• UGI USER
  • Jul 01, 2024
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NEPAL AND INDIA’S SPECIAL RELATIONSHIP – AND HOW IT IS GETTING BETTER

Relevance: GS 2 – Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Why in the News?

  • India and Nepal share a deep, broad, and wide-ranging relationship.
    • Various concerns of the people in both countries need to be addressed.
  • The recent momentum in partnership and progress between India and Nepal should be maintained.
  • This discussion highlights the importance of sustaining this momentum for future cooperation and development.

Unique Relationship between the two countries

Nepal and India share a unique relationship characterized by:

  • An open border
  • Shared cultural ties
  • Economic interdependence
  • Deep-rooted people-to-people connections
  • Strengthened Partnership
    • The newly-focused partnership has enabled relations to move from strength to strength over the last two years.
    • Eight high-level visits, including four by prime ministers, have re-energized relations.
    • Many agreements are being implemented.
  • Collaborative Efforts Between Nepal and India:
    • Reducing the trade deficit
    • Initiating and strengthening cross-border digital financial connectivity to facilitate trade, tourism, and remittance flows
    • Enhancing physical connectivity to reduce the cost of doing business and promote people-to-people ties.

Nepal’s Ties with India

  • Economic Ties: India is Nepal’s largest trading partner, primary source of tourists, sole supplier of petroleum products, and the biggest provider of foreign investment.
    • India provides transit for nearly all of Nepal’s third-country trade.
    • A significant portion of inward remittances to Nepal comes from pensioners, professionals, and laborers working in India.
    • Issues:
      • But Nepal’s trade deficit with India is close to 18% of its GDP.
      • Inadequate infrastructure and high transaction costs make Nepal a high-cost economy.
    • Disaster Response and Support: India has consistently been the first responder during disasters and emergencies in Nepal.
      • India provided a financial package of $75 million for the development of areas affected by recent earthquakes in Nepal, alongside immediate rescue and relief efforts.

Electricity Cooperation

  • A Joint Vision Statement on Power Sector Cooperation was signed in 2022, covering bilateral cooperation in the production, transmission, and cross-border trading of hydropower.
    • The export of electricity from Nepal to India reached around 650 MW in 2023.
    • Nepal earned more than Rs 10 billion from electricity exports, helping to reduce the trade deficit and augment foreign exchange earnings.
    • The volume of exports is expected to increase significantly.
  • Long-term Power Trade Agreement
    • In 2023, a long-term power trade agreement was signed to export 10,000 megawatts of electricity from Nepal to India over 10 years.
    • This agreement is essential for boosting investor confidence in Nepal’s hydro sector and ensuring returns on their investment.

Hydroelectricity Export and Regional Cooperation

  • Significant partnerships have been formed to build cross-border transmission lines.
    • Nepal has started exporting hydroelectricity to Bangladesh under a tripartite agreement with India and Bangladesh.
  • Nepal plans to export 40 MW of electricity to Bangladesh in 2025, with potential increases in the future.
  • New avenues have opened for a regional grid in the BIMSTEC and SAARC regions to promote, develop, and trade renewable energy, a priority for member countries.

Digital Financial Connectivity

  • Nepal and India decided to establish and enhance digital financial connectivity.
  • Indians traveling to Nepal can now make payments through their mobile phones.
  • Nepali people will soon be able to do the same after the Nepal government finalizes regulations.
    • This facility will enable hassle-free payments for traders, tourists, pilgrims, students, and people traveling to India for medical treatment.
  • The mobile transfer mechanism will allow workers in Nepal and India to transfer earnings through formal channels to their home countries.

Measures that Deepened and Enhanced the Relationship

  • The momentum of partnership and progress in recent years must be continued.
  • Bilateral Mechanisms
    • Established bilateral mechanisms to address areas of cooperation and concerns, including boundary issues, should be activated to keep the relationship robust.
  • Banking and Identification Simplification
    • Requirements for Nepalis to open bank accounts in India are being simplified.
    • The process for Nepali residents to obtain an Aadhaar card is straightforward.
  • Petroleum Pipelines:
    • Construction of two new petroleum pipelines between Siliguri, India, and Jhapa, Nepal, and between Amlekhgunj and Chitwan is underway.
    • These projects follow the success of the Motihari-Amlekhgunj petroleum pipeline, inaugurated in 2019, the first-ever cross-border pipeline in South Asia.
      • The Motihari-Amlekhgunj pipeline has saved Nepal at least Rs 1 billion per annum in transportation costs.
    • Additional savings come from reduced pilferage, leakage, theft, and delays by using pipelines instead of trucks.
  • Integrated Check Posts (ICPs): Two additional ICPs will be built in Bhairahaba and Dodhara-Chandani, Nepal, with grant assistance from India to facilitate the smooth movement of cargo and passenger vehicles.
    • Three ICPs have already been completed.
  • Transportation Infrastructure:
    • Border roads have been upgraded to reduce transportation and transaction costs.
    • Cross-border freight rail between India and Nepal is operational, with several other cross-border roads and bridges under construction.
    • The feasibility study of the Raxaul-Kathmandu railway has been completed.
      • A direct rail service from Ayodhya to Janakpur is being considered.

Alternative articles

https://universalinstitutions.com/india-nepal-relations/

Source: https://indianexpress.com/article/opinion/columns/nepal-and-indias-special-relationship-and-how-it-is-getting-better-9424984/

Mains question

Discuss the collaborative efforts between India and Nepal in enhancing their bilateral relations, focusing on economic partnerships and energy cooperation. (250 words)