India-Nepal Bilateral Relations
Strategic Importance and Challenges
India and Nepal share a unique relationship defined by an open border, deep cultural and civilisational ties (Hinduism, Buddhism), extensive people-to-people connections, and significant economic interdependence. Nepal is landlocked and depends heavily on India for trade transit, energy imports, and remittance channels. India is Nepal's largest trade partner and the source of the majority of Nepal's oil, LPG, and construction materials. The bilateral relationship has also been periodically tested by border disputes (particularly the Kalapani-Limpiadhura-Lipulekh triangle), Nepal's periodic tilts toward China (particularly Belt and Road Initiative connectivity), and domestic political dynamics in Kathmandu that often use India-sceptic rhetoric for electoral advantage.
- Treaty of Peace and Friendship (1950): foundational bilateral treaty granting Nepali and Indian citizens equal rights in each other's territory; the RSP and previous Nepali governments have called for its renegotiation.
- Kalapani dispute: India and Nepal both claim the Kalapani-Limpiadhura-Lipulekh area; Nepal published a new political map in 2020 incorporating these territories.
- India-Nepal power trade: India is importing increasing amounts of hydropower from Nepal; the Arun III hydropower project (900 MW) is a key Indian investment.
- Connectivity: India is developing road links and cross-border rail to improve Nepal's market access; Raxaul-Kathmandu rail link is a flagship project.
- RSP's foreign policy: "strategic autonomy" — equal distance from India and China — while pursuing bilateral economic cooperation.
● Tracked since March 09, 2026 · last seen June 06, 2026 · updates as the daily brief publishes