fake Indian currency, and trained cadres.
  • Nepal over the years has observed constant political instability, including a 10-year violent insurgency, damaging Nepal’s economy and development.